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 is also relaxing its surety requirements; this move will facilitate the pursuit of investigations and judicial action. The Administration will monitor China's implementation of the new customs regulations and continue to work actively to clamp down on counterfeit and pirated Chinese exports at U.S. borders.

4. Accelerate efforts to ratify and join the WIPO Internet treaties.

Enacting legislation to implement these treaties would greatly improve the legal basis for enforcement against Internet piracy. China has a rapidly growing number of Internet users (believed to be the second or third highest in the world). China needs to strengthen the available tools for rights holders and enforcement authorities to combat an emerging frontier for IPR piracy.

5. Continue audits to implement the use of legitimate software, including extension of such efforts to include local urban governments.

We remain concerned that many Chinese enterprises, institutions, and other entities fail to use software in accordance with the terms of their license. Government institutions, at all levels, should set a positive example. This effort, by drawing in local urban governments, represents a further step to ensure that this is the case. While there were a small number of positive court rulings involving end-user piracy in 2003, significant problems remain. We urge China to accelerate its efforts to undertake criminal investigations and prosecutions to address such problems.

6. Conduct public education campaigns on the importance of IPR.

China will further intensify its efforts to increase awareness among Chinese consumers of the economic harm and potential health and safety risks that result from purchasing counterfeit and pirated products. IPR infringements hurt Chinese and foreign rights holders and damage the reputation of the "Made in China" brand. Fake Chinese-made automotive parts, pharmaceuticals, infant formula, and other counterfeit products have harmed consumers both in China and throughout the world.

Lastly, the JCCT established an IPR Working Group to discuss IPR issues, including monitoring the implementation of the commitments stated above.

We will also continue to press China to increase purchases of legitimate goods, both through its own government procurement and through a lowering of market access barriers.

The United States will continue to monitor China's actions to implement effectively its JCCT commitments, its WTO commitments, and the 1995 bilateral IP agreement with the United States (including additional commitments made in 1996). We will be conducting an out-of-cycle review in early 2005 to evaluate whether China is implementing its commitments and whether the actions undertaken are bringing forth substantial progress toward China's objective of significantly reducing its level of IPR infringement.

PARAGUAY

Paraguay continues to have problems in providing protection to copyrights and trademarks, both with respect to poor internal enforcement and weak border enforcement. The USTR identified Paraguay as a Priority Foreign Country in January 1998 as part of a Special 301 out-of-cycle review. The subsequent 301 investigation terminated with the signing of a comprehensive Memorandum of Understanding (MOU) on the protection of intellectual property in 1998. That MOU expired and the U.S. and Paraguay