The Bureau of Industry and Security is buried within an organization “hostile to the aggressive use of export controls,” and should be moved from the Commerce Department to the State Department, which puts national security first, said Sen. Tom Cotton, R-Ark., Thursday during a Reagan Presidential Foundation program. Cotton wants the Office of Foreign Assets Control (see 2102190012) expanded and sanctions applied to those who steal intellectual property from U.S. firms and to those companies that profit from that theft. “Huawei has been effectively cut off from most high-end U.S. chips; the United States should ensure ZTE is cut off, as well. When the next Huawei or ZTE arises, the government should deal with it in the same manner,” he wrote. He said the U.S. should aim to bankrupt Huawei and ZTE through further sanctions and cut them off from the U.S. financial system. Cotton, who co-sponsored the Creating Helpful Incentives to Produce Semiconductors for America Act (see 2102180023), said work is underway to fund the act. Commerce, Huawei, ZTE and the Chinese Embassy didn't comment Friday.
Trade groups representing intellectual property rightsholders told the Patent and Trademark Office that secondary trademark infringement liability hasn't been effective in getting e-commerce platforms to police themselves. Some want Congress to define the parameters of this doctrine by passing a law. Comments were due Monday. The Computer and Communications Industry Association said shifting responsibility to platforms would reduce voluntary cooperation and wouldn't decrease the number of counterfeits for sale. The American Apparel and Footwear Association said the test of platform liability, that a company should “know or have reason to know” of trademark infringement, seems straightforward, but courts have applied it differently. “The court in Tiffany v. eBay believed that market-based forces would provide a strong incentive for platforms to combat counterfeits. Empirically, it is irrefutable that this assumption is false," said AAFA. The Shop Safe Act (HR-6058) from the last session of Congress would have created a new form of secondary liability for counterfeits, and AAFA said it needs a clearer definition and its coverage should be expanded. The National Association of Manufacturers said legislation is needed to set “judicial review standards that encourage courts to develop critical fact-specific case law.” NAM said some courts say Communications Decency Act Section 230 protections for platforms give them a safe harbor to host sellers of bogus goods, and that wasn't what Congress intended. Amazon noted that in 2019 it invested more than a half-billion dollars to fight counterfeits and other fraud and abuse on its site. “Amazon’s primary focus is on preventative, technology-driven tools built on machine learning and data science to proactively scan the more than 5 billion changes submitted to Amazon’s worldwide catalog" daily, it commented. “For every one of the self-service takedowns by brands, Amazon’s automated protections proactively stop more than 100 listings.” It said it launched a Counterfeit Crimes Unit in June 2020: "Amazon needs the help of rights holders, the company said, and information sharing, from both [Customs and Border Protection] on seizures and from other platforms, would help the company stop counterfeiters."
The 2020 report on "notorious" world markets for counterfeit and pirated goods, published Thursday by the Office of the U.S. Trade Representative, focused heavily on websites and apps where one can readily download or stream pirated movies, shows, music and videogames, but also expressed renewed concern about the ease of buying counterfeit goods online based on photos of legitimate products.
Commerce Department rules for reviewing transactions involving some foreign telecom and IT products and services would cost all 4.5 million firms possibly affected as much as $20 billion, the department says in Tuesday's Federal Register. The rule allows Commerce to step in to review any proposed, ongoing or pending ITCS goods or services transaction. The rule provides for an optional "licensing" process whereby companies can request a review of their transaction and, if approved, get safe harbor. Procedures for the licenses will be published by Commerce in 60 days, the rule said. Included in the new supply chain rules are information or communications technology used in a critical infrastructure; software, hardware and services integral to wireless local area networks, mobile networks, satellite payloads and operations and control; software or hardware that has sensitive personal data on more than 1 million U.S. customers; and software designed for communicating via the Internet used by more than that number.
The top Republican on the House Ways and Means Committee supports extending Trade Act Section 301 tariff exclusions on Chinese imports automatically instead of through burdensome notice and comment proceedings, he told reporters Wednesday. The Trump administration should alleviate “the energy and effort that businesses have to undertake to extend these exclusions right now when they frankly have bigger fish to fry,” said Rep. Kevin Brady, R-Texas. He said he expressed his views to U.S. Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross. Brady supports bipartisan legislation sponsored by fellow Ways and Means member Rep. Jackie Walorski, R-Ind., and House Agriculture Committee Chairman Collin Peterson, D-Minn., that would direct USTR to extend expiring exclusions for at least a year, but would give the agency some discretion when it disagrees (see 2007170050). U.S. businesses should be “focused on surviving” the COVID-19 pandemic and keeping people employed instead of scrambling to find non-Chinese sourcing or arguing for an exclusion extension, Brady said. USTR and Commerce didn’t comment Thursday.
