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February 22 2013 Issue

Friday, February 22, 2013
Sandler, Travis & Rosenberg Trade Report

Obama Administration Announces Strategy to Mitigate Theft of U.S. Trade Secrets

The White House released Feb. 20 a strategy for mitigating the theft of U.S. trade secrets. The introduction to the strategy states that it reflects a commitment to act vigorously to combat the theft of trade secrets that could be used by foreign companies or foreign governments to gain an unfair economic edge. However, many of the specific initiatives set forth in the strategy are merely a continuation of existing efforts.

According to the introduction, emerging trends indicate that the pace of economic espionage and trade secret theft against U.S. corporations is accelerating. Foreign competitors of U.S. corporations, some with ties to foreign governments, have increased their efforts to steal trade secret information through the recruitment of current or former employees. There are also indications that U.S. companies, law firms, academia and financial institutions are experiencing cyber intrusion activity against electronic repositories containing trade secret information. These activities threaten U.S. businesses, diminish U.S. export prospects and undermine U.S. national and economic security.

The areas of focus for this strategy are as follows.

Diplomatic Efforts. Other governments “must recognize that trade secret protection is vital to the success of our economic relationships and that they must take steps to strengthen their enforcement against trade secret theft.” The U.S. will therefore continue to apply sustained and coordinated diplomatic pressure, including by the most senior levels of the administration, on other countries to discourage trade secret theft.

Trade Policy Tools. The U.S. Trade Representative will make additional efforts to promote the adequate and effective protection and enforcement of trade secrets, including targeting weaknesses in trade secret protection through enhanced use of the annual Special 301 process and seeking through trade negotiations new provisions on trade secret protections requiring parties to make available remedies similar to those provided for in U.S. law.

International Law Enforcement Cooperation. Federal law enforcement agencies will encourage cooperation with their foreign counterparts to enhance efforts to pursue domestic investigations of trade secret theft by foreign entities and encourage foreign law enforcement to pursue those targets themselves. The Department of Justice and the Federal Bureau of Investigation, in collaboration with the departments of Homeland Security and State, will include trade secret theft awareness and enforcement instruction in applicable international law enforcement training forums and country-specific training missions.

Best Practices by Private Industry. The U.S. Intellectual Property Enforcement Coordinator will help facilitate efforts by organizations and companies to develop and adopt voluntary, industry-led best practices to protect trade secrets and will help highlight those practices. Areas that may be considered for voluntary best practices include research and development compartmentalization, information security policies, physical security policies and human resources policies. However, such guidelines are intended solely to offer suggestions and are not designed to be a minimum standard of protection.

Domestic Law Enforcement. The DOJ will continue to make the investigation and prosecution of corporate and state-sponsored trade secret theft a top priority. The FBI is expanding its efforts to fight computer intrusions that involve the theft of trade secrets by individual, corporate and nation-state cyber hackers.

Information Sharing. The Office of the Director of National Intelligence will coordinate expanded discussions between the intelligence community and the private sector, focusing on (1) the number and identity of foreign governments involved in trade secret misappropriation, (2) the industrial sectors and types of information and technology targeted by such espionage, (3) the methods used to conduct such espionage and (4) the dissemination, use and associated impact of information lost in trade secret misappropriation. ODNI will also share threat warning and awareness information with the private sector, including by briefing trade association groups and conferences on industry-specific threats, and impart counterintelligence tradecraft procedures tailored to the private sector.

(The strategy notes that in its November 2011 report to Congress the Office of the National Counterintelligence Executive determined that foreign collectors may have the greatest interest in the following areas: (1) information and communications technology, (2) business information that pertains to supplies of scarce natural resources or that provides foreign actors an edge in negotiations with U.S. businesses or the U.S. government, (3) military technologies, particularly marine systems, unmanned aerial vehicles and other aerospace/aeronautic technologies, and (4) civilian and dual-use technologies in sectors likely to experience fast growth such as clean energy and health care or pharmaceuticals.

The ONCIX also explored characteristics that make U.S. businesses more vulnerable to trade secret misappropriation, including the use of portable devices, globalization of economic activities, and digitization of business records, research results and other sensitive economic or technology-related information.)

Legislation. President Obama has signed into law two pieces of legislation that will have “an immediate and positive impact” on prospective trade secret prosecutions. The Theft of Trade Secrets Clarification Act of 2012 closed a loophole in the Economic Espionage Act that had allowed the theft of trade secret source code and the Foreign and Economic Espionage Penalty Enhancement Act of 2012 bolstered criminal penalties for economic espionage and directed the U.S. Sentencing Commission to consider increasing offense levels for trade secret crimes. The IPEC will initiate and coordinate a process to review existing laws and determine if further legislative changes are needed. 

