USTR Initiates Section 301 Investigation Into Chinese Forced Tech Transfer Policies
U.S. Trade Representative Robert Lighthizer on Aug. 18 initiated an investigation into China under Section 301 of the Trade Act of 1974, to determine whether acts, policies and practices related to technology transfer, intellectual property and innovation are “unreasonable or discriminatory” and “burden or restrict” U.S. commerce, the Office of the U.S. Trade Representative announced. Per statute, the investigation must be completed within one year of initiation. Section 301 gives the president broad authority, including import duties, to retaliate against restrictions found to “burden or restrict” U.S. commerce. President Donald Trump on Aug. 14 issued a memorandum directing Lighthizer to determine whether to launch the investigation (see 1708150027). “After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation,” Lighthizer said in a statement.
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The USTR also requested consultations with China concerning issues being investigated, the agency said in a notice. The interagency Section 301 Committee will hold a public hearing at 9:30 a.m. on Oct. 10 at the International Trade Commission, which could continue into Oct. 11, if needed, USTR said. Comments and requests to appear at the hearing are due Sept. 28, and post-hearing rebuttals are due Oct. 20. “Unreasonable actions,” as covered by Section 301 cover “unfair and inequitable” actions that are “not necessarily in violation of, or inconsistent with, the international legal rights of the United States,” it said. USTR has consulted with appropriate advisory committees and members of the Section 301 Committee, as required by the Trade Act of 1974.
Among the areas the investigation will examine are opaque and “discretionary” administrative approval processes, “joint venture requirements” and procurements, which China reportedly employs to regulate or intervene in U.S. companies’ China operations. Such requirements may pressure U.S. companies into transferring technologies and IP to Chinese companies, USTR said. “Moreover, many U.S. companies report facing vague and unwritten rules, as well as local rules that diverge from national ones, which are applied in a selective and non-transparent manner by Chinese government officials to pressure technology transfer,” USTR said. China’s policies and practices also reportedly deprive U.S. companies of the ability to set “market-based terms” for licensing and other “technology-related negotiations” with Chinese companies, and “undermine” U.S. companies’ control over their technology in China. China’s Regulations on Technology Import and Export Administration set out particular terms for indemnities and ownership of technology improvements for imported technology, for example, USTR said.
The investigation will also “consider” whether the Chinese government is “conducting or supporting unauthorized intrusions into U.S. commercial computer networks or cyber-enabled theft of intellectual property, trade secrets, or confidential business information,” and whether this harms U.S. companies or provides competitive advantages to Chinese sectors or companies, USTR said. Interested parties can also submit for consideration information on other “acts, policies and practices” of China relating to technology transfer, IP and innovation described in Trump’s memorandum that might be included in the investigation, and/or “addressed through other mechanisms.”