Tag: China

CNIPA Announces Registration of Beijing 2022 Winter Olympics Mascots and Logos

The China National Intellectual Property Administration (CNIPA) announced seven Beijing 2022 Winter Olympics and Paralympics symbols including mascots and names on January 15, 2020.  Per the Regulations on the Protection of the Olympic Symbols, the term of protection is 10 years subject to renewal terms of 10 years each.  Fines for unlicensed commercial of the symbols are up to 250,000 RMB (about $36,000 USD) or up to 5 times illegal revenue.

The 7 symbols are:

Beijing 2022 Winter Olympics Mascot

1. A000020 The Olympic Mascot

2. A000021 The Chinese characters 冰墩墩 (Bing dun dun; meaning approximately ice pier)

3. A000022 A Romanization of A000021: Bing Dwen Dwen.

Beijing 2022 Paralympic Mascot

4. A000023 The Paralympic Mascot

5. A000024 The Chinese characters 雪容融 (Xue Rongrong)

6. A000025 A Romanization of A000024: Shuey Rhon Rhon

Beijing 2022 Winter Olympics Volunteer logo

7. A000026 The 2022 Olympic and Paralympic Volunteer Logo

The 2022 Winter Olympics will take place from February 4 to February 20, 2022 in Beijing, China and Zhangjiakou, China. Beijing will be the first city to host both winter and summer Olympics.

© 2020 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more on trademark registration, see the National Law Review Intellectual Property Law page.

Bruce Lee Enterprises, LLC Sues Chinese Fast Food Chain for IP Infringement

Earlier this month, Bruce Lee Enterprises, LLC sued Shanghai Zhengongfu Fast Food Management Co., Ltd., Guangzhou Zhengongfu Catering Management Co., Ltd., and Guangzhou Zhengongfu Fast Food Chain Management Co., Ltd. (collectively referred to as Zhengongfu (真功夫)) in the Shanghai Second Intermediate People’s Court, asking Zhengongfu to cease using a Bruce Lee image (in marketing materials and signage), issue a public clarification in the media for 90 consecutive days that it has nothing to do with Bruce Lee, and requested the court to order Zhengongfu to pay 210 million yuan in economic losses and 88,000 yuan in reasonable expenses (about $30 million USD).

Zhengongfu was founded in 1990 and now has over 600 restaurants throughout China and is in the only Chinese brand in the top 5 of fast food chains in China.  Zhengongfu has been using a drawn image in store signage and marketing of a martial artist in a yellow top that is reminiscent of Bruce Lee dressed in a yellow-and-black one-piece tracksuit from the movie Game of Death.  Zhengongfu has also registered several trademarks incorporating the martial artist that Bruce Lee Enterprises, LLC alleges is Bruce Lee.  For example, in 2004, Zhengongfu filed for mark 3999537 reproduced below and registered in 2008.  There are at least eleven other Chinese trademarks bearing a similar image registered to Zhengongfu.

CN Trademark No. 3999537
This mark is regularly used in store signage as shown in the photo below of a Shanghai branch of the chain.
By WhisperToMe – Own work, CC0.

In the following screen shot from Game of Death, Bruce Lee, in a yellow-and-black tracksuit, strikes a pose similar to that in the trademark.

Still from Game of Death

The cause of action will most likely be portrait right violation, which is similar to California’s right of publicity and right of publicity for the deceased.  Portrait rights in China are protected in the General Principles of Civil Law, with relevant articles reproduced below:

Article 100 Citizens shall enjoy the right of portrait. The use of a citizen’s portrait for profits without his consent shall be prohibited.

Article 120 If a citizen’s right of personal name, portrait, reputation or honor is infringed upon, he shall have the right to demand that the infringement be stopped, his reputation be rehabilitated, the ill effects be eliminated and an apology be made; he may also demand compensation for losses.

The above paragraph shall also apply to infringements upon a legal person’s right of name, reputation or honor.

Although not explicit in the law, portrait rights in China apply to the deceased as the Supreme Court made clear in Zhou Haiying v. Shaoxing Yuewang Jewellery and Gold Co., Ltd. for violating Lu Xun’s portrait right.  The Court ruled that portrait rights continue after death and a close relative has the right sue on behalf of the deceased.  Accordingly, Bruce Lee’s daughter, Shannon Lee, may need to be a named plaintiff in the current lawsuit.

Further, other cases indicate that drawn or cartoon images of persons are also protected by portrait right.  As long as the person is identifiable in the image, portrait rights are infringed regardless of the medium (painting, sculpture, etc.).  For example, in Beijing Huariling Automobile Trading Co., Ltd. and Zhang Zhensuo (stage name: Zhang Liang), the First Intermediate People’s Court of Beijing held that a cartoon reproduction of the plaintiff violated his portrait rights.

On the other hand, Michael Jordan was less successful in the Supreme Court based on a silhouette of a basketball player not showing any facial characteristics.  The Supreme Court explained “the “portrait” protected by the right of portrait should be identifiable, which should contain enough information to enable the public to identify the corresponding right’s subject, that is, the personal characteristics of a specific natural person, so that it can clearly refer to the corresponding right’s subject…the facial features of natural persons are the most important personal characteristics of their physical features.”

