Free Trade Zones & Their Role In Counterfeiting & Piracy In China, The UAE And Singapore

This webinar considers free trade zones in Singapore, China and the UAE and in particular; their impact on counterfeit and pirate goods; the challenges and benefits that they present to brand owners; and practical ways in which those challenges can be addressed.

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Transcript

Kate Swaine: Hello everyone on behalf of Gowling WLG's Unauthorised Goods and Brand Enforcement Group I would like to welcome you to the second webinar in our Autumn anti-counterfeiting webinar series.

My name is Kate Swaine and I lead Gowling WLG's Brand and Design team in the UK. I will be moderating this session which will cover the issue of free trade zones in the United Arab Emirates, Singapore and China and we'll consider their impact on the issue of counterfeit and pirate goods.

This is the second of three webinars which will be available this Autumn all of which address some of the specific jurisdictional issues that are faced in the battle against counterfeit goods.

Today I'm joined by colleagues from some of our international offices. All of them are experts in anti-counterfeiting and work in areas of the world that have free trade zones.

First with me is Jon Parker who is the Head of IP at Gowling WLG's Dubai office in the UAE and who has practised IP law in the Middle East for over a decade.

Next we have Sheena Jacob who leads the team at JurisAsia, a Singapore firm specialising in IP and corporate law and with an exclusive association with Gowling WLG.

Finally, we have Jamie Rowlands who is head of the Gowling WLG China office in Guangzhou and an experience IP litigator.

Welcome to all of our speakers who will be providing you with valuable insights on the functioning of free trade zones and in particular their impact on counterfeit and pirate goods, the challenges and benefits that they present to brand owners and practical ways in which those challenges can be addressed.

But Jon before we delve into the issues perhaps you could start us off by explaining to our audience what a free trade zone is and how it works in the UAE.

Jon Parker: Thank you Kate.

I think the first thing to say is that the free trade zone has a number of names, so from free zone as shown on the screen to free trade zones and in some countries they are known as special economic areas and these are areas that are exempt from Custom duties. It doesn't mean that they exempt from national laws that take effect in that country, normally it's merely the Customs duty that they are exempt from, although there are some differences particularly here in the UAE that I will touch on later in my part of this presentation.

So the free zone is an area where goods are landed, handled, stored, manufactured or reconfigured with little to no Customs intervention and again what you often find is that they are in close proximity to ports. So goods may come off the ship or off an aeroplane, into storage for onwards transportation and for distribution around the country. But what you do see is that these free zones are a growing issue for brand owners. So there are some figures on screen from a BASCAP report in 2013 which show that in 1975 there were 79 free zones globally around the world, whereas by 2013 this had increased to 30,000 free zones in over 130 countries. But these are important, you know most of the free zones you will find in developing countries and as you will see they account for 68,000,000 jobs and over $500 billion for direct trade value. In a little while...I will show the impact of just one free zone for the UAE.

So turning now to the UAE itself, just a very brief overview. The UAE is the Federation of Seven Emirates and each of those Emirates has its own enforcement authority. So for example Dubai Police is separate from Abu Dhabi Police, which is separate from Abu Dhabi Customs, which is separate from Sharjah Customs. So this can complicate things for brand owners when you're looking to take action because you need to work out who actually has responsibility in the relevant Emirate. Again, which poses a number of problems for rights holders. There are over 20 seaports, we have three large international airports in quite close proximity and of course we have these wonderful beasts called free trade zones and currently we have over 40 but there are many more due to come on track over the coming years.

So looking at the UAE and the free zones here that I just touched on, there are over 40 of them here in the country and over half of those are in Dubai, so the Emirate of Dubai which has been very much the main area of commerce through the country alongside Abu Dhabi. As you will see from the map on the screen those free zones are very much found on the one side of the country hugging the coast. So you know at the moment I'm sitting in one of those free zones, I'm in the Dubai International Finance Centre. Many companies enjoy setting up here because it means you will have that 100% control and ownership of your company, which you may not necessarily have with an onshore business. I think the other thing which perhaps may be unusual for the UAE compared to some of the other countries is that not all of the free zones here will have a suitable border. So Jebel Ali free zone which is a port, there is a physical border there because the officials want to make sure that any product coming onshore over the port has the relevant Custom duties paid before they reach onshore. However the free zone I'm sitting in we have no physical border, you can cross the road and you're outside the free zone. The free zones here are focussed on commercial areas from media companies to research and development areas to commodity.

So as I've touched on...some of these are purely service driven so the DIFC where I'm sitting you won't necessarily find warehousing or product manufacturing here it's purely service driven and again it's because of surety over 100% ownership of the company which brings people to these zones. So what you often find in these purely service driven zones, the infringement or the IP issues are more likely to be around trade name issues rather than say products coming through and so it may well be that you find a company that's trading off your trade name or your trademark and so you're looking to take action to try and make them change their name and to stop them continuing to mislead and perhaps cause confusion in the marketplace.

So I just thought I would finish this section on the UAE highlighting perhaps the most well-known free zone here which is the Jebel Ali free zone, often known as JAFZA. So JAFZA is the eighth largest port in the world covering over 57,000,000 square metres. As you will see from the screen there are 17,000 business properties in that area, with over 7,000 companies from 138 different countries. I mentioned earlier that these are important from the growth of developing countries such as the UAE and as you will see here JAFZA itself accounts for over 20% of Dubai's GDP each year.

One of the issues we often find for brand owners and clients is that the fact that there are 17,000,000 containers coming through JAFZA Customs each year, where unfortunately it is only possible to check about 3% of those shipments which of course means that there are 97% that are coming through without being checked. But what is important for brand owners to do, which we'll touch on later, is try and record their registered rights with Customs and train Customs so that that increases the possibility of suspect shipments being stopped.

So one of the complications around JAFZA is that there are two authorities you have to deal with potentially for IP issues. So for example the Free Zone Authority itself will deal with any issues regarding the licensing of the company. So for example if you find a company which is misusing your trademark in their trade name you would have to complain to the Free Zone Authority. However if you become aware of a suspect of shipment coming into the port, you will have to complain to Dubai Customs or hope that Dubai Customs pick up on this in order to try and stop those products coming into the market.

That's the initial introduction from me to free zones and the UAE.

Kate: Thank you Jon. That really demonstrates, 17,000,000 containers per annum shows the scale and importance of trade in these areas.

Jamie does the free trade zone in China work in the same way and where are the free trade zones located?

Jamie Rowlands: Well yes Kate, in China the free trade zones work in very much a similar way to that which Jon's just explained. Broadly speaking the zones were set up to encourage global trade and promote economic growth and that's both internally and externally and there are a number of ways that the zones demonstrate that.

Firstly there is a real benefit to companies to register in the free trade zone and particularly foreign companies and the reason for that is there is a far less stringent regulatory framework. That can be seen in a number of ways so for example that I have mentioned on the slides a company set up process in the free trade zone is very much streamlined and that is quite a big deal in China because setting up a business as a foreign entity requires an awful lot of red tape, it takes a long time. One has to go to a number of different authorities and it can really be a painstaking process. To set up in a free trade zone gets rid of much of that problematic red tape and can be seen as a very attractive force. In addition to that there is also attractive tax breaks particularly around issues such as corporation tax. Over and above that there are special trade regulations for free trade zones in China so for example one can establish virtual offices in many of the free trade zones and again that is not something that is committed in much of mainland China particularly for foreign companies. As Jon touched on the zones, certainly the financial and business free trade zones, are very much set up to...