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More paperwork required before outbound shipments – A new way to control branded products in Vietnam?

There have been recent policy/procedural changes at the Vietnamese Customs that may be causing customs issues for foreign businesses/trademark owners who engage manufacturing vendors in Vietnam for their products.

The Anti-Smuggling and Investigation Department (“ASID”) of General Department of Vietnam Customs has, during our recent meeting, recently identified a current trend in the Vietnam manufacturing industry of a lot garment products being produced in Vietnam, affixed with the trademarks of other parties, and then exported out of Vietnam (i.e. locally-manufactured goods meant for the export market). Among the trademarks used in the garment products manufactured in Vietnam for export purpose, many of them are well-known ones (e.g. DKNY, FOREVER 21, CALVIN KLEIN, WAL-MART, ADIDAS, GAP, ZARA, MANGO, etc.). As a result of the current prevailing view taken by the Vietnam enforcement authorities concerning the manufacture of goods for export only, in an effort to tighten control over exported products, the ASID informed that the Customs authorities would request local manufacturers to provide them with the following before the goods are exported out of Vietnam:

(i) evidence to prove that the manufacturers are entitled or licensed to use the trademark on the processed products;

(ii) bar code information;

(iii) Power of Attorney; and

(iv) pictures of the products.

From our viewpoint, in respect of the documents from (i)-(iv) above, we opine that the documents as required at (iv) may be very cumbersome for each shipment while other documents at points (i)-(iii) may not because they may be provided once per year, not for every shipment.

No explicit regulations on the aforesaid issues are found, but under Article 5.1., 5.3 and 5.4 of Circular No. 13/2014/TT-BTC, the Vietnamese customs authorities may request the local processors to provide the above documents. Please refer to the text underlying such legislation.

[Article 5. Rights and obligations of customs authority: 1. Commence to apply measures of inspection , monitoring, control, temporary suspension of customs procedures as prescribed in the regulation of law on customs, the regulation of law on commerce and regulation of law on Intellectual property for goods which are suspected of counterfeit or infringing intellectual property rights; 3. Coordinate with the State management agencies, the competent forces in anti-counterfeit and protection of intellectual property rights in combating and handling counterfeit goods, goods infringing intellectual property rights under the provisions of current laws; 4. Request related individuals and organizations to submit, present related documents to explain, clarify the doubts of customs authority on exported and imported goods infringement intellectual property rights or counterfeit goods].

According to the ASID, the provision of documents as requested above results from the responsibility of the local companies who engage in export activities and such requests from Customs authorities are not beyond the laws of Vietnam. The provisions of requested documents from local companies would facilitate the Vietnamese customs authorities in monitoring, controlling and taking actions against those who manufacture the goods for export, using the registered trademarks of other parties without permission.

Currently, the Vietnamese enforcement authorities are of different viewpoint on the manufacture-for-export-only goods. While some opine that act of manufacturing the goods for export only is not likely to cause loss and damage to the trademark owners (because those products are completely exported out of Vietnam), thus, can not be sanctioned, others argue that affixing the registered trademarks without permission from the trademark owners constitute trademark infringement and must be punished. In a “manufacture-for-export-only” case where the trademark of other was used without permission from the trademark owner, Inspectorate of Ministry of Science & Technology (“IMOST”) concluded that there were no grounds to settle the case under administrative procedures because it was impossible to prove that the goods were sold in the Vietnamese market and it was impossible to prove damages caused to the trademark owner under Article 211.1(a) of the IP Law of Vietnam which provides that [“Acts of infringement of industrial property rights which shall be subject to administrative penalties: The following acts of infringement of industrial property rights shall be subject to administrative penalties: (a) Acts of infringement of intellectual property rights which cause loss and damage to authors, owners, consumers or society”].