USTR Special Section 301 Report Identifies 36 Countries for IP Infringement Watch Lists

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The Office of the United States Trade Representative (USTR) released its annual Section 301 report late last week, covering intellectual property protection by U.S. trading partners and its so-called Notorious Markets List.

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The Trump administration utilized Section 301 of the Trade Act of 1974 to impose heavy duties on Chinese goods last year, to the tune of $250 billion worth of imports. The move came on the heels of long-standing U.S. criticism of what it sees as China’s unfair trade practices, including forced technology transfer and intellectual property violations, among others. (China retaliated last year with $110 billion worth in tariffs on U.S. goods.)

“The Special 301 Report identifies trading partners that do not adequately or effectively protect and enforce intellectual property (IP) rights or otherwise deny market access to U.S. innovators and creators that rely on protection of their IP rights,” a USTR release stated.

According to the release, countries presenting the “most significant concerns regarding IP rights” are placed on either the Priority Watch List or Watch List. In total, the report identifies 36 countries qualifying for inclusion on either of the two lists.

The countries listed under Priority Watch were: Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Saudi Arabia, Ukraine and Venezuela.

Meanwhile, the Watch List included: Barbados, Bolivia, Brazil, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Greece, Guatemala, Jamaica, Lebanon, Mexico, Pakistan, Paraguay, Peru, Romania, Switzerland, Thailand, Turkey, Turkmenistan, the United Arab Emirates, Uzbekistan and Vietnam.

“These trading partners will be the subject of increased bilateral engagement with USTR to address IP concerns,” the USTR release stated. “Specifically, over the coming weeks, USTR will review the developments against the benchmarks established in the Special 301 action plans for countries that have been on the Priority Watch List for multiple years. For such countries that fail to address U.S. concerns, USTR will take appropriate actions, such as enforcement actions under Section 301 of the Trade Act or pursuant to World Trade Organization or other trade agreement dispute settlement procedures, necessary to combat unfair trade practices and to ensure that trading partners follow through with their international commitments.”

The full Section 301 report can be read here.

The report also features a Notorious Markets List, which includes markets “reported to engage in and facilitate substantial copyright piracy and trademark counterfeiting.” The report identifies 33 online markets and 25 physical markets under the Notorious Markets List.

“This activity harms the American economy by undermining the innovation and intellectual property rights of U.S. IP owners in foreign markets,” the USTR said. “An estimated 2.5 percent, or nearly half a trillion dollars’ worth, of global imports are counterfeit and pirated products.”

The physical markets section of the report highlights China’s role in the distribution of counterfeit products.

“As in past years, several commenters continue to identify China as the primary source of counterfeit products,” the Notorious Markets List report states. “Together with Hong Kong, through which Chinese merchandise often transships, China accounted for 78 percent of the value (measured by manufacturer’s suggested retail price) and 87 percent of the seizures by CBP in 2017.

“Some Chinese markets, particularly in larger cities, have adopted policies and procedures intended to limit the availability of counterfeit merchandise. However, these policies are not widely adopted and enforcement 32 remains inconsistent.”

The full report on the Notorious Markets list, including full listings for each online and physical market, can be found here.

The U.S. Chamber of Commerce issued a statement on the heels of the USTR’s release of the special report, calling global IP laws “under-developed” despite “steps in the right direction.”

“Despite steps in the right direction, overall global IP laws remain under-developed, denying cutting-edge American businesses a return of fair value on their innovations and creativity, and leaving many countries unprepared to meet the challenges and opportunities of a 21st century knowledge economy,” said Patrick Kilbride, the U.S. Chamber of Commerce’s senior vice president of the Global Innovation Policy Center, said in a prepared statement. “Lack of enforcement to protect copyright rights-holders; misuse of competition enforcement; price controls; compulsory licenses; and undermining IP protections through multilateral organizations favor domestic commercial interests at the expense of innovators, creators, and consumers around the world.”

Kilbride also highlighted the pending United States-Mexico-Canada Agreement (USMCA), saying the “USMCA and the forthcoming FTAs provide an opportunity to strengthen IP protections around the world.”

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“We applaud the negotiation team on the completion of the USMCA and urge Members of Congress to recognize the benefits of the agreement,” Kilbride added. “GIPC benchmarked the USMCA against the IP standards included in the U.S. Chamber’s International IP Index. The research reveals a significant improvement from the original NAFTA, which scored a mere 48 percent while the USMCA scored 80 percent.”

The USMCA must be approved by each country’s legislature before the agreement can go into effect.

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