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Legislative Update: China, Trade Secrets, Corporate Tax, Exports

Friday, May 13, 2016
Sandler, Travis & Rosenberg Trade Report

Market Economy Status for China. The China Market Economy Status Congressional Review Act (S. 2906, introduced May 9 by Sen. Franken, D-Minn.) would require Congress to consider and approve any action by the Department of Commerce to grant market economy status to China for antidumping duty purposes. Congress would be required to consider any proposed change within 45 days and a resolution approving market economy status for China would be considered under expedited procedures.

The DOC currently considers China a non-market economy, which allows it to use a different methodology for calculating AD duty rates that typically results in those rates being higher. China is arguing that the expiration of a key provision of its World Trade Organization accession protocol this December will automatically terminate its status as an NME, which could mean lower AD duty rates on goods imported from China. However, Obama administration officials have contested this view, saying the DOC will still be able to use the NME methodology to calculate AD duties on Chinese goods if certain conditions are met.

Trade Secrets. President Obama signed into law May 11 the Defend Trade Secrets Act (S. 1890), which creates a federal civil cause of action for the misappropriation of trade secrets (customer lists, algorithms, software codes, unique designs, industrial techniques, food recipes, etc.) that models the Uniform Trade Secrets Act. A cause of action requires a showing of acquisition of a trade secret by improper means and disclosure or use of a trade secret by a person who had reason to know it was acquired by improper means or under circumstances giving rise to a duty of secrecy.

Additionally, in extraordinary circumstances a court may order an ex parte seizure based on the requisite showing that it is necessary to prevent destruction of evidence or dissemination of the trade secret. A court-ordered seizure must provide for the narrowest seizure necessary, that is least burdensome to the subject and that allows the accused to seek damages in case of wrongful or excessive seizure.

The bill also authorizes the award of damages to trade secret owners consistent with the Uniform Trade Secrets Act, including enhanced damages for willful and malicious misappropriation, and establishes economic espionage and trade secret misappropriation as RICO predicate offenses.

Corporate Tax. The Corporate EXIT Fairness Act (H.R. 5125, introduced April 29 by Rep. Doggett, D-Texas) would amend the Internal Revenue Code of 1986 to discourage corporate inversions by requiring any company that claims foreign residency for tax purposes to immediately pay taxes it owes on offshore income.

Small Business Exports. The Boosting America’s Exports Act (H.R. 5146, introduced April 29 by Rep. Bustos, D-Ill.) would (1) direct the U.S. Commercial Service to design metrics and set goals relating to new-to-exporting firms served by the agency’s programs, (2) increase resources for export assistance centers so they can conduct outreach to non-exporting firms, enhance collaboration with state and local export promotion programs, and hire additional trade specialists and staff, and (3) instruct the International Trade Administration to assess whether EACs are optimally located to reach small and medium-sized businesses and present a plan to Congress on under-performing locations to close and new locations to open.

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