USTR Section 301 Report Says Canada Improved, China, India, Others Continue IP Violations

Canada and Colombia were removed from the priority watch list for intellectual property violations, and Tajikistan moved off the watch list, according to the Office of the U.S. Trade Representative's annual review of countries' policies on patents, trade secrets, counterfeits and piracy. Saudi Arabia was moved up to the priority watch list because of deteriorating conditions there, including "rampant satellite and online piracy," a USTR official said April 25.

China, India, Indonesia, Russia, Chile, Argentina, Kuwait, Saudi Arabia, Ukraine, Algeria and Venezuela are on the more serious priority watch list. Mexico, Vietnam, Canada, Brazil, Turkey, Colombia, Costa Rica, Dominican Republic, Thailand, Ecuador, Guatemala, Jamaica, Egypt, Barbados, Bolivia, Greece, Lebanon, Pakistan, Paraguay, Peru, Romania, Switzerland, Turkmenistan, the United Arab Emirates and Uzbekistan are on the watch list.

USTR said its officials will work on action plans for countries that have been on the priority watch list for several years, and could take enforcement actions under Section 301 -- such as the tariffs on Chinese goods levied this year -- or bring cases at the World Trade Organization.

Although the penalties could affect importers the most, an official from USTR who spoke to reporters on background about the report said it's exporters who rely on IP who suffer when countries don't have high standards. He said that about 30 percent of U.S. GDP is dependent on IP, and exporting companies in these fields support 45.5 million jobs.

The report suggested that India may not be the last country to lose Generalized System of Preferences program tariff preferences over intellectual property complaints. USTR said it is reviewing IP practices in Indonesia and Uzbekistan, after implementing a partial suspension of GSP to Ukraine over IP violations.

Tajikistan got off the list because it gave its customs agents ex-officio authority to seize counterfeits, and because it is making sure government purchases of software are not purchases of pirated software.

The report complained that "Brazil, China, Colombia, Hong Kong, India, Indonesia, Nigeria, Paraguay, Singapore, Thailand, Turkey, the UAE, and Vietnam, do not provide adequate or effective border enforcement against counterfeit and pirated goods. In addition, many listed countries’ customs officials lack authority to take ex officio action to seize and destroy such goods at the border or to take such action for goods in-transit."

"Counterfeit goods, including semiconductors and other electronics, chemicals, automotive and aircraft parts, medicines, food and beverages, household consumer products, personal care products, apparel and footwear, toys, and sporting goods, make their way from China and other source countries directly to purchasers around the world. The counterfeits are shipped either directly to purchasers or indirectly through transit hubs, including Indonesia, Turkey, and the UAE, to third country markets such as Brazil, Nigeria, Paraguay, and Thailand that are reported to have ineffective or inadequate IP enforcement systems," USTR said.

Even countries that are not on a watch list were mentioned in the report. Japan's regulation and price controls on prescription drugs and medical devices were highlighted -- an issue that USTR will bring up in bilateral trade talks. "The United States has serious concerns regarding recent policy changes to the Price Maintenance Premium (PMP), a mechanism designed to accelerate the introduction of innovative drugs to the Japanese market," the report said, adding, "The implementation of 16 the Cost-Effectiveness Assessment, a health technology assessment system, may add uncertainty for companies selling highly innovative and high-impact drugs and medical devices in Japan."

The U.S. Chamber of Commerce commended the report, and asked USTR to engage on IP issues with the EU, Korea, Japan, South Africa and Australia, in addition to some of the other countries on the watch lists.