Sandler, Travis & Rosenberg Trade Report | Wednesday, August 23, 2017
The Office of the U.S. Trade Representative has self-initiated a Section 301 investigation into China’s intellectual property practices and perceived “forced transfers” of technology to China. While the practices examined will relate to specific intellectual property transfers and related issues, the relief could be imposed on a broader basis. As such, any company doing business with China should participate in this investigation to ensure that its imports from China are protected.
USTR has announced a schedule for the receipt of comments and the holding of a hearing. Comments must be filed by Sept. 28 and a hearing will be held Oct. 10, with rebuttal or final comments due by Oct. 20. These initial comments and hearing will focus on the specific practices in China that are purportedly negatively impacting U.S. companies. If relief is determined to be appropriate, and if this investigation follows normal procedures, a second set of comments will be sought with respect to the type of relief to be granted.
The investigation is intended to provide a general overview of China’s practices and to look at four specific types of conduct.
- Chinese pressure on U.S. company operations in China to force them to transfer technologies and intellectual property to China
- Chinese government policies that deprive U.S. companies of the ability to set market-based terms for licensing
- Chinese government directed investment in U.S. companies by Chinese companies in order to obtain cutting-edge technologies and intellectual property
- Chinese government support for unauthorized intrusions into U.S. commercial computer systems and the cyber-theft of intellectual property, trade secrets, or confidential business information
Relief under Section 301 is broad in nature and is normally not limited to the specific industry against which the action is brought. Rather, it typically includes other related sectors as a means of pressuring the targeted industry. For example, in the U.S.-EU beef hormone dispute the U.S. obtained relief from European restrictions on imports of beef containing certain hormones by imposing retaliatory duties on chocolate, water, tomatoes, certain cheeses, and similar products. Relief will often be imposed on tangentially related products in sectors successfully targeted by U.S. manufacturers. As such, it is important to advocate against the imposition of duties or other restrictions on products of interest.
The best way to prevent the imposition of restrictions on your products is to participate in the investigation and provide to USTR reasons why relief under Section 301 is not appropriate. The specific nature of the presentation will depend upon a risk-benefit review of your importations.
For more information, please contact OCEANAIR Compliance at (781)-286-2700, or contact Kristen Smith at (202) 730-4965 or David Craven at (312) 279-2844 at Sandler, Travis & Rosenberg.