E6-1466. Results of Out-Of-Cycle Review Under Section 182 and Termination of Action Under Section 301(b): Intellectual Property Laws and Practices of the Government of Ukraine

AGENCY:

Office of the United States Trade Representative.

ACTION:

Revocation of identification of Ukraine as a Priority Foreign Country under section 182 and termination of action under section 301(b).

SUMMARY:

The Out-of-Cycle Review (“OCR”) under section 182 (commonly referred to as the “Special 301” provision) of the Trade Act of 1974, as amended (“Trade Act”), has concluded with a finding that the Government of Ukraine substantially has improved its intellectual property right (“IPR”) enforcement efforts. As a result, the United States Trade Representative (“Trade Representative”) is revoking the identification of Ukraine as a Priority Foreign Country (“PFC”) under section 182 and instead is placing Ukraine on the Priority Watch List, and is restoring the tariff-free treatment under the Generalized System of Preferences (“GSP”) accorded to products of Ukraine. Pursuant to section 306 of the Trade Act, the Office of the United States Trade Representative (“USTR”) will continue to monitor closely the Government of Ukraine's IPR enforcement efforts.

DATES:

The restoration of tariff-free GSP treatment accorded to products of Ukraine is effective with respect to articles entered, or withdrawn from warehouse, for consumption on or after January 23, 2006.

FOR FURTHER INFORMATION CONTACT:

For questions concerning the results of the Special 301 Out-of-Cycle Review: Jennifer Choe Groves, Director for Intellectual Property and Chair of the Special 301 Committee, USTR, [phone], Laurie Molnar, Director for European and Mediterranean Trade Affairs, USTR, [phone], or Stephen Kho, Associate General Counsel, USTR, [phone]; for questions concerning procedures under Section 301: William Busis, Associate General Counsel and Chairman of the Section 301 Committee, USTR, [phone]; and for questions concerning entries: Teiko Campbell, Program Officer, Office of Trade Compliance and Facilitation, U.S. Customs and Border Protection, Department of Homeland Security, [phone].

SUPPLEMENTARY INFORMATION:

History of the 301 Investigation

On March 12, 2001, the Trade Representative identified Ukraine as a PFC under Special 301. The PFC identification was based on deficiencies in Ukraine's acts, policies and practices regarding IPR protection, including weak enforcement, as evidenced by high levels of piracy of optical media products (such as CDs and DVDs), and the failure of the Government of Ukraine to enact adequate and effective IPR legislation to address optical media piracy. The Trade Representative simultaneously initiated an investigation (Docket 301-121) under Section 301(b) of the Trade Act in order to investigate these IPR protection issues. See 66 FR 18,346 (April 6, 2001).

In August 2001, the Trade Representative determined that the acts, policies, and practices of Ukraine with respect to IPR protection were unreasonable and burdened or restricted United States commerce, and were thus actionable under section 301(b) of the Trade Act. As an initial action in response, the Trade Representative suspended GSP treatment accorded to products of Ukraine, effective August 24, 2001. See 66 FR 42,246 (Aug. 10, 2001). In December 2001, the Trade Representative took the additional action of imposing 100% ad valorem tariffs on certain Ukrainian exports with an annual trade value of approximately $75 million, effective January 23, 2002. See 67 FR 120 (Jan. 2, 2002).

In August 2005, the Government of Ukraine adopted important amendments to its Laser-readable Disc Law that strengthen Ukraine's licensing regime and enforcement capabilities to stem the illegal production and trade of optical media products. In response, the Trade Representative terminated the 100% ad valorem duties. The Trade Representative also announced that at the conclusion of an OCR focused on whether Ukraine had implemented fully the legislative improvements and had otherwise strengthened IPR enforcement, he would determine whether to revoke the identification of Ukraine as a PFC and whether to restore Ukraine's GSP benefits. USTR requested written comments from the public concerning these matters. See 70 FR 53,410 (Sep. 8, 2005).