Dates and Deadlines: Services Pact, GSP, Incoterms, Child Products, CBP Notices

Following are highlights of regulatory effective dates and deadlines and federal agency meetings coming up in the next week.

Feb. 25 – deadline for comments on proposed extension of CBP Form 3299, Declaration for Free Entry of Unaccompanied Articles

Feb. 25 – deadline for comments on proposed safety standards for bedside sleepers and handheld infant carriers

Feb. 26 – deadline for comments on International Services Agreement

Feb. 26 – ST&R webinar on products believed to be made with forced or child labor

Feb. 27 – ITC hearing on potential modifications to list of products eligible for duty-free treatment under GSP

Feb. 27 – ST&R webinar on Incoterms 2010

Feb. 28 – effective date of final rule establishing new safety standard on play yards

Feb. 28 – STTAS webinar on benefiting from EU free trade agreements

Feb. 28 – USTR hearing on GSP product petitions and CNL waivers

Feb. 28 – effective date of CBP final rule allowing for publication of notices of seizure and intent to forfeit on an official government forfeiture Web site

Feb. 28 – FDA meeting on proposed rules on preventive controls and produce safety

Feb. 28 – deadline for comments on possible exclusion order on kinesiotherapy devices

Feb. 28 – deadline for requesting administrative reviews of antidumping and countervailing duty order 

Updated Status of GSP Country Practice Reviews

The Office of the U.S. Trade Representative has issued notice of the following actions on petitions requesting a review of certain country practices under the Generalized System of Preferences.

- deferred a decision on acceptance of a petition concerning expropriation in Russia

- closed its review of intellectual property rights in Lebanon in view of progress made by the government of that country in addressing IPR issues and a resulting request by the petitioner to withdraw its petition

- scheduled a March 28 hearing in Washington, D.C., to receive information regarding recent developments pertinent to its ongoing country practice reviews regarding worker rights and/or child labor in Bangladesh, Georgia, Niger, the Philippines and Uzbekistan and IPR protection in Russia and Uzbekistan (pre-hearing briefs and requests to appear due by March 14; post-hearing briefs due April 18) 

USTR Invites Comments on Argentina’s WTO Complaint Against U.S. Import Restrictions

The Office of the U.S. Trade Representative is inviting through March 21 comments on the issues raised in a World Trade Organization dispute Argentina has filed against U.S. measures affecting the importation of animals, meat and other animal products from Argentina. This case was filed after the U.S. brought its own WTO complaint against trade restrictive measures imposed by Buenos Aires such as non-automatic import licenses and trade balancing requirements.

USTR states that due to the presence of foot-and-mouth disease in Argentina the Department of Agriculture’s Animal and Plant Health Inspection Service does not permit the import of fresh bovine meat (beef) from Argentina. Several years ago Argentina submitted applications for FMD-free status for two sub-national regions, which would allow imports of fresh beef (chilled or frozen) from those regions, but APHIS has yet to reach a final decision on those requests. Argentina alleges that APHIS has not processed these applications in a timely manner and that the U.S. ban on its beef in connection to FMD lacks scientific justification and is discriminatory.

Final Affirmative AD/CV Duty Determinations on Steel Sinks from China

The International Trade Administration announced Feb. 20 its final affirmative antidumping and countervailing duty determinations on drawn stainless steel sinks from China. Dumping margins range from 27.14% to 76.53% and subsidy rates range from 4.80% to 12.26%.

The ITA will now instruct U.S. Customs and Border Protection to collect AD cash deposits on entries of subject merchandise at the applicable rates. If the International Trade Commission’s final CV injury determination (which is due by April 5) is affirmative, the ITA will also instruct CBP to require CV cash deposits at the final subsidy rates while reducing the AD cash deposit rates for the export subsidies received.

The items covered by these investigations are stainless steel sinks with single or multiple drawn bowls and a smooth basin with seamless, smooth and rounded corners. Imports of subject merchandise are provided for under HTSUS 7324.10.0000 and 7324.10.0010. Specifically excluded from the scope of these investigations are stainless steel sinks with fabricated bowls, which do not have seamless corners but rather are made by notching and bending the stainless steel and then welding and finishing the vertical corners to form the bowls.

