Commenters call for China to be identified for the 15th straight year as a country of major intellectual property concerns.
The Rail Security Alliance (RSA) said U.S. Section 301 tariffs on Made in China 2025 products have been effective in addressing intellectual property issues and anticompetitive tactics by China’s state-owned enterprises, as China continues to target modern rail assets in step with its strategic economic plan.
In comments to the Office of the U.S. Trade Representative, RSA urged for China to be listed for the 15th straight year on the USTR 2019 Special 301 Report’s Priority Watch List, the designation for countries deemed by the United States as posing the greatest IP-related dangers to U.S. companies that engage in foreign commerce.
Yearly Special 301 reports reflect the outcome of a congressionally mandated annual review of the status of foreign countries’ IP protection and enforcement.
USTR collected comments through Thursday to inform its 2019 Special 301 Report, set to be released on about April 26.
Advanced rail equipment is one of 10 strategic sectors targeted by Beijing’s Made in China 2025 initiative, and China’s state-owned rail conglomerate, China Railway Rolling Stock Corp., has built a rail manufacturing “beachhead” in the U.S., which, left unchecked, will allow huge amounts of Chinese rail exports to the U.S. to the detriment of U.S. manufacturing jobs and businesses, RSA said.
“To date, the Section 301 tariffs have had a modest impact in deterring China’s practices targeting rail manufacturing,” RSA said. “But there is every reason to expect that they are critically necessary to provide relief for U.S.-based manufacturers who know that, if tariffs are lifted, China will use its government-controlled manufacturing operations in the United States to ship vast quantities of rail products into the country at below-market prices, displacing U.S. manufacturing and creating a deep economic security threat across the sector.”
As CRRC has used anticompetitive tactics to secure several high-value rail contracts in cities including Boston, Philadelphia, Chicago and Los Angeles, several other transit agencies that reportedly contemplated contracting with CRRC delayed awarding those contracts or denied CRRC’s bids, after the U.S. announced tariffs on rail equipment from China, RSA said.
These occurrences send “a strong signal that these tariffs may be having an important, if initial, beneficial impact,” the alliance said.
In separate comments, the National Association of Manufacturers (NAM) noted a 2017 report by the Commission on the Theft of Intellectual Property finding that stolen ideas, brands and inventions remove up to $600 billion from the U.S. economy, almost double the amount stated in a commission report four years prior.
Like RSA, NAM focused much attention at China, noting that the latest Customs and Border Protection statistics (2017) show over three-quarters of all counterfeits by value seized at U.S. borders originate in the country.
But the China Chamber of International Commerce (CCOIC) submission to USTR countered the views of various U.S. stakeholders like RSA and NAM.
CCOIC said no evidence exists of a link between technology transfer and China’s venture capital investments, including in U.S. emerging technology sectors, and noted its “well-established legal system against infringements and counterfeits,” pointing to regulations such as a 2018 revision of the Implementing Regulations of the People’s Republic of China on the Customs Protection of IPRs.
India, South Korea and Singapore “remain consistent sources” for counterfeits imported into the U.S., and Bangladesh, Canada, Pakistan, Taiwan, Turkey and Vietnam also make “recent and repeat appearances” as top sources for counterfeits, NAM said.
Boosting the “authority and political will” of customs officials in key markets to seize and destroy counterfeits originating within their customs territory as well as within free trade zones, which often fall under more lax regulations or inspections, is integral to battling counterfeiters, NAM said.
NAM also commended 2018 Priority Watch List member Canada for recent and planned changes to several core IP laws, including revisions to both its Industrial Design Act, in effect as of Nov. 5, 2018, and its Trademark Law, in effect as of June 17, 2019, as well as anticipated changes to its Patent Rules.
But both NAM and the American Apparel and Footwear Association (AAFA) cited remaining concerns about Canada’s approach to IP.
Despite the fact that some AAFA members register IP, they haven’t actually seen any seizures of products infringing on a firm’s IP, and the Royal Canadian Mounted Police is “completely inactive” on trademark and counterfeiting matters, AAFA said.
“Some members note that any issues they discover in Canada are typically handled through civil actions given the lack of support from law enforcement and Customs,” AAFA said.
The group also suggested USTR should look into IP enforcement in Spain, where illegal street vendors “have now covered” major cities like Barcelona and Madrid, offering for sale counterfeits from dozens of brands.
In 2018, Spain was neither on the Special 301 Priority Watch List nor on the Watch List, which designates countries that lack effective IP protections but don’t pose threats as severe as countries on the Priority Watch List.
USTR collects comments for Special 301 review