Michael Jordan silhouette

In contrast, in the instant case, multiple characteristics potentially identifiable as belonging to Bruce Lee, including his facial characteristics, are present.  Accordingly, Bruce Lee Enterprises, LLC  and Bruce Lee’s daughter could prevail if the Shanghai Second Intermediate People’s Court rules that the Zhengongfu image is identifiable as Bruce Lee.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more IP infringement cases, see the National Law Review Intellectual Property law page.

U.S./China Trade “Deal” Short on IP/Trade Secret Specifics

With the announcement last week of a tentative partial trade agreement with China, the U.S. appears to be headed to a somewhat easing of tensions between the two superpowers.  Terms of the agreement are vague, with references to a reduction in tariffs, increase in agricultural purchases by China, and agreements to return to the bargaining table.

What is missing, though, are references to increases in protection of U.S. intellectual property: trade secrets, patents, copyrights, and trademarks, long espoused by the U.S.  This silence is in stark contrast to the stated goal of the U.S. that protection of U.S. intellectual property in China is among the key components to a successful and permanent trade deal.

The importance of such protection has been made manifest in several recent events.  The National Association of Manufacturers was hacked over the summer and blame was placed by investigators on Chinese nationals.  Earlier in the year, a former employee of a U.S. cast iron plant was sentenced to one year in prison after being arrested at the airport, en route to China with files of confidential information of his former employer.  Furthermore, China’s trademark register is full of foreign trademarks registered in China by its citizens.

China apparently has verbally committed as a part of an overall trade package to tighten up enforcement efforts in the IP arena.  But how does China quantify that commitment?  Such requires a change in the Chinese government’s mindset, its enforcement policies, and its recognition of the protectability of foreign trade secrets and other IP rights.  None of these can be reduced to tariff percentages, bushels or other common trade terms.  What can China offer in the way of a concrete plan to bolster protection of foreign confidential information?  Indeed, the silence of the parties as to this important issue is probably an indication of the difficulty the parties are having in reaching a verifiable agreement on IP.  With trust levels between the nations at their nadir, one can easily see how resolution of the IP protection issue may be a major stumbling block to a lasting trade agreement.  Will it become prohibitive?  Time will tell.

© 2019 Jones Walker LLP

More on IP agreements on the National Law Review Intellectual Property law page.

China’s TikTok Facing Privacy & Security Scrutiny from U.S. Regulators, Lawmakers

Perhaps it is a welcome reprieve for Facebook, Google and YouTube. A competing video-sharing social media company based in China has drawn the attention of U.S. privacy officials and lawmakers, with a confidential investigation under way and public hearings taking place on Capitol Hill.

Reuters broke the story that the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) is conducting a national security review of the owners of TikTok, a social media video-sharing platform that claims a young but formidable U.S. audience of 26.5 million users. CFIUS is engaged in the context of TikTok owner ByteDance Technology Co.’s $1 billion acquisition of U.S. social media app Musical.ly two years ago, a deal ByteDance did not present to the agency for review.

Meanwhile, U.S. legislators are concerned about censorship of political content, such as coverage of protests in Hong Kong, and the location and security of personal data the company stores on U.S. citizens.

Sen. Josh Hawley (R-Mo.), Chairman of the Judiciary Committee’s Subcommittee on Crime and Terrorism, invited TikTok and others to testify in Washington this week for hearings titled “How Corporations and Big Tech Leave Our Data Exposed to Criminals, China, and Other Bad Actors.”

While TikTok did not send anyone to testify, the company’s recently appointed General Manager for North America and Australia Vanessa Pappas, formerly with YouTube, sent a letter indicating that it did not store data on U.S. citizens in China. She explained in an open letter on the TikTok website, which reads similarly to that reportedly sent to the subcommittee, that the company is very much aware of its privacy obligations and U.S. regulations and is taking a number of measures to address its obligations.

For nearly eight years Pappas served as Global Head of Creative Insights and before that Audience Development for YouTube. In late 2018 she was strategic advisor to ByteDance, and in January 2019 became TikTok’s U.S. General Manager. In July her territory expanded to North America and Australia. Selecting someone who played such a leadership position for YouTube, widely used and familiar to Americans, to lead U.S. operations may serve calm the nerves of U.S. regulators. But given U.S. tensions with China over trade, security and intellectual property, TikTok and Pappas have a way to go.

Some commentators think Facebook must enjoy watching TikTok getting its turn in the spotlight, especially since TikTok is a growing competitor to Facebook in the younger market. If just briefly, it may divert attention away from the attention being paid globally to the social media giant’s privacy and data collection practices, and the many fines.

It’s clear that TikTok has Facebook’s attention. TikTok, which allows users to create and share short videos with special effects, did a great deal of advertising on Facebook. The ads were clearly targeting the teen demographic and were apparently successful. CEO Mark Zuckerberg recently said in a speech that mentions of the Hong Kong protests were censored in TikTok feeds in China and to the United States, something TikTok denied. In a case of unfortunate timing, Zuckerberg this week posted that 100 or so software developers may have improperly accessed Facebook user data.

Since TikTok is largely a short-video sharing application, it competes at some level with YouTube in the youth market. In the third quarter of 2019, 81 percent of U.S. internet users aged 15 to 25 accessed YouTube, according to figures collected by Statista. YouTube boasts more than 126 million monthly active users in the U.S., 100 million more than TikTok.