Company Fined for Exports of Unlicensed Medical Goods to Iran

The Treasury Department’s Office of Foreign Assets Control reports that a California medical supply company has agreed to pay $404,100 to settle potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations and the Reporting, Procedures and Penalties Regulations. OFAC alleged that the company violated the ITSR on 36 occasions between 2005 and 2010 when it (a) exported, or attempted to export, unlicensed medical goods and services to Iran or to a person in a third country with knowledge or reason to know that the medical goods and services were intended for supply, transshipment or reexportation to Iran and (b) engaged in transactions and dealings related to goods and/or services for exportation to Iran. OFAC also alleged that the company violated the RPPR when it failed to fully respond to two administrative subpoenas.

The base penalty amount for the alleged violations totaled $449,000. OFAC notes that the company did not voluntarily self-disclose the matter, that the alleged violations resulted from willful or reckless conduct in which the company’s senior management was directly involved, that the company actively participated in concealing the ultimate destination of its exports, and that the company continued to export unlicensed medical goods to Iran even after having received two administrative subpoenas from OFAC regarding its conduct. On the other hand, the company has not been the subject of prior OFAC enforcement action, the alleged violations constituted a non-egregious case and the exports at issue likely would have been licensed by OFAC under existing licensing policy, and the company agreed to toll the statute of limitations. 

IPR Enforcement Actions on Laminated Packaging, Microprocessors

New IPR Infringement Petition on Products with Laminated Packaging. The International Trade Commission received Feb. 20 on behalf of Lamina Packaging Innovations LLC a petition requesting that it institute a Section 337 investigation regarding certain products having laminated packaging, laminated packaging and components thereof. The proposed respondents are located in France and the U.S.

Section 337 investigations primarily involve claims regarding intellectual property rights violations by imported goods, including the infringement of patents, trademarks and copyrights. Other forms of unfair competition involving imported products, such as misappropriation of trade secrets or trade dress and false advertising, may also be asserted. The primary remedy available in Section 337 investigations is an exclusion order that directs U.S. Customs and Border Protection to stop infringing imports from entering the U.S. In addition, the ITC may issue cease and desist orders against named importers and other persons engaged in unfair acts that violate Section 337, including selling infringing imported articles out of U.S. inventory.

No IPR Import Restrictions on Microprocessors. The International Trade Commission has terminated without the imposition of import restrictions patent infringement investigation 337-TA-781 of certain microprocessors, components thereof and products containing same. This step follows the administrative law judge’s determination that the importation, sale for importation and sale within the U.S. after importation of these products was not violating certain patents owned by X2Y Attenuators LLC. 

DOT Notes Hazmat Special Permit Applications, Decisions, Delays in Processing

The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration has issued the following concerning exceptions from the Hazardous Materials Regulations.

- a list of applications for special permits for exceptions from the HMR, including for motor vehicles, rail freight, cargo vessels, cargo aircraft and passenger-carrying aircraft (comments due no later than March 25)

- a list of applications to modify previously issued special permits; e.g., to provide for additional hazardous materials, packaging design changes, additional mode of transportation, etc. (comments due no later than March 11)

- a list of actions taken on special permit applications, including modified, new and emergency permits granted or withdrawn and permits denied

- a list of special permit applications that have been in process for 180 days or more, including the reason(s) for delay and the expected completion date 

Trade Advisory Committee on Small and Minority Business to Meet March 4

The Office of the U.S. Trade Representative’s Industry Trade Advisory Committee on Small and Minority Business (ITAC-11) will hold a partially open meeting March 4 in Washington, D.C. Topics to be discussed include the launch of 2.0, the Doing Business in Africa Initiative and the Metropolitan Export Initiative.

Ex-Im Bank Considers Financing Exports of Aircraft, Vehicle Assembly Equipment

The Export-Import Bank of the United States has received an application for final commitment for a long-term loan or financial guarantee to support the export of U.S.-manufactured Boeing 737 aircraft to Mexico to provide short- and medium-haul airline service in Mexico and between Mexico and other countries in North, Central and South America. Comments on this application are due no later than March 19.

The Ex-Im Bank has also received an application for a $115 million direct loan to support the export of approximately $100 million worth of vehicle assembly equipment to India. The U.S. exports will enable the Indian company to produce approximately 330,000 vehicles per year, and available information indicates that the majority of this production will be sold in India, with the remainder sold in Mexico, the Middle East, Africa and the ASEAN region. Comments on this application are due no later than March 8. 

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