The “Dutiful” China: A Proposal to Impose Duties on Merchandise from China

Congressman Steve King (R-IA) introduced legislation last week, H.R. 3375, that aims to punish China for failing to protect the holders of United States intellectual property rights.  The legislation would accomplish this by directing the President to impose duties on merchandise from China in an amount equivalent to the estimated annual loss of revenue to holders of United States intellectual property rights as a result of violations of such intellectual property rights in China.  Under King’s bill, the revenue raised by the imposition of duties on Chinese merchandise will be proportionally distributed to provide compensation to holders of United States intellectual property rights.

In his press release, Rep. King states that, “The creative genius of Americans, protected by our copyrights, trademarks and patents, is systematically being pirated by the Chinese whose government appears to be complicit” and that his bill “levies a duty on all Chinese imports in an amount necessary to both pay U.S. property rights holders for their stolen intellectual property and to administer the program.”

While Rep. King cites a Congressional Research Report to imply there has been some research performed, the facts and figures of this report are questionable.  Most importantly, while the bill may be well-intentioned, the real question is: who will ultimately bear the burden of these imposed duties?

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The Constitutionality of the ACTA

On October 1, 2011, in Tokyo, representatives from eight governments, including: the United States; New Zealand; Canada; Singapore; South Korea; Australia; Japan; and Morocco, signed the Anti-Counterfeiting Trade Agreement (ACTA).   Proponents began negotiations back in 2008 with the hope of establishing international standards on the enforcement of intellectual property rights, particularly in response to the increase in counterfeit goods and piracy of copyrighted works.  The negotiations were criticized for being classified as secret, in the United States, on the basis of that disclosure could pose “damage to the national security.”  The Office of the U.S. Trade Representative (USTR), the government agency that negotiated and signed the agreement, has claimed ACTA will become “the highest-standard plurilateral agreement ever achieved concerning the enforcement of intellectual property rights.”  The final text of the agreement, which was finalized in November, includes provisions on civil, criminal, border, and digital environment enforcement, and further includes provisions to assist participants to the agreement in their enforcement efforts and to establish best practices for effective enforcement of intellectual property rights.

The USTR has made claims that because the ACTA is consistent with current U.S. copyright, patent, and trademark laws, it “does not require the enactment of implementing legislation” and that “The United States may therefore enter into and carry out the requirements of the Agreement under existing legal authority, just as it has done with other trade agreements.”  Critics, however, have expressed their doubts regarding the legality of the ACTA.  For example, several law professors have voiced concerns that not only is the ACTA inconsistent with U.S. law, but that the president does not have the proper authority to bind the U.S. to the agreement.  Senator Ron Wyden (D-Ore.) cites some of these legal experts and states that, “if the USTR ratifies ACTA without Congress’ consent it may be circumventing Congress’s Constitutional authority to regulate international commerce and protect intellectual property.”

Earlier this year, the USTR tried to keep a report by the Congressional Research Service (CRS) buried; in the report, the CRS concluded that “[d]epending on how broadly or narrowly several passages from the ACTA draft text are interpreted, it appears that certain provisions of federal intellectual property law could be regarded as inconsistent with ACTA…it is debateable whether these apparent inconsistencies are significant or whether they would require changes to federal law in order for the U.S. to be considered in compliance with ACTA’s general obligations.”  The European Union, which represents 27 of the 37 parties to the ACTA negotiations, has declined to sign the ACTA at this time, despite its support.  It too has concluded that the ACTA may indeed be, or possibly may not be, legal and in line with the existing legal framework of the European Union.  However, unlike the U.S., the EU Commission has not asserted that it can implement the ACTA without parliamentary approval.