Potential counterintelligence ‘we cannot ignore’

Last month, U.S. Senate Minority Leader Chuck Schumer (D-NY) and Senator Tom Cotton (R-AR) asked Acting Director of National Intelligence to conduct a national security probe of TikTok and other Chinese companies. Expressing concern about the collection of user data, whether the Chinese government censors content feeds to the U.S., as Zuckerberg suggested, and whether foreign influencers were using TikTok to advance their objectives.

“With over 110 million downloads in the U.S. alone,” the Schumer and Cotton letter read, “TikTok is a potential counterintelligence threat we cannot ignore. Given these concerns, we ask that the Intelligence Community conduct an assessment of the national security risks posed by TikTok and other China-based content platforms operating in the U.S. and brief Congress on these findings.” They must be happy with Sen. Hawley’s hearings.

In her statement, TikTok GM Pappas offered the following assurances:

  • U.S. user data is stored in the United States with backup in Singapore — not China.
  • TikTok’s U.S. team does what’s best for the U.S. market, with “the independence to do so.”
  • The company is committed to operating with greater transparency.
  • California-based employees lead TikTok’s moderation efforts for the U.S.
  • TikTok uses machine learning tools and human content reviews.
  • Moderators review content for adherence to U.S. laws.
  • TikTok has a dedicated team focused on cybersecurity and privacy policies.
  • The company conducts internal and external reviews of its security practices.
  • TikTok is forming a committee of users to serve them responsibly.
  • The company has banned political advertising.

Both TikToc and YouTube have been stung by failing to follow the rules when it comes to the youth and children’s market. In February, TikTok agreed to pay $5.7 million to settle the FTC’s case which allege that, through the Musical.ly app, TikTok company illegally collected personal information from children. At the time it was the largest civil penalty ever obtained by the FTC in a case brought under the Children’s Online Privacy Protection Act (COPPA). The law requires websites and online services directed at children obtain parental consent before collecting personal information from kids under 13. That record was smashed in September, though, when Google and its YouTube subsidiary agreed to pay $170 million to settle allegations brought by the FTC and the New York Attorney General that YouTube was also collecting personal information from children without parental consent. The settlement required Google and YouTube to pay $136 million to the FTC and $34 million to New York.

Quality degrades when near-monopolies exist

What I am watching for here is whether (and how) TikTok and other social media platforms respond to these scandals by competing on privacy.

For example, in its early years Facebook lured users with the promise of privacy. It was eventually successful in defeating competitors that offered little in the way of privacy, such as MySpace, which fell from a high of 75.9 million users to 8 million today. But as Facebook developed a dominant position in social media through acquisition of competitors like Instagram or by amassing data, the quality of its privacy protections degraded. This is to be expected where near-monopolies exist and anticompetitive mergers are allowed to close.

Now perhaps the pendulum is swinging back. As privacy regulation and publicity around privacy transgressions increase, competitive forces may come back into play, forcing social media platforms to compete on the quality of their consumer privacy protections once again. That would be a great development for consumers.

 

© MoginRubin LLP

ARTICLE BY Jennifer M. Oliver of MoginRubin.
Edited by Tom Hagy for MoginRubin LLP.
For more on social media app privacy concerns, see the National Law Review Communications, Media & Internet law page.

The Fairness for High-Skilled Workers Act May Endanger Economy

The Fairness for High-Skilled Workers Act has passed the House of Representatives, and is pending before the Senate where it may pass by unanimous consent (i.e., with no actual vote or hearing).

On its face, the Fairness Act seems fair. By eliminating the 7% per country cap, Indian nationals and Chinese nationals who have been waiting and would continue to wait for years to capture green cards would be placed at the front of line. But this would be at the expense of workers from other countries who are also important to the United States.

About 25% of all STEM workers in the U.S., including those in the fields of healthcare, physical science, computer, and math, are foreign-born and that figure is on the rise. One quarter of all doctors in the U.S. are foreign-born — many from sub-Saharan Africa — and are particularly important in poor, rural areas of the country where physicians are scarce. One in five pharmacists and one in four dentists are foreign-born. Other types of healthcare workers come from Asia, Mexico, Central America, and the Caribbean and our need for these workers rises as baby boomers age.

If the Fairness Act were to pass, recruiting from countries other than India and China might become more difficult, and this talent may well turn elsewhere. New Zealand, Ireland, Australia and the UK are also dependent on foreign-trained doctors.

High-tech workers from India and China are also important to the U.S. and its economy; but our current immigration system is driving them out as well. This started in 2008, when it became difficult for high-tech companies to get the number of H-1B visas they needed. That frustration has grown with the increased scrutiny of H-1B petitions and the long green card waiting lines. Indian and Chinese talent is heading for other countries, and Canada is welcoming them and their companies with open arms. South Africa, Argentina, India, Chile, Japan, Hong Kong, South Korea, Israel, Australia, and Ireland also are popular competitors.

Quotas of one kind or another have been part of the U.S. immigration system since the early part of the 20th century. Literacy requirements limited immigration from some of the poorer countries of the world. Country-of-birth quotas benefited those from the UK, Ireland, and Germany at the expense even of those born in southern and eastern Europe. The 1965 Immigration and Nationality Act (the Hart-Celler Act), which is the basis of our current system, abolished national origin quotas (to eliminate discrimination) and focused on family reunification. The 7% annual ceiling on the number of immigrants from any one country was established. The ceiling was not meant to be quota, but rather a “barrier against monopolization.”

