Keep copies of invoices and supplier documentation for every shipment; avoid purchasing goods priced significantly below market rates: if an employee buys counterfeit products, the employer can still be held legally responsible.

20. Keep copies of invoices and supplier documentation for every shipment; avoid purchasing goods priced significantly below market rates: if an employee buys counterfeit products, the employer can still be held legally responsible.

Cost: Zero upfront expense. For each batch of goods, retain essential paperwork: purchase contracts, invoices, payment records, the supplier’s business license, and any authorization documents. Implement a company policy requiring all buyers to sign off on purchases; under no circumstances should items priced far below market value be accepted. The real challenge lies in resisting the temptation to purchase seemingly profitable low-cost goods.

In plain terms: Selling counterfeit merchandise can lead to criminal penalties. If the illicit profits exceed 30,000 RMB or if total sales reach 50,000 RMB, the offender faces up to three years in prison. Even unsold inventory in storage counts toward these thresholds. Merely claiming “I didn’t know it was fake” is not a valid defense: if purchase prices are markedly lower than market rates without a reasonable explanation, guilt is presumed. Maintaining proper purchase contracts, invoices, payment records, and supplier details provides a crucial legal safeguard.

Benefit: Intentional sale of goods bearing counterfeit trademarks incurs serious legal consequences. When illicit earnings surpass 30,000 RMB or total sales reach 50,000 RMB, imprisonment for up to three years and monetary fines are likely. In cases where these figures are ten times higher, sentences range from three to ten years alongside substantial penalties. Un sold stock also contributes to this calculation; if its value triples the sales threshold, criminal liability applies automatically. The burden of proof lies with defendants to demonstrate genuine ignorance, but judicial interpretations issued in 2025 outline five circumstances where intent is deemed evident regardless of personal admission. These include visible tampering with trademarks, possession of forged authorization papers, prior convictions for similar offenses, purchasing goods at inexplicably low prices, and attempting to conceal evidence after detection. Corporate entities face dual penalties: financial fines imposed on the company itself and individual executives held accountable under identical statutes. Consequently, even when employees execute unauthorized purchases, senior management ultimately bears legal responsibility. Conversely, trademark law offers a defense mechanism: if sellers can prove they lawfully acquired products and identify their source, they avoid compensation obligations. Essential documentation—specifically invoices and supplier records—forms the backbone of this protection; lacking them nullifies any claim of innocence (applicable nationwide; judicial interpretation effective April 26, 2025).

Evidence grade: A

Sources: Standing Committee of the National People's Congress (2020). Criminal Law Amendment (11) (Items 17 and 24, namely Articles 214 and 220 of the Criminal Law). <https://www.spp.gov.cn/zdgz/202012/t20201227_503682.shtml>; Supreme People's Court of China, Supreme People's Procuratorate of China (2025). Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Intellectual Property Infringement (Fashi [2025] No. 5, effective from April 26, 2025). <https://www.spp.gov.cn/xwfbh/wsfbt/202504/t20250424_693977.shtml>; Standing Committee of the National People's Congress (2019). Trademark Law (amended in 2019, Articles 57 and 64; revised to Articles 72 and 78 on June 26, 2026, effective from January 1, 2027). <https://www.cnipa.gov.cn/art/2019/7/30/art_95_28179.html>, <https://www.cnipa.gov.cn/art/2026/6/26/art_95_206942.html>

Notes: Cosmetics, alcoholic beverages, baby products, electronics, and apparel frequently involve such legal disputes due to substantial price variations among identical items. Marketing terms like “exclusive channel stock,” “end-of-line clearance,” or “duty-free imports” cannot substitute for proper documentation. Beyond criminal penalties, administrative sanctions apply: convicted parties forfeit infringing merchandise and tools, while fines up to five times the illegal revenue may be imposed for operations exceeding 50,000 RMB in value. Upon discovering questionable purchases, immediately cease sales, secure the inventory, and contact brand representatives or regulatory authorities—destroying records or merchandise directly triggers the fifth presumption of intent mentioned earlier. For trademark-related matters, refer to Section 21 regarding permissible usage of third-party designs. A common scam involves strangers offering free merchandise in exchange for retail distribution; later, they claim infringement based on missing paperwork and abnormally low purchase prices, effectively negating all defenses. Legitimate consignment arrangements mandate written contracts, copies of supplier identification and business licenses, and explicit clauses defining ownership and liability boundaries.