It's not enough to restrict sales of chips to Huawei, and convince allies not to use the Chinese company in their 5G networks, experts said at a Senate Banking Committee Economic Policy Subcommittee hearing Wednesday. Rather, they testified, both 5G and export controls should be looked at more broadly. Martijn Rasser, senior fellow in the Center for a New American Security's Technology and National Security Program, said 5G networks will be essential to all the U.S. does in technology, so getting it right is urgent. Of talk of the U.S. buying an equity stake in Nokia or Ericsson, or creating its own "national champion" company in telecom equipment, that's "nibbling at the edges of the question," he said: Networking is an oligopoly, "which is why I’m advocating for a whole new approach." Rasser suggests the U.S. should convince allies to support open radio access networks. He said U.S. companies are strong in software, and this approach would make the industry more competitive. Tim Morrison, senior fellow at the Hudson Institute, said the way to win the economic competition with China is through a trade agreement similar to the Trans Pacific Partnership, leaving developing countries out except Mexico, and adding the U.K. and South Korea. Michigan State University Economics professor Lisa Cook, who agrees intellectual property theft is a problem in China, said it's ironic, because Chinese inventors are receiving more and more U.S. patents to protect their own innovations. "On the other hand, when I was in China," she said, the people she met told her because China "is a developing country, it deserves to have intellectual property rights abrogated." Rasser said export controls on semiconductors aren't as effective as putting them on chipmaking equipment. China's embassy didn't comment.
The Office of the U.S. Trade Representative received some 380 comments on the possibility of punishing Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain, Turkey and the U.K. if they start collecting digital service taxes as proposed. USTR is also considering punishing the EU, which is considering a unionwide DST. Trade groups that are concerned about the proposed DSTs -- including the U.S. Chamber of Commerce -- asked the U.S. to continue working toward a global solution through the Organization of Community and Economic Development. Tech groups are less worried about such penalties over other countries' DSTs. "Contrary to some press accounts, the Chamber understands real progress has been achieved in some aspects of the negotiations under way," it wrote. Associations whose tech members would be most affected by DST didn't discourage the use of tariffs. The Information Technology Industry Council said Belgium and Kenya should also be in the crosshairs, because they are also considering such taxes. The Computer & Communications Industry Association praised the use of tariff threats on France's DST, suggesting it could be effective again. "CCIA takes seriously the impact that tariffs can have and, as a general policy view, believes that they only be used in limited circumstances, in a targeted manner, and where there is a clear strategy in place designed to change the behavior of a trading partner. In the French case, it was encouraging that this strong action led to the temporary pause of collection on behalf of the French government in January 2020." The docket is USTR-2020-0022 and here. USTR announced this month it's delaying duties on French goods for now (see 2007100057).
Rep. Suzan DelBene, D-Wash., is worried the participation of “so many countries” at the World Trade Organization in e-commerce talks -- including China -- will mean the result won't be a high-standard agreement. The House Ways and Means Committee member who also leads on trade in the New Democrat Coalition, DelBene represents a western Washington district that includes Microsoft headquarters. During a Washington International Trade Association interview Wednesday, she agreed tax policy should be rethought, and no longer so focused on physical goods, but said digital services taxes proposed in Europe are discriminatory. She said negotiations at the Organization for Economic Cooperation and Development need to be given time to work. U.S. Trade Representative Robert Lighthizer testifies next week in virtual hearings by the Ways and Means Committee and Senate Finance Committee.
The Trump administration's "biggest focus" in its trade relations with China is implementing the phase one deal that takes effect Friday, Treasury Secretary Steve Mnuchin told a Senate Finance Committee hearing Wednesday on the administration's proposed fiscal 2021 budget. Implementing phase one has "slowed down" amid the coronavirus epidemic, said Mnuchin, a top negotiator in the phase one talks with China. Implementing phase two could come gradually, he said. President Donald Trump "doesn't want to set arbitrary timelines," he said. That the administration has left "significant tariffs" in place on Chinese imports gives the Chinese incentive to work with the U.S. on phase two, he said. When Sen. Ben Sasse, R-Neb., expressed skepticism that China would follow through on its phase one commitments on forced technology transfer or intellectual property reforms. Mnuchin replied, "The difference here is this agreement has real enforcement."
President Donald Trump's recent executive order to strengthen e-commerce enforcement may pose hurdles to trade professionals, experts told us. The EO (see 2001310061) is ambiguous, and how Customs and Border Protection plans to heed the order's call to restrict access to importer of record numbers based on customs and intellectual property rights violations is unclear, said Sandler Travis lawyer Paula Connelly in an interview. The EO says customs brokers and express shippers would be responsible for determining if a foreign importer is trying to get around a past debarment, for instance, by changing the company's name. National Customs Brokers & Forwarders Association of America President Amy Magnus said brokers aren't investigators, but “there’s going to be an expectation that we’re going to be more involved in the vetting and sort of screening of all parties.” The White House didn't comment Tuesday.