Senator Rand Paul, who opposes the Fairness Act, introduced the BELIEVE Act (Backlog Elimination, Legal Immigration and Employment Visa Enhancement Act) (S. 2091) on July 11, 2019. That bill would simply quadruple the number of employment-based visas by doubling the number available annually and exempting dependents from being counted toward the annual quota of visas. His bill also would exempt all shortage occupations from green card limits.

The Fairness Act may be just an interim solution. Rather than pitting family-based immigration against employment-based immigration and rather than pitting one country against another or one industry against another, perhaps it is time for legislation like the BELIEVE Act that would simply increase the number of green cards available to everybody.

Jackson Lewis P.C. © 2019

For more on green card legislation, see the National Law Review Immigration law page.

WIPO Launches UDRP for .CN and .中国 ccTLD

The World Intellectual Property Organization (WIPO) launched a Uniform Domain-Name Dispute-Resolution Policy (UDRP) for .CN and .中国 (China) country code Top-Level Domain (ccTLD), the first non-Chinese entity to do so. Previously, the China International Economic and Trade Arbitration Commission Online Dispute Solution Center (CIETAC ODRC) or the Hong Kong International Arbitration Center (HKIAC) were authorized by the China Internet Network Information Center (CNNIC) to handle domain name disputes for these domains. The .CN and .中国ccTLD is among the largest in the world with over 22 million registered domain names.

The WIPO UDRP for .CN and .中国 ccTLD is only applicable to .CN and .中国domain names that have been registered for less than three years.  In contrast to the conventional UDRP, the Chinese UDRP applies to domain names that are identical or confusingly similar, not only to a mark, but to any “name” in which the complainant has civil rights or interests.

The complainant must prove that either registration or use of the disputed domain name is in bad faith, but not both as in the traditional UDRP.  Examples of bath faith provided by WIPO include:

  • The purpose for registering or acquiring the domain name is to sell, rent or otherwise transfer the domain name registration to the complainant who is the owner of the name or mark or to a competitor of that complainant, and to obtain unjustified benefits;
  • The disputed domain name holder, on many occasions, registers domain Names in order to prevent owners of the names or marks from reflecting the names or the marks in corresponding domain names;
  • The disputed domain name holder has registered or acquired the domain name for the purpose of damaging the Complainant’s reputation, disrupting the Complainant’s normal business or creating confusion with the Complainant’s name or mark so as to mislead the public;
  • Other circumstances which may prove the bad faith.

The language of proceedings will be in Chinese unless otherwise agreed by the parties or determined by the Panel.  More information is available at WIPO’s site.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more on internet IP concerns, see the National Law Review Intellectual Property law page.

Control Freaks and Bond Villains

The hippy ethos that birthed early management of the internet is beginning to look quaint. Even as a military project, the core internet concept was a decentralized network of unlimited nodes that could reroute itself around danger and destruction. No one could control it because no one could truly manage it. And that was the primary feature, not a bug.

Well, not anymore.

I suppose it shouldn’t surprise us that the forces insisting on dominating their societies are generally opposed to an open internet where all information can be free. Dictators gonna dictate.

Beginning July 17, 2019, the government of Kazakhstan began intercepting all HTTPS internet traffic inside its borders. Local Kazakh ISPs must force their users to install a government-issued certificate into all devices to allow local government agents to decrypt users’ HTTPS traffic, examine its content, re-encrypt with a government certificate and send it on to its intended destination. This is the electronic equivalent of opening every envelope, photocopying the material inside, stuffing that material in a government envelope and (sometimes) sending it to the expected recipient. Except with web sites.

According to ZDNet, the Kazakh government, unsurprisingly, said the measure was “aimed at enhancing the protection of citizens, government bodies and private companies from hacker attacks, Internet fraudsters and other types of cyber threats.” As Robin Hood could have told you, the Sheriff’s actions taken to protect travelers and control brigands can easily result in government control of all traffic and information, especially when that was the plan all along. Security Boulevard reports that “Since Wednesday, all internet users in Kazakhstan have been redirected to a page instructing users to download and install the new certificate.

This is not the first time that Kazakhstan has attempted to force its citizens to install root certificate, and in 2015 the Kazakhs even applied with Mozilla to have Kazakh root certificate included in Firefox (Mozilla politely declined).

Despite creative technical solutions, we all know that Kazakhstan is not alone in restricting the internet access of its citizens. For one (gargantuan) example, China’s population of 800 million has deeply restricted internet access, and, according to the Washington Post, the Chinese citizenry can’t access Google, Facebook, YouTube or the New York Times, among many, many, many others. The Great Firewall of China, which involves legislation, government monitoring action, technology limitations and cooperation from internet and telecommunications companies. China recently clamped down on WhatsApp and VPNs, which had returned a modicum of control and privacy to the people. And China has taken these efforts two steps beyond nearly anyone else in the world by building a culture of investigation and shame, where its citizens could find their pictures on local billboard for boorish traffic or internet behavior, or in jail for questioning the ruling party on the internet. All this is well documented.

