VZCZCXRO9134
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1777/01 1300252
ZNR UUUUU ZZH
P 090252Z MAY 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 7148
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHIN/AIT TAIPEI 6937
RUEHKO/AMEMBASSY TOKYO 1919
RUEHUL/AMEMBASSY SEOUL 0649
RUEHMO/AMEMBASSY MOSCOW 8992
RUEHGV/USMISSION GENEVA 2216
RUEAHLC/DHS WASHDC
RUCPDOC/USDOC WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMCSUU/FBI WASHINGTON DC

UNCLAS SECTION 01 OF 03 BEIJING 001777 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM SECOR/YAMAMOTO 
State for INL - JVigil 
USTR for China Office - AWinter; IPR Office - RBae; 
and OCG - SMcCoy 
Commerce for National Coordinator for IPR Enforcement 
Commerce for WPaugh, NWinetke 
Commerce for MAC 3204/LRigoli, ESzymanski 
Commerce for MAC 3042/SWilson, JYoung 
LOC/Copyright Office - STepp 
USPTO for Int'l Affairs - LBoland, EWu 
DOJ for CCIPS - MDubose and SChembtob 
FTC for Blumenthal 
FBI for LBryant 
DHS/ICE for IPR Center - Dfaulconer, TRandazzo 
DHS/CBP for IPR Rights Branch - GMacray, PPizzeck 
ITC for LLevine, LSchlitt 
State for White House OTP Ambassador Richard Russell 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON CH
SUBJECT: USITC IS AN INDEPENDENT AGENCY 
 
¶1. (SBU) Summary.  On March 25, 2008, International 
Trade Commission (ITC) Chairman Daniel Pearson met 
with Ministry of Commerce (MOFCOM) Vice Minister (V/M) 
Yi Xiaozhun and Director General (DG) Li Ling.  V/M Yi 
proposed closer cooperation on information sharing and 
said China wants to work with the United States to 
lower multilateral trade barriers.  DG Li expressed 
concern about United States firms' "abuse" of Section 
337 filings and Unites States Department of Commerce's 
(DOC) use of data from surrogate countries in 
antidumping calculations involving nonmarket economies. 
Pearson said the United States is open to more 
cooperation and sought MOFCOM's assistance in 
gathering data for an analysis requested by 
Congressman Rangel.  He said the ITC was an 
independent agency, known for balanced reports that 
helped defuse political pressure in the bilateral 
trade relationship.  End Summary. 
 
V/M Yi Proposes Closer Cooperation 
---------------------------------- 
 
¶2. (SBU) V/M Yi proposed closer and more constructive 
cooperation between the ITC and MOFCOM, especially the 
sharing of customs and statistical data.  Yi said open 
trade was in both countries' interests.  China wanted 
to work with the United States toward further 
liberalization at the WTO and in the Doha round. 
There was room for the United States to decrease 
agricultural subsidies, he said.  Yi noted that half 
of 337 cases were settled before judgment was rendered. 
Chairman Pearson agreed that agricultural subsidies 
were distorting.  He noted there had been a large 
increase in the caseload of Section 337 investigations, 
reflecting the growing inter-connectedness of the 
global economy.  He added that requests for anti- 
dumping investigations were not initiated by the 
United States, but by industry.  In outlining the 
ITC's mandate, Pearson explained that Congress and 
USTR routinely ask the ITC to conduct studies on the 
trade policies and practices of other countries. 
Congressman Rangel had made such a request related to 
China. 
 
DG Li Expresses Concern About 337 Abuse... 
------------------------------------------ 
 
¶3. (SBU) DG Li, who formerly was the leading MOFCOM 
official supporting the now-stalled bilateral IPR 
dialogue,  relayed that MOFCOM's Bureau of Free Trade 
(BOFT), which she currently oversees, is responsible 
for supporting Chinese responses to section 332 and 
337 investigations.  China is a major target of 
section 337 investigations, in particular, she said. 
China is concerned about United States firms' abuse of 
the 337 statute.  Litigation costs are high. 
Intellectual property right (IPR) holders target 
Chinese small and medium-sized enterprises that cannot 
afford to defend themselves.  The general exclusion 
orders of the statute leads to exclusion of products 
from firms that may not have known about the cases. 
DG Li requested that the United States postpone the 
deadline for comments on revisions to the 337 process 
until the end of April so that MOFCOM could submit 
 
