Study on the Countermeasures China enterprises deal with the America tariff law "section 337" (two)

Five. Exports USA tariff law "337 clause" and Chinese enterprises in the United States

(a) effect of "337 investigation" the rapid growth of Chinese Enterprises

1According to the Chinese "337 investigation" growing number

   In recent years, along with the continuous upgrade Chinese the structure of export products, high value-added, high technology content products export proportion rising, disputes involving intellectual property is becoming increasing. Since 1986, China suffered the first America "337 investigation", as of 2006 June, China has suffered 53 "337 investigation". The 53 survey, both directly to China export enterprises to apply for the case, namely direct sued; also have to Chinese for country of origin of the case under investigation, namely indirect sued.[1]

   Generally speaking, in our country suffered a total of 53 "337 investigation", the infringement of the patent right by the cases accounted for 39, the trademark infringement grounds in 7 cases, with the common infringement of patent and trademark on the grounds in 5 cases, the common infringement of the patent right and copyright by 1, to common infringement of patent, copyright and trademark on the grounds of 1. In recent years America on Chinese "337 investigation" increase, it can be said that the current "China has become the biggest victimized country 337 investigation". In December 29, 1986, USA International Trade Commission launched the first of China together, "337 investigation", and in 2004 there were investigated. Up to 39, in 1986 after the "337 investigation" accounted for 13% of the total. 1986-1995 10 years, USA launched the "337 investigation" 143 on the global (as shown in Figure two), to our country 3 years; 1996-2004 9 years, USA on global launched the "337 investigation" 157, in view of our country to have 36 cases, accounted for 23%. From the beginning of 1996, American every year of China launched the "337 investigation", and showed increasing trend, especially in recent three years, the growth America on China "337 investigation" very fast. In 2002, USA "337 investigation" placed on file 17, on China's 5, accounting for 29%; in 2003, USA "337 investigation" placed on file 18, to our country 8, accounted for 44%, than the 60% growth in 2002; in 2004, America "337 investigation" placed on file 26, to our country 11, accounted for 42%, than the 38% growth in 2003. In addition, in our country suffered 53 "337 investigation", has been closed to 30, applicable exclusion order and the prohibition of 15, accounting for 50% of the number of cases, including a separate application of general exclusion order 7, a separate application of limited exclusion order 4, the same exclusion orders and stop orders 4.[2]

Figure two: 1972 - 2004 USA on global launched the "337 investigation" the number of Graphs

2The types of products tend to be widely

   In twentieth Century 60 to 70 years, American mainly target of antidumping is Japan, South Korea, Japan, South Korea; the late 80's has gradually become the main object America "337 investigation"[3]. American anti-dumping investigations against China increase is from the beginning of the twentieth Century 80's, but in recent years, Chinese became the major countries USA "337 investigation". With the development of Chinese manufacturing industry and the improvement of science and technology, Sino US trade conflicts of intellectual property rights has become increasingly fierce, has "337 investigation" has become the main obstacle to the anti-dumping investigation on China products export American market, can be predicted more USA enterprises will choose "337 investigation" limit China competitor's products to enter the USA.

In USA on China 53 "337 investigation", widely to the products involved in the industry. Electronic industry, chemical industry, light industry, machinery industry, automobile industry, leather industry and other industries have different time respondent to start "337 survey". Among them, 26 cases involving electronics, accounting for about 49% of the total number of investigations; relates to the chemical industry in 12 cases, accounting for about 23%; involved in light industry in 9 cases, accounting for about 17%; involving industrial machinery in 3 cases, accounting for about 7%; relates to the automobile industry in 2 cases, accounting for about 4% leather industry; involved in 1 cases, accounting for about 2%[4]. Visible, electron industry is to start "337 survey times" the most, followed by the chemical industry, but also from labor-intensive products to products with high added value changes. This also from another aspect reflects the Chinese enterprises to occupy the USA market share gradually improve, objectively constitute the America threatened domestic industries.

