Page:Special 301 Report 2015.pdf/44

 United States urges China to suspend the new regulations and to further consider the potential impacts of these far-reaching regulatory changes.

Counterfeit Goods

Despite increased enforcement efforts, USTR's 2014 Notorious Markets List reported that many sources identify China as the source of counterfeit products sold illicitly in markets around the world. Counterfeit goods produced in China that are shipped to the United States include: food and beverages; apparel, footwear, and accessories; consumer electronics, computers and networking equipment; entertainment and business software; batteries; chemicals; appliances; pharmaceuticals; and auto parts. As described in Section I, the effects of these counterfeit goods go beyond lost sales volumes and harm to the reputations of U.S. trademark owners. Counterfeit pharmaceuticals potentially threaten the health of American consumers, and faulty or substandard goods that enter the supply chains of American manufacturers are dangerous as well. For example, higher defect and failure rates among counterfeit semiconductors may cause malfunctions in medical devices and vehicle safety and braking systems.

The United States and China have committed to strengthened cooperation on IPR border enforcement. In 2013, U.S. CBP and GACC conducted a successful joint customs IPR enforcement operation designed to interdict shipments of consumer electronics. However, during Fiscal Year 2014, products from China accounted for an estimated 63 percent of the total value of the IPR infringing products seized at U.S. ports. Products transshipped through, or designated as originating in, Hong Kong, many of which also were produced in China, accounted for 25 percent of the estimated total value of such seizures. The United States welcomes additional opportunities for enhanced bilateral engagement with China on IPR border enforcement issues. Such cooperation would include sharing best practices and customs-to-customs information exchange for use in risk management and enforcement actions, and conducting joint customs enforcement operations designed to deter and interdict shipments of counterfeit and pirated goods destined to the United States both as cargo and through international mail and international express carriers.

Although rights holders report increased enforcement activities, mostly but not exclusively on behalf of local brands, enforcement efforts have yet to slow the sale of counterfeit goods online. This is particularly concerning in light of the rapid growth of e-commerce in China and from China to overseas markets. Rights holders report that local Administrations for Industry and Commerce (AICs) typically confine their efforts to physical markets. While both the State Administration for Industry and Commerce (SAIC) and local AICs have called on online trading websites to improve procedures for removing listings of IPR-infringing goods, these measures

39