23 countries in Asia and 7 in Africa restrict torrents, pornography, political media and social media. The only two European nations that have the same restrictions are Turkey and Belarus. Politicians in the U.S. and Europe had hoped that the internet would serve as a force for freedom, knowledge and unlimited communications. Countries like Russia, Cuba and Nigeria also see the internet’s potential, but they prefer to throttle the net to choke off this potential threat to their one-party rule governments.

For these countries, there is no such thing as private. They think of privacy in context – you may keep thoughts or actions private from companies, but not the government. On the micro level, it reminds me of family dynamics –When your teenagers talk about privacy, they mean keeping information private from the adults in their lives, not friends, strangers, or even companies. Controlling governments sing the song of privacy, as long as information is not kept from them, it can be hidden from others.

The promise of Internet freedom is slipping further away from more people each year as dictators and real life versions of movie villains figure out how to use the technology for surveillance of everyday people and how to limit access to “dangerous” ideas of liberty. ICANN, the internet control organization set up by the U.S. two decades ago, has proven itself bloated and ineffective to protect the interests of private internet users.  In fact, it would be surprising if the current leaders of ICANN even felt that such protections were within its purview.

The internet is truly a global phenomenon, but it is managed at local levels, leaving certain populations vulnerable to spying and manipulation by their own governments. Those running the system seem to have resigned themselves to allowing national governments to greatly restrict the human rights of their own citizens.

A tool can be used in many different ways.  A hammer can help build a beautiful home or can be the implement of torture and murder. The internet can be a tool for freedom of thought and expression, where everyone has a publishing and communication platform.  Or it can be a tool for repression. We have come to accept more of the latter than I believed possible.

Post Script —

Also, after a harrowing last 2-5 years where freedom to speak on the internet (and social media) has exploded into horrible real-life consequences, large and small, even the most libertarian and laissez faire of First World residents is slapping the screen to find some way to moderate the flow of ignorance, evil, insanity, inanity and stupidity. This is the other side of the story and fodder for a different post.

And it is also probably time to run an updated discussion of ICANN and its role in internet management.  We heard a great deal about internet leadership in 2016, but not so much lately. Stay Tuned.

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
For more global & domestic internet developments, see the National Law Review Communications, Medis & Intenet law page.

Trade Trouble – East, West, and South, But North is Settled For Now!

Agriculture Secretary Perdue recently stated the trade damages to be addressed in a new round of farm aid is $15 to $20 billion! The general press is replete with stories about how, as these tariffs continue, companies are making sourcing changes that will be hard to reverse. So, what is the latest news?

First, there is trade with China. It seems clear that unless there is a breakthrough at the G-20 meeting in Tokyo, or shortly thereafter, the anecdotal headaches we hear about will get far more costly. The American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai conducted a survey before List 3 was announced. Even at that point, American companies operating in China acknowledged higher production costs, decreased demand for products, reduced staffing, reduced profits, increased inspections at importation, increased bureaucratic oversight and regulatory scrutiny, slower approval of licenses and permits, higher product rejections, and increasing plans to relocate (but not back to the U.S.).

On a point one can consider only marginally helpful, those with goods on List 3 now have until June 14th to file their entries. To be clear, the goods still must have left China before May 10, and the entry filed no later than June 14th for the 10% to apply. Otherwise, you pay the 25%.

On a somewhat more positive note, if you found the May 21, 2019 Federal Register notice, it published the submission by the U.S. Trade Representative (USTR) to the Office of Management and Budget of a request for expedited approval of a form to be used for List 3 exclusion requests. In that notice, USTR stated it expected the window to open for List 3 exclusion requests around June 30, 2019, which is 10 days after the Tokyo G-20 meeting. If they have not already done so, companies would be wise to start the data gathering process. Among the information to be submitted are product details, whether the product or one comparable can be purchased in the U.S. or other sources outside China, the value and quantity of the product imported in 2017, 2018 and Q1 2019 distinguished by sourcing from China, other third countries and domestically, the degree of severe economic harm caused by the tariffs, and whether or not the applicant submitted any exclusion requests regarding products on List 1 or 2. Those who have prepared exclusion requests for goods on Lists 1 and 2 will instantly recognize the data requirements.

Complicating U.S.-China relations further, on May 15, 2019, a Presidential Document was issued entitled Securing the Information and Communications Technology and Services Supply Chain. It forms the framework permitting the Administration to name companies barred from doing business with U.S. entities on national security grounds. On May 21, 2019, the Bureau of Industry and Security published a Federal Register notice adding Huawei Technologies Co., Ltd. and various affiliates (68 in total) to the Entity List on the ground there is reasonable cause to believe that Huawei “has been involved with activities contrary to the national security or foreign policy interests of the United States.” A May 22, 2019 Federal Register notice reversed that position and issued a Temporary General License effective between May 20, 2019 and August 19, 2019 for these same entities. See Supplement 7 to 15 CFR part 744.

