U.S. Trade Representative (USTR) Ambassador Robert Lighthizer initiated an investigation on August 18, 2017 pursuant to Section 301 of the Trade Act of 1974. The probe will determine whether acts, policies, and practices of the People’s Republic of China (PRC) related to technology transfer, intellectual property, trade secrets, and innovation are discriminatory towards U.S. firms by undermining the United States’ ability to compete fairly in the global market. Section 301 allows the President to retaliate by removing any act, policy, or practice of a foreign government that violates an international agreement.

The investigation began after PRC President Xi Jinping unveiled a cybersecurity law to “protect personal information and individual privacy,” as reflected in China’s Made in China 2025 initiative. The law requires foreign companies operating in China to store their data on local servers. U.S. companies are now also being instructed to participate in joint ventures with Chinese enterprises, therefore sharing valuable technology information with their Chinese counterparts.

USTR allegedly finalized its report in December 2017, and the remedies are undergoing vetting in the interagency process. However, the U.S. may partner with the European Union and Japan to seek consultations through the WTO, rather than solve the issue unilaterally.

Pursuant to the Trade Act, Ambassador Lighthizer must determine within 12 months from the date of the initiation whether the Chinese government violated U.S. intellectual property laws. The retaliatory action proposed by USTR, if any, must be implemented within 30 days of the determination. USTR may delay the implementation up to 180 days if the agency determines that substantial progress could be made by the foreign government. If the determination is affirmative, then USTR will decide what action to take.

If Ambassador Lighthizer recommends retaliation under Section 301, the President could impose sanctions on certain Chinese industries, specifically steel. The current administration has demonstrated a tough stance on overcapacity by imposing a 25 percent global tariff on imported steel products, and a 10 percent global tariff on imported aluminum products.

As expected, the Chinese government is already demonstrating “tit for tat” retaliation by self-initiating anti-dumping (AD) and countervailing (CVD) investigations on imports of sorghum from the United States. In addition, China is already among one of the countries that has requested consultations from the WTO regarding the safeguard measures on solar cells and residential washing machines.

The USTR is expected to release its findings to the President within the coming months.

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Photo of Daniel Cannistra Daniel Cannistra

Dan Cannistra is a partner in the firm’s Washington, D.C. office. His practice focuses on legislative, executive and regulatory representation of domestic and international clients on a broad spectrum of international trade matters. Dan has represented domestic and foreign companies in over 75

Dan Cannistra is a partner in the firm’s Washington, D.C. office. His practice focuses on legislative, executive and regulatory representation of domestic and international clients on a broad spectrum of international trade matters. Dan has represented domestic and foreign companies in over 75 U.S. antidumping and countervailing duty cases before the U.S. Department of Commerce and the U.S. International Trade Commission under the Tariff Act of 1930. Many of these matters involved appeals to the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, binational panels under the North American Free Trade Agreement (NAFTA), and dispute settlement proceedings before the World Trade Organization (WTO). Dan has also represented clients in antidumping proceedings in the European Union, Canada, Mexico, Brazil, India, Thailand, Singapore, Guatemala and Taiwan.

Prior to joining Crowell & Moring, Dan was a director in a national accounting firm providing customs and international trade guidance to multinational clients related to the supply and distribution of goods and services across international borders. Areas of specialization included antidumping and countervailing duties and policy, trade remedies and litigation, free trade agreements and negotiations, classification and valuation, and international trade and development.

Dan’s government appointments include service to U.S. Trade Representative on the roster of international trade practitioners to resolve antidumping disputes involving NAFTA members. For the European Commission, Dan provided advice and training on international trade and antidumping methodology and practice. In addition, Dan has served as an international trade consultant to the governments of Guatemala and Singapore, providing technical advice to these governments on the application of international trade regulations consistent with international law and World Trade Organization agreements and the General Agreement on Tariffs and Trade, Agreement on Antidumping.