[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Notices]
[Pages 7230-7234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3129]



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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
[Docket No. 301-92]


Determination of Action Concerning the People's Republic of 
China's Protection of Intellectual Property and Provision of Market 
Access to Persons Who Rely on Intellectual Property Protection

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of determination pursuant to sections 301 and 304 of the 
Trade Act of 1974, as amended (Trade Act), 19 U.S.C. 2414.

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SUMMARY: Pursuant to section 304(a)(1)(A)(ii) of the Trade Act, the 
United States Trade Representative (USTR) has determined that certain 
acts, policies and practices of the Chinese government with respect to 
the enforcement of intellectual property rights and the provision of 
market access to persons who rely on intellectual property protection 
are unreasonable and constitute a burden or restriction on U.S. 
commerce. Pursuant to section 304(a)(1)(B) and section 301(b), the USTR 
has determined that trade action is appropriate and that sanctions are 
appropriate. The sanctions will take the form of increasing duties on 
products listed in the attached Annex originating in China to 100 
percent ad valorem.

EFFECTIVE DATE: USTR's determination as to actionability and the 
specific action to be taken was made on February 4, 1995. The increased 
duties will be assessed upon all products of China identified in the 
Annex to this notice that are entered, or withdrawn from warehouse for 
consumption, on or after February 26, 1995.

ADDRESSES: Office of the United States Trade Representative, 600 17th 
Street, NW., Washington, DC 20606.

FOR FURTHER INFORMATION CONTACT:
Deborah Lehr, Director for China and Mongolian Affairs (202) 395-5050, 
Joseph Papovich, Deputy Assistant USTR for Intellectual Property (202) 
395-6864, or Thomas Robertson, Assistant General Counsel (202) 395-
6800.

SUPPLEMENTARY INFORMATION: On June 30, 1994, China was identified as a 
priority foreign country under the ``special 301'' provisions of the 
Trade Act for its failure to enforce intellectual property rights or to 
provide fair and equitable market access to persons who rely on 
intellectual property protection. On the same day, the USTR initiated 
an investigation of those acts, policies and practices of China that 
were the basis for its identification as a priority foreign country. 
See 59 FR 35558 (July 12, 1994).
    The effectiveness of China's enforcement regime is hampered by, 
among other things, internally inconsistent laws; a lack of 
transparency in the enforcement structure; a lack of protection for 
existing works; gaps in responsibility in the enforcement structure; a 
lack of consistent application of the laws throughout the central, 
provincial and local governments; a lack of funding, training and 
education; possible conflicts of interest; burdensome and 
discriminatory agency requirements that restrict foreign access to 
trademark protection; overly-broad compulsory licensing provisions; a 
failure of enforcement authorities to coordinate; and the absence of an 
effective border control mechanism.
    In the area of market access, the most serious problems with the 
Chinese system are found in the areas of audio-visual products, sound 
recordings, and published written materials. Particular concerns 
include a hidden system of internal quotas, a lack of transparency, a 
lack of consistency in application, monopoly control over the 
importation and distribution of products embodying intellectual 
property, and a prohibition on the production or distribution of 
products embodying intellectual property that is not related to the 
content of those products.

Extension of Investigation, Proposed Determinations, and Public 
Comment

    On January 5, 1995, the USTR published a notice that the six-month 
statutory deadline for the close of this investigation had been 
extended until February 4, 1995, in light of the complex and 
complicated nature of the issues involved. See 60 FR 1829, 1830 
(January 5, 1995). In that notice, the USTR also published a proposed 
determination of action and request for public comment concerning the 
proposed action. The USTR proposed to determine that China's failure to 
enforce intellectual property laws or to provide market access to 
persons who rely on intellectual property protection is unreasonable 
and discriminatory and constitutes a burden or restriction on U.S. 
commerce. If that determination were finally made, the USTR also 
proposed to increase duties on certain products of China in an amount 
equivalent to the damaged caused by the Chinese acts, policies and 
practices which formed the basis of the investigation. The USTR 
published, as an annex to the notice, a list of products from which 
specific products could be selected for the imposition of increased 
duties.
    In response to the January 5, 1995, Federal Register notice, the 
USTR and the section 301 Committee receive approximately 198 sets of 
written comments and heard the oral testimony of 53 witnesses at public 
hearings held on January 24-25, 1995. The comments primarily focused on 
the appropriateness of subjecting the products listed in the proposed 
retaliation list to an increase in duties, the levels at which duties 
on particular products should be set, and the degree to which an 
increase in duties on particular products might have an adverse effect 
on U.S. consumers, workers and industries. [[Page 7231]] 
    The United States estimates that the damage caused by China's 
failure to provide adequate intellectual property protection or market 
access for persons who rely on intellectual property protection is at 
least $1.08 billion on an annual basis. The USTR has directed the 
section 301 Committee to examine the effect on U.S. commerce of the 
export of infringing products from China to third countries.

Determination and Action

    Numerous meetings have been held with the Chinese Government on 
these issues since the initiation of this investigation. While China 
has indicated it will take some action to address U.S. concerns, issues 
remain unresolved. Consequently, pursuant to section 304(a)(1) of the 
Trade Act, the USTR has determined (1) that China's acts, policies and 
practices which formed the basis of the investigation are unreasonable 
and discriminatory and constitute a burden or restriction on U.S. 
commerce, and (2) that trade action is appropriate. Pursuant to section 
301(b) and 301(c), the USTR has decided to increase duties to 100 
percent ad valorem upon goods described in the Annex to this notice 
that are of Chinese origin. These products were selected in light of 
the comments submitted to the section 301 Committee in response to the 
January 5, 1995, notice and the testimony presented at the public 
hearing held on January 24-25, 1995.
    Accordingly, effective with respect to articles entered, or 
withdrawn from warehouse for consumption, on or after February 26, 
1995, the Harmonized Tariff Schedule of the United States (HTS) is 
hereby modified by inserting the provisions listed in the Annex to this 
notice in numerical sequence in subchapter III of chapter 99, with the 
content of the new subheadings and superior text set forth in the HTS 
columns designated ``Heading/Subheading'', ``Article Description'', and 
``Rate of Duty General'', respectively. The amount of trade affected by 
this action is equivalent to the value of the burden or restriction on 
U.S. commerce by the Chinese practices that formed the basis of the 
investigation.
Irving A. Williamson,
Chairman, Section 301 Committee.

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[FR Doc. 95-3129 Filed 2-6-95; 8:45 am]
BILLING CODE 3190-01-C