The US Trade Representative (USTR) has begun its annual review of the intellectual property-based trade barriers faced by US companies and products. The so-called “Special 301” Report identifies countries that do not provide “adequate and effective” protection of IP rights or “fair and equitable market access to United States persons that rely upon intellectual property rights.” Countries identified in the Special 301 Report may receive designations such as “Priority Foreign Countries” or be included on a “Priority Watch List” or “Watch List.” This annual review is particularly significant in the current political environment, because issues that arise in the proceedings may later form the basis of an investigation and the imposition of duties under Section 301 of the Trade Act of 1974. Beginning in March 2018, the Trump Administration imposed special duties, as high as 25%, on billions of dollars of Chinese imports under Section 301, after building on findings that had been raised under USTR’s Special 301 proceedings against China.
On December 28, 2018, USTR published the schedule for the Special 301 proceedings, with the first deadline for written comments on February 7, 2019, and a public hearing scheduled for February 27, 2019. USTR requests comments that identify “countries whose acts, policies, or practices deny adequate and effective protection for intellectual property rights or deny fair and equitable market access to US persons who rely on intellectual property protection.” The Special 301 Report is scheduled to be published on April 26, 2019, setting forth a new Priority Watch List and Watch List to “assist the Administration in pursuing the goals of the Special 301 provision.” These lists would be used to identify countries that exhibit particular problems with respect to IP rights. Countries placed on the Priority Watch List would be “the focus of increased bilateral attention concerning the problem areas.”
These proceedings may lead another country down the same path that China followed in 2017-2018. The March 2018 announcement of additional duties on Chinese products followed concerns raised about China’s IP practices in Special 301 proceedings. The subsequent Section 301 investigation concluded that Chinese policies force American companies to, among other things, transfer technology rights to Chinese enterprises. A cornerstone of the report was the finding that the ‘Made in China 2025’ initiative demonstrated China’s intent to seize economic leadership through “unfair, market-distorting behavior.”
A number of countries have remained on the Priority Watch List in recent years, like China. These countries include Algeria, Argentina, Chile, India, Indonesia, Russia, Thailand, Ukraine, and Venezuela. Next month presents an opportunity for interested parties to develop the record on the current status of the IP regimes in these countries – with potentially significant sanctions, duties, or other trade restrictions at stake.
For those interested in participating or monitoring the proceedings, here are the key dates to watch:
Dates for Action
- February 7, 2019: deadline for written comments, hearing statements, and notices of intent to appear
- February 21, 2019: deadline for written comments, hearing statements, and notices of intent to appear at the hearing from foreign governments
- February 27, 2019 Special 301 Subcommittee Hearing
- April 26, 2019: Special 301 Report published