Underscoring that tit-for-tat is very real, China announced on June 1, 2019 the creation of its own “unreliable” entities list. The initial rollout of this new policy took the form of a press briefing. That coverage made clear the criteria which China will rely upon is typically opaque: “foreign enterprises, organizations and individuals could land on this list because they do not obey market rules, violate contracts and block or cut off supply for non-commercial reasons, severely damage the legitimate interests of Chinese companies” or “pose a threat or potential threat to national security.” Almost immediately thereafter, it was announced that FedEx is under investigation in China for misdelivering some packages for Huawei (including returning them to sender or improperly routing them to the U.S.). China stated the purpose of the “unreliable entities list” was to “protect international economic and trade rules and the multilateral trading system, to oppose unilateralism and trade protectionism, and to safeguard China’s national security, social and publish interests,” according to a Ministry of Commerce spokesman.

Then there is the issue of China’s supply of rare earth minerals. China’s official press points out it is only a matter of time before China rolls out a plan to severely limit its exports of these metals which are used to make a variety of electronic products or accessories (including lithium batteries) along with items for U.S. military purposes such as to manufacture night vision goggles, precision-guided weapons and communications/GPS equipment. The latest numbers show that 52% of these metals are found in China and Russia (neither is exactly a friend to the U.S. right now), whereas 18% can be found in Brazil, but only about 1% in the U.S.

Add to this the announcement on May 30th, there will be tariffs imposed on “all goods imported from Mexico.” Even a few days later the most basic questions remain unanswered. Does this statement literally mean all goods from Mexico? What about American products returned which are duty free because unchanged? How about American products used to assemble the final product in Mexico but qualifying for duty free on the American components in the final product? [For you trade nerds – think 9801 and 9802.] What about goods which are of not of Mexican origin? Or are NAFTA qualifying?

Right now, all we have is the timeline – 5% on June 10%, 10% on July 1, 15% on August 1, 20% on September 1 and 25 % on October 1. Every indication right now is these tariffs will be imposed. Then the question becomes: are there grounds on which the tariffs would be removed? The only answer we have right now is if Mexico does “enough” to satisfy President Trump that all reasonable action was taken to stem the tide of migration, the tariffs would be removed. However, the determination as whether “enough” has been done is solely within the discretion of the President in the current proposal.

Having declared in February 2019 the migration situation at the U.S. southern border to be a matter of national security, President Trump has chosen now to invoke IEEPA to support the current action. IEEPA is the International Emergency Economic Powers Act, see 50 U.S.C. 1701 et seq. It authorizes the President to act in the national security interest of the country if dealing with “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States.”

 Article 302 of NAFTA as currently enacted provides: “… no Party may increase any existing customs duty, or adopt any customs duty, on an originating good.” In other words, the imposition of this additional tariff on NAFTA-qualifying goods violates NAFTA and presents yet another reason why a precisely-worded policy is needed and a claim is possible. Can we also expect a World Trade Organization claim, assuming the bilateral discussions between the two countries do not diffuse the situation?

How does any of this help hardworking American business owners (of any size and in any industry) to keep their companies operating and profitable? This situation makes us all wonder how long it will take for the American public to wake up and realize China and Mexico are not paying these tariffs?

 

© 2019 Mitchell Silberberg & Knupp LLP
This post was written by Susan Kohn Ross of Mitchell Silberberg & Knupp LLP.
Read more on Trade on our Antitrust and Trade Regulation Page.

U.S. Increases Tariffs On Chinese Imports

The president announced this week that special Section 301 tariffs on $200 billion of Chinese imports (List 3) will increase from 10% to 25%. The Office of United States Trade Representative (USTR) issued the official notice of the tariff increase May 8. The rate increase is effective on May 10, 2019.

List 3 is composed of about 6,000 different Harmonized Tariff Schedule of the United States (HTSUS) codes and $200 billion worth of imports; comparatively, the previously imposed List 1 and List 2 collectively cover approximately 1,000 HTSUS codes and $50 billion worth of imports from China.

This rate increase will have a massive effect on almost all industries that rely on imports from China, including agriculture, automotive, electronics, textiles, and energy, just to name a few.

Two other things of particular note from the notice:

(1) increased tariffs will be applied to goods entered for consumption (or withdrawn from warehouse for consumption) on or after 12:01 a.m. Eastern time on May 10, 2019, and exported from China on or after May 10, 2019, so goods that were on the water prior to May 10 will not be affected.

(2) USTR indicates that it will promulgate a product exclusion process in the near future so importers, purchasers, trade associations and other interested parties can request that certain products be excluded from the tariff. Domestic producers will also have the opportunity to object to such exclusion applications.

 

© 2019 BARNES & THORNBURG LLP
You can learn more about trade and tariffs on the National Law Review Global Page.

US Trade Representative Publishes List of Chinese Products Subject to Retaliatory Tariffs

The Office of the US Trade Representative (USTR) published a list of 1,300 Chinese products, valued at $50 billion, on which it intends to impose an additional 25 percent tariff in retaliation for the “harm to the US economy” resulting from certain Chinese industrial policies.  USTR also announced a public comment period to enable interested parties to request that products be removed from the list. In response to this April 3 announcement, China announced its own retaliatory import tariffs on 106 US products.

In Depth

On April 3, the Office of the US Trade Representative (USTR) published a list of 1,300 Chinese products, valued at $50 billion, on which it intends to impose a 25 percent tariff on top of any existing US tariff in retaliation for the “harm to the US economy” resulting from certain Chinese industrial policies. The full US retaliation list, available here, includes products from the chapters listed in Annex I below.