Results of OCR

In the OCR, the interagency Special 301 Committee has concluded that enforcement against optical media piracy in Ukraine has improved since the initiation of the investigation in 2001, and that the Government of Ukraine has made substantial progress on IPR enforcement actions suggested in an August 2005 OCR Action Plan. The Government of Ukraine has presented statistical and other data to show that it has conducted raids against entities involved in commercial distribution of IPR-infringing products and has conducted numerous and continuing inspections of Ukraine's licensed optical disc plants. The Government of Ukraine has established a specialized IPR unit within the Economic Crime Division under the Ministry of the Interior and a specialized unit in Customs to deal with IP crimes. The Government of Ukraine has agreed to establish an Enforcement Coordination Group that will provide Ukrainian IPR enforcement officials, U.S. Government officials, and copyright industry representatives with a forum to meet and share information on Ukraine's enforcement efforts. In sum, in contrast to 2001 when the Trade Representative designated Ukraine as a PFC, Ukraine is no longer a major producer of pirated optical media sold elsewhere in Europe. IPR enforcement concerns do remain, however, including with respect to the transshipment through Ukraine of pirated optical media produced in neighboring countries.

Under section 182(c)(1)(A) of the Trade Act, the Trade Representative is authorized to revoke the identification of any foreign country as a PFC at any time. In light of the positive results of the OCR, the Trade Representative has determined to revoke the identification of Ukraine as a PFC under section 182 and instead has placed Ukraine on the Priority Watch List.

Termination of Action

Section 307(a) of the Trade Act authorizes the Trade Representative to “modify or terminate any [Section 301] action, subject to the specific direction, if any, of the President * * * if * * * such action is being taken under Section 301(b) and is no longer appropriate.” In passing the amendments to its Laser-readable Disc Law, in improving its record of IPR enforcement, and by agreeing to the creation of an Enforcement Coordination Group, the Government of Ukraine has responded adequately to the two issues (inadequate IPR legislation and inadequate IPR enforcement) that were the basis of the PFC designation and the Trade Representative's finding that Ukraine's acts, policies and practices were actionable under section 301(b). In recognition of these changes in Ukraine's acts, policies, and practices regarding IPR enforcement, and taking into account public comments and the results of consultations with U.S. copyright industries, the Trade Representative has decided to terminate the suspension of GSP treatment accorded to products of Ukraine. The termination of the GSP suspension concludes this Section 301 investigation, except for the ongoing monitoring required by section 306 of the Trade Act.

The termination of the suspension of the GSP treatment accorded to products of Ukraine restores the GSP treatment applicable in August 2001, when Ukraine's GSP benefits were suspended. Accordingly, effective January 23, 2006, the Harmonized Tariff Schedule of the United States (HTS) is modified as follows: (1) General note 4(a) is modified by adding “Ukraine” to the list entitled “Independent Countries”; (2) general note 4(d) is modified by adding in numerical sequence “2306.30.00 Ukraine” and “2804.29.00 Ukraine”; and (3) the Rates of Duty 1-Special subcolumn for HTS subheadings 2306.30.00 and 2804.29.00 is modified by deleting the “A” and inserting an “A* ”. The foregoing modifications to the HTS apply to articles entered, or withdrawn from warehouse, for consumption on or after January 23, 2006.

Section 306 Monitoring

Pursuant to section 306 of the Trade Act, USTR is required to continue to monitor the implementation of each measure undertaken, and agreement entered into, to provide a satisfactory resolution of a matter subject to a section 301 investigation. Accordingly, USTR will continue to monitor Ukraine's IPR enforcement efforts, including through the activities of the Enforcement Coordination Group. If on the basis of such monitoring the Trade Representative were to conclude that the Government of Ukraine is not satisfactorily implementing a measure or agreement that resulted in the resolution of this investigation, the Trade Representative would be authorized under section 306(b) to take further action.

William Busis,

Chairman, Section 301 Committee.