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U.S. Investigation of Chinese Trade Practices Under Section 301

Section 301 Investigation of China Launched; Companies Should Consider Options to Protect Interests

Thursday, August 24, 2017
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative has initiated a Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. While the practices to be examined in this investigation will be specific, any potential relief (e.g., additional tariffs or import restrictions) could be imposed on a broader basis. As a result, any company doing business with China should participate in this investigation to ensure that its interests are protected.

A public hearing will be held Oct. 10, written comments and requests to appear at the hearing are due by Sept. 28, and post-hearing rebuttal comments are due by Oct. 20. USTR’s determination on whether and what kind of action to take against China is due by Aug. 18, 2018.

In this investigation USTR will evaluate whether the acts, policies, and practices at issue are unreasonable or discriminatory and burden or restrict U.S. commerce. Unreasonable actions are those that, while not necessarily in violation of or inconsistent with the international legal rights of the U.S., are otherwise unfair and inequitable.

This investigation will examine four specific types of conduct by the Chinese government.

- using tools such as administrative approval processes, joint venture requirements, and vague or unwritten rules to require or pressure U.S. companies to transfer technologies and intellectual property to Chinese companies

- policies that deprive U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations with Chinese companies

- directing or facilitating investment in and/or acquisition of U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property in specific industries

- conducting or supporting unauthorized intrusions into U.S. commercial computer systems or cyber-enabled theft of intellectual property, trade secrets, or confidential business information 

However, interested parties may also submit information on other Chinese acts, policies, and practices relating to technology transfer, intellectual property, and innovation that might be included in this investigation and/or addressed through other applicable mechanisms.

Relief under Section 301 is normally not limited to the specific industry against which the action is brought but instead affects other sectors in an effort to influence a change in the offending behavior. For example, in a previous dispute the U.S. responded to European Union restrictions on imports of hormone-treated beef by imposing retaliatory duties on chocolate, water, tomatoes, cheeses, and similar products.

Companies interested in avoiding the imposition of such measures on their imports should participate in this investigation to advise USTR on why relief under Section 301 would not be appropriate. For more information or assistance, please contact Kristen Smith at (202) 730-4965 or David Craven at (312) 279-2844.

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