Counterfeits and Customs: Updates on IP Protection at the Border

Counterfeiting is among the major issues in Indonesia Intellectual Property (IP) landscape. The number of counterfeit products and fake goods circulating in the market is evidently big enough to still warrant Indonesia a place in the USTR 301 Priority Watch List released last year. In the context of Criminal Law, the act of counterfeiting is punishable in Indonesia. However, the prosecution can only start if the right holder files a complaint. While filing a complaint is easy, the real problem for the right holders lies in the process of monitoring their IP and finding the act of infringement. It is especially more difficult to monitor when the counterfeit products enter the Indonesian market from other countries. In light of this, Customs and Excise involvement becomes even more crucial. This involvement may come in the form of IP recordation.

Border Protection Measures

On February 27, 2024, the Directorate General of Customs and Excise (DGCE) from Indonesia’s Ministry of Finance hosted an event. During the event, they shared with registered IP Consultants a few key points regarding the implementation of a few regulations concerning the IP recordation. To add a background, the Indonesian government enacted a Government Regulation Number 20 of Year 2017 to carry out the mandate from the TRIPS agreement pertaining to border measures. In addition to that, Regulation of the Minister of Finance Number 40 of Year 2018 gives elaboration on how to implement it.

By definition, IP recordation is a service provided by DGCE through the CEISA HKI System. The process starts when the right holders submit relevant documents to the system. By doing so, their IPs will be recorded at DGCE’s database. Once the IPs are recorded, whenever DGCE finds potentially infringing products during Customs Clearance at the borders, the right holders will be alerted. If the right holders wish DGCE to act on it, they will have to provide a bank guarantee or insurance in the amount of 100.000.000 IDR (100 million Rupiah) to cover the operational costs that might arise.

The Practice of IP Recordation

According to the most recent data, CEISA HKI has 32 trademarks from 7 companies in their records. This number is relatively small, considering the service has been provided to the public for close to 6 years. According to DGCE, what can be considered the barrier in the recordation process is the provisions of Article 3(5) of Regulation of the Minister of Finance No. 40/2018. It states that only IP owners or IP right holders domiciled within the Indonesian region can proceed with recordation. For overseas trademark owners, setting up a company or a representative office may feel like an extra commitment. Especially for business entities using the trademarks in Indonesia through the aid of licensees.

As the numbers don’t seem to impress, DGCE presented another perspective on the importance of IP recordation. They highlighted a case where they managed to deter a huge number of infringing products from entering Indonesia during Custom Clearance activities at Jakarta ports. It is quite an accomplishment considering the trademark infringement is concerning a registered 3-D trademark.

A Latent Issue

There was an interesting discussion with regards to licensees, who own the rights to use trademarks to some extent, on whether they can act on behalf of the trademark owners to file for recordation at DGCE due to the Regulation of the Minister of Finance having two different terminologies “Owner” and “Right Holder”. While the regulation does not mention this, but the requirement to set up a company is there because DGCE provides the recordation service free of charge, so reciprocally the trademark owners can contribute to the country through paying taxes, which means they need to have an official business entity in Indonesia. The Indonesian government and the Minister of Finance will evaluate this practice periodically and may decide to alter the regulation whenever there is an urgency to do so.

If you need assistance in performing IP recordation, please do not hesitate to reach out to us.