In conjunction with its list, USTR announced a public comment period to enable interested parties to request that products be removed from, or added to, the list. Comments must be filed by May 11, 2018. The agency will also hold a public hearing on May 15, 2018, for parties wishing to comment further on the list. USTR has not set a specific deadline for implementing the new tariffs, but said it will provide “final options” to President Trump after the comment and hearing process conclude.

In addition to the proposed retaliatory tariffs, President Trump has also directed the Secretary of the Treasury to develop new restrictions on inbound Chinese investments aimed at preventing Chinese-controlled companies and funds from acquiring US firms with sensitive technologies. The US Treasury Department has until May 21, 2018, to develop these restrictions, which will be in addition to the restrictions already imposed by the Committee on Foreign Investment in the United States (CFIUS).

In response to the administration’s April 3 announcement, China announced its own retaliatory import tariffs on 106 US products. Its retaliation products, listed below in Annex II, will face 25 percent tariffs should the Trump administration move forward with its announced tariffs.

After China issued its retaliatory tariff list, President Trump directed USTR on April 5 to assemble an additional $100 billion worth of retaliatory tariffs against Chinese goods on the grounds that China had unfairly retaliated against American farmers and manufacturers rather than addressing its own “misconduct.” The specific additional tariffs, once announced by USTR, will be subject to a review and public comment period similar to the one now underway for USTR’s initial $50 billion list.

McDermott is actively engaged in this issue and can assist Firm clients and contacts affected by the announcement, including with the preparation of comments and other advocacy efforts to influence products on the list. Please contact any of the authors to seek assistance or learn more.

This post includes contributions from Leon Liu from  China Law Offices.

Annex I

HTS Chapters Represented on the USTR Retaliatory List*

HTS Chapter Product
28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes
29 Organic chemicals
30 Pharmaceutical products
38 Miscellaneous chemical products
40 Rubber and articles thereof
72 Iron and steel
73 Articles of iron or steel
76 Aluminum and articles thereof
83 Miscellaneous articles of base metal
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles
86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds
87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof
88 Aircraft, spacecraft, and parts thereof
89 Ships, boats and floating structures
90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments, and apparatus; parts and accessories thereof
91 Clocks and watches and parts thereof
93 Arms and ammunition; parts and accessories thereof
94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated sign illuminated nameplates and the like; prefabricated buildings

 

* Not all products contained in each chapter are represented.  For the complete list, visit: https://ustr.gov/sites/default/files/files/Press/Releases/301FRN.pdf

 

Annex II

Unofficial Translation of China’s Retaliation List

No. Product HTS Code
1. Yellow soybean 12019010
2. Black soybean 12019020
3.

 

 Corn 10059000
4. Cornflour 11022000
5. Uncombed cotton 52010000
6. Cotton linters 14042000
7. Sorghum 10079000
8. Brewing or distilling dregs and waste 23033000
9.

 