3"337 investigation" rapid growth have serious consequences for China Enterprises

China's enterprises suffer caused USA "337 investigation" losses, including direct and indirect loss. The direct loss: patent license fee settlement pay, after losing to pay damages, attorney fees and interest etc.. Damages and compensatory and punitive damages, compensatory damages such as fees, the use of intellectual property should be of interest income and the infringer unfair profit loss, high up to hundreds of millions of dollars, there are millions of dollars low. If convicted of malicious tort, also will be punished by compensatory damages amount 2 ~ 3 times of punitive damages. Over the past five years, very little defense Chinese enterprises involved, but most did not appear in court, in the course of time, more and more Chinese enterprises fall victim to the "section 337"[5]. However, according to "the relevant provisions of Section 337", if the enterprises do not participate in the respondent, the respondent enterprises that ITC will automatically lose a "general exclusion order"[6]The production of the product, all Chinese enterprises are unable to enter America market.

With China's rubber industry, since 2002 China's America tire exports to grow steadily, whether export or export volume ranked in the top four America tire importer, at the same time America has become China's tire exports the first big foreign markets. In 2004 Chinese tire output 239000000 (including parts of motorcycle tires), export volume of 68752000, the number of automobile tire exports American is 22885000; 2005 tire exports has more than 90000000. Accounted for 33% of the total export tire. Among them, motor cars tire exports to American 11629000, accounting for exports American tire 51%. In the face of strong pressure, Chinese exports in March 23, 2005, should USA Akron Flexsys America LP applications, ITC decided to carry out the "337 investigation" on the import of rubber auxiliaries, Shandong Sinorgchem chemical Limited by Share Ltd become the subject of investigation of.[7]Because of America the rubber additives products have obtained patents in the American, any unauthorized use of the product, and its production of tires can not be exported to American. If the company lost completely, can foresee the consequences are, on the one hand, the ageing agent may not be able to enter the market America domestic production of rubber plates, the market will have a gap, the plaintiff will occupy the market, the enterprise to enter Chinese American can go to a lot of trouble; on the other hand, containing the product would tire unable to enter the America market, the whole world tire sales pattern will undergo significant changes.[8]

Moreover Chinese wood flooring industry, in July 1, 2005 the Holland Unilin company and Its Related Enterprise Ireland flooring company and American Unilin North Carolina flooring companies to USA National Trade Commission filed "337 investigation" application, charges including power Dekor, Fillinger Heshengda 18 Chinese enterprises, 38 of the world's aggrandizement wood floor manufacturers violated its floor lock technology patent. In 2007 January, ITC make a final determination decision 38 wood flooring enterprise violates the floor lock the complainant[9]Patents, and issued a "general exclusion order". At present, many wood floor container China export American detained in American port. According to the final order, Chinese wood flooring enterprises to export America market, to Holland Unilin company "one-time payment of 100000 - 120000 dollars, the patent license fee for each sales 1 square meters pay another 0.65 dollars.". From a long-term point of view, Chinese wood floor enterprise export in the future will be severely hampered, to enlarge the cost price competitive advantage will no longer exist[10].

The China enterprises tend to be in a nice hobble, or give up the big market American, or pay a licensing fee for high to the other enterprises. Can be said that the indirect loss is the main export market loss. As China's export enterprises suffered general exclusion order, then the associated, downstream products exports, will be banned.

Figure three: China trade with the United States and the "337 investigation"

Figure four: Japan's trade with the United States and the "337 investigation"

Figure five: South Korea's trade with the United States and the "337 investigation"

(Analysis of the causes of two)

Cause Chinese enterprises accounted for the proportion of the reasons for the high enterprises are in many aspects, the art of war cloud: "know yourself as well as the enemy, know yourself", the premise to "section 337" should be the reason for its existence in itself behind the analysis and understanding, "knows its however should know why".

1Chinese trade with the US growth

Analysis of figure three shows, since 1986 USA International Trade Commission for Chinese enterprises began the first "337 investigation", especially since the China after joining the WTO, China on American trade growth and America on China launched gradually "337 investigation" was almost proportional growth.

Since the two countries since the establishment of diplomatic relations in 1979, Sino US trade volume was less than $2500000000 in 1979, rising to $211630000000 in 2005, an increase of 85 times. If we can continue to maintain this speed, the future to 2010, bilateral trade volume is expected to exceed $300000000000, according to the related data statistics on the other[11]In 2005, America trade deficit of $201600000000. The US China trade deficit gradually increase the from all walks of life, especially USA exerted a profound influence on business, resulting in some industries USA discontent in some extent, and then to have to start the "337 investigation" to combat Chinese products export.

Especially China since joining the WTO, China exports to American is increasing day by day, the product more and more low price, high technology content gradually, manufacture of USA constitutes a clear threat. America enterprises also used "337 clause" to prevent Japan, Korea and Taiwan enterprises occupy the market (see Figure four, figure five).

2China enterprises lack of awareness of intellectual property protection

At present, China enterprise intellectual property protection consciousness is not strong. On the one hand Chinese enterprises lack of intellectual property protection network strong, not timely in USA patent, trademark and copyright protection; on the other hand, before entering the American market China enterprises lack in-depth investigations on the market, the competitors or potential competitors what intellectual property, their products will be on the tort problems such as unclear. Along with our country gradually become the global manufacturing center and the expansion of export scale, will it affect the more far-reaching and extensive.[12]At present, the past five years in the face of the "337 investigation" China enterprises involved very little defense, but most did not appear in court, more and more China enterprises fall victim to the "section 337". This is mainly due to the ITC of the litigation cost is very high, the total cost is generally 1500000 to 2000000 dollars (and what is more, Zhuhai Juli won 337 victories, attorney fees as high as $5000000[13]), and ITC can't make money damages award. Therefore, most of the enterprises have to abandon the respondent. American and other National Co that China Company will not defend in the "section 337" survey, they think the China Company is "soft persimmon good pinch of".[14]

When you become the "337 investigation" by the applicant, if the enterprises choose the Chinese ignored, or make a final award before no longer ignore any required to make answer file and does not participate in the check, the applicant may directly result in favorable verdict. In December 27, 2002, Usa Inc New Holland North American, Inc. to Beiqi Foton Motor Co. Ltd. and Usa Inc for the respondent, put forward "337 investigation" request. In February 10, 2003, ITC decided to accept the case, case No.: 337-TA-486. Beiqi Futian Automobile Co., Ltd. did not submit a reply. In March 7, 2003, signed by the administrative judge Beiqi Foton Motor Co. Ltd., requirements before March 14, 2003 proposed that we can not make an award for the. Beiqi Futian Automobile Co., Ltd. did not submit a reply. In July 1, 2003, ITC ruled "unfair import" was established, and signed the "limited exclusion order", banned Beiqi Futian Automobile Company Limited production of the mentioned in the application of products to enter the market American. ITC and decided to come into effect before the ruling (if America president 60 days not to veto, ruling came into effect), was ruled not allowed to import products into the market if American, must pay the amount of imports of equal value and margin[15]. In addition, Beiqi Foton Motor Co., except encounter this situation, many other China enterprises was also the same situation in the "337 investigation".

3"337 clause" itself

As a kind of import trade relief system, compared with other such as anti-dumping, countervailing and safeguard measures and other common system, "features 337 main clause" in its severity. According to the provisions of this clause, if China imported into the America products using a technology in the production process, and the technology is protected by patents in America territory, even if the production of the product technology has China patent protection in American overseas, as long as their ownership is different or not obtain a patent license once the product into the USA, frontier constitute patent infringement. If USA patent people find their rights have been violated, as long as to appeal to the ITC, the organization charged matters quickly to start the "337 investigation".

On the other hand "section 337" short time characteristics, so that the complainant can achieve the purpose of eliminating rivals out of business within the shortest time.[16]"337 investigation" only 9 months from the substantive procedure time. The complainant prepared, but the defendant is in a passive position, the Respondent must be in a very short period of time to prove itself does not have all the materials of tort, difference plus the language, legal system, this enough energy to Party down.

In addition, "337 investigation" litigation costs, "the total cost of the defense process 337 investigation" is usually between 1500000 to 2000000 dollars, and because ITC cannot make money damages ruling parties, so don't expect to recover its litigation costs in the complaint or counterclaim. However, "pull one hair and use the whole body" is the "337 investigation". "General exclusion order" and "limited exclusion order" different, the command is enacted, the customs will stop all infringing products into a kind USA, regardless of who produced, the wrong people, without distinction of origin or production, but also in the future and has not yet grasp the manufacturers and importers.

In short, "337 investigation" has become a tool of war in the market economy. The loss is also has the market lost. Export enterprises, if lost, suffered an injunction or limited exclusion order, the enterprise will be permanently lost the market, or the product of permanent can not enter the America market, this is also the reason why the "337 investigation" more lethal than anti-dumping.