 Other durum wheat 10011900
10. Other wheat and mixed wheat 10019900
11. Whole and half head fresh and cold beef 02011000
12. Fresh and cold beef with bones 02012000
13. Fresh and cold boneless beef 02013000
14. Frozen beef with bones 02021000
15. Frozen boneless beef 02022000
16. Frozen boneless meat 02023000
17. Other frozen beef chops 02062900
18. Dried cranberries 20089300
19. Frozen orange juice 20091100
20. Non-frozen orange juice 20091200
21. Whiskies 22083000
22. Unstemmed flue-cured tobacco 24011010
23. Other unstemmed tobacco 24011090
24. Flue-cured tobacco partially or totally removed 24012010
25. Partially or totally deterred tobacco stems 24012090
26. Tobacco waste 24013000
27. Tobacco cigars 24021000
28. Tobacco cigarettes 24022000
29. Cigars and cigarettes, tobacco substitutes 24029000
30. Hookah tobacco 24031100
31. Other tobacco for smoking 24031900
32. Reconstituted tobacco 24039100
33. Other tobacco and tobacco substitute products 24039900
34. SUVs with discharge capacity of 2.5L to 3L 87032362
35. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 2500ml, but not exceeding 3000ml for SUVs (4 wheel drive) 87034052
36. Vehicles with discharge capacity of 1.5L to 2L 87032342
37. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 1000ml, but not exceeding 1500ml for SUVs (4 wheel drive) 87034032
38. Passenger cars with discharge capacity 1.5L to 2L, 9 seats or less 87032343
39. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 1000ml, but not exceeding 1500ml for 9 passenger cars and below 87034033
40. Passenger cars with discharge capacity of 3L to 4L, 9 seats or less 87032413
41. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 3000ml, but not exceeding 4000ml for 9 passenger cars and below 87034063
42. Off-road vehicles with discharge capacity of 2L to 2.5L 87032352
43. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 2000ml, but not exceeding 2500ml for off-road vehicles 87034042
44. Passenger cars with discharge capacity of 2L to 2.5L, 9 seats or less 87032353
45. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 2000ml, but not exceeding 2500ml for 9 passenger cars and below 87034043
46. Off-road vehicles with discharge capacity of 3L to 4L 87032412
47. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 3000ml, but not exceeding 4000ml for off-road vehicles 87034062
48. Diesel-powered off-road vehicles with discharge capacity of 2.5L to 3L 87033312
49. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 2500ml, but not exceeding 3000ml for diesel-powered off-road vehicles 87035052
50. Passenger cars with discharge capacity of 2.5L to 3L, 9 seats or less 87032363
51. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement exceeding 2500ml, but not exceeding 3000ml for 9 passenger cars and below 87034053
52. Off-road vehicles with discharge capacity of less than 4L 87032422
53. Other vehicles equipped with an ignited reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source. Cylinder capacity displacement not exceeding 4000ml for off-road vehicles 87034072
54. Other vehicles which are equipped with an ignited reciprocating piston internal combustion engine and a drive motor and can be charged by plugging in an external power source 87034090
55. Other vehicles that are equipped with a compression ignition type internal combustion engine (diesel or semi-diesel) and a drive motor, other than vehicles that can be charged by plugging in an external power source 87035090
56. Other vehicles which are equipped with an ignition reciprocating piston internal combustion engine and a drive motor and can be charged by plugging in an external power source 87036000
57. Other vehicles that are equipped with a compression-ignition reciprocating piston internal combustion engine and a drive motor that can be charged by plugging in an external power source 87037000
58. Other vehicles that only drive the motor 87038000
59. Other vehicles 87039000
60. Other gasoline trucks of less than 5 tons 87043100
61. Transmissions and parts for motor vehicles not classified 87084099
62. Liquefied Propane 27111200
63. Primary Shaped Polycarbonate 39074000
64. Supported catalysts with noble metals and their compounds as actives 38151200
65. Diagnostic or experimental reagents attached to backings, except for goods of tariff lines 32.02, 32.06 38220010
66. Chemical products and preparations for the chemical industry and related industries, not elsewhere specified 38249999
67. Products containing PFOS and its salts, perfluorooctanyl sulfonamide or perfluorooctane sulfonyl chloride in note 3 of this chapter 38248700
68. Items listed in note 3 of this chapter containing four, five, six, seven or octabromodiphenyl ethers 38248800
69. Contains 1,2,3,4,5,6-HCH (6,6,6) (ISO), including lindane (ISO, INN) 38248500
70. Primarily made of dimethyl (5-ethyl-2-methyl-2oxo-1,3,2-dioxaphosphorin-5-yl)methylphosphonate and double [(5-b Mixtures and products of 2-methyl-2-oxo-1,3,2-dioxaphosphorin-5-yl)methyl] methylphosphonate (FRC-1) 38249100
71. Containing pentachlorobenzene (ISO) or hexachlorobenzene (ISO) 38248600
72. Containing aldrin (ISO), toxaphene (ISO), chlordane (ISO), chlordecone (ISO), DDT (ISO) [Diptrix (INN), 1,1,1-trichloro-2 ,2-Bis(4-chlorophenyl)ethane], Dieldrin (ISO, INN), Endosulfan (ISO), Endrin (ISO), Heptachlor (ISO) or Mirex (ISO). 38248400
73. Other carrier catalysts 38151900
74. Other polyesters 39079999
75. Reaction initiators, accelerators not elsewhere specified 38159000
76. Polyethylene with a primary shape specific gravity of less than 0.94 39011000
77. Acrylonitrile 29261000
78. Lubricants (without petroleum or oil extracted from bituminous minerals) 34039900
79. Diagnostic or experimental formulation reagents, whether or not attached to backings, other than those of heading 32.02, 32.06 38220090
80. Lubricant additives for oils not containing petroleum or extracted from bituminous minerals 38112900
81. Primary Shaped Epoxy Resin 39073000
82. Polyethylene Terephthalate Plate Film Foil Strips 39206200
83. Other self-adhesive plastic plates, sheets, films and other materials 39199090
84. Other plastic non-foam plastic sheets 39209990
85. Other plastic products 39269090
86. Other primary vinyl polymers 39019090
87. Other ethylene-α-olefin copolymers, specific gravity less than 0.94 39014090
88. Other primary shapes of acrylic polymers 39069090
89. Other primary shapes of pure polyvinyl chloride 39041090
90. Polysiloxane in primary shape 39100000
91. Other primary polysulphides, polysulfones and other tariff numbers as set forth in note 3 to chapter 39 are not listed. 39119000
92. Plastic plates, sheets, films, foils and strips, not elsewhere specified 39219090
93. 1,2-Dichloroethane (ISO) 29031500
94. Halogenated butyl rubber sheets, strips 40023990
95. Other heterocyclic compounds 29349990
96. Adhesives based on other rubber or plastics 35069190
97. Polyamide-6,6 slices 39081011
98. Other primary-shaped polyethers 39072090
99. Primary Shaped, Unplasticized Cellulose Acetate 39121100

100.

Aromatic polyamides and their copolymers

39089010

101.

Semi-aromatic polyamides and their copolymers

39089020

102.

Other polyamides of primary shape

39089090

103.

Other vinyl polymer plates, sheets, strips

39201090

104.

Non-ionic organic surfactants

34021300

105.

Lubricants (containing oil or oil extracted from bituminous minerals and less than 70% by weight)

34031900

106.

Aircraft and other aircraft with an empty weight of more than 15,000kg but not exceeding 45,000kg

88024010
© 2018 McDermott Will & Emery.