BEIJING 00001777  002 OF 003 
 
 
detailed comments. [Note: USG agencies may wish to 
note that MOFCOM intends to sumit comments on these 
revised rules, yet Chinse agencies have recently 
denied opportunitie for USG to provide comments on 
draft IPR-relted rules, particularly patent law 
amendments, in light of China's determination to 
suspend bilateral IPR cooperation. End Note] 
 
¶4. (SBU) In response to DG Li's point on the severity 
of general exclusion orders, ITC Chief of Staff Mary 
Beth Jones noted that general exclusions were not 
granted automatically.  Rather, they were granted when 
the infringing producers were hard to find or had 
resisted being identified, or when there was a public 
interest in the matter, such as excluding potentially 
unsafe infringing products, like pharmaceuticals.  In 
addition, if the administrative law judge hearing the 
case recommended a general exclusion order, the 
recommendation had to be approved by a majority of the 
ITC's six committee members. 
 
...and Use of Data from Surrogate Countries in CVD 
Analysis 
--------------------------------------------- --------- 
--- 
 
¶5. (SBU) DG Li said economists at ITC agreed that 
ITC's practice of using data from surrogate countries 
in countervailing duties (CVD) cases was inappropriate. 
Recent cases used the price of land in Thailand as a 
substitute for the price of land in China, which was 
"very irrational."  DOC faced problems responding to 
many cases because it does not recognize China's 
market economy status, which results in unfair 
practices toward Chinese firms, Li said.  China wished 
to invite ITC economists to visit so that they could 
better understand the reality of China's economy. 
Through more exchanges, China hoped to help the ITC 
develop a more comprehensive grasp of the "Chinese 
situation" and Chinese efforts to protect IPR.  [Note: 
China has periodically complained about national 
treatment and "fairness" in Section 337 cases.  In a 
separate development MOFCOM Director An Baisheng at a 
seminar on April 7 hosted by East China University of 
Politics and Law noted that he was "pessimistic" that 
China would bring a WTO case against the United States 
for lack of national treatment in Section 337 cases, 
despite other countries having brought such cases in 
the past.  End Note] 
 
¶6. (SBU) Pearson said he thought there was a chance 
that in his lifetime China could come to be regarded 
as a market economy given the degree of policy 
evolution.  He noted that China resorts to anti- 
dumping cases liberally.  China had more anti-dumping 
orders against the United States than any other 
country, he said. 
 
United States Open to More Cooperation 
-------------------------------------- 
 
¶7. (SBU) On strengthening cooperation, Pearson noted 
that ITC staff had visited China in the past, which he 
supported.  Two of four administrative judges had come 
 
BEIJING 00001777  003 OF 003 
 
 
in the past year.  With the increase in filings and 
staffing shortages, it would be difficult to arrange 
more visits in the short-term.  Embassy Patent and 
Trademark Office (USPTO) Senior Intellectual Property 
Rights (IPR) Attach Mark Cohen added that the Embassy 
had proposed cooperation on patent enforcement, 
including Section 337 and been turned down as recently 
as the prior week by local Chinese governments.  He 
stated that it was difficult to consider 337 actions 
separate from other IPR enforcement actions, including 
a recent increase in civil patent litigation involving 
China, and the relatively low level of US companies 
bringing IPR litigation in China.  He noted upcoming 
meetings on (Intellectual Property) IP that touched on 
Section 337, and that there is a proposed forthcoming 
visit by Court of Appeals for the Federal Circuit 
(CAFC) Judge Rader, who would be lecturing in Shanghai 
in July. He noted that the CAFC handles appeals of 
Section 337 determinations.  Cohen noted that he is 
willing to help China understand the United States 
enforcement system, and to exchange views on the 
Chinese system at the same time, and in a separate 
exchange he noted that USPTO would be funding programs 
with State Intellectual Property Office (SIPO) on 
patent prosecution during late April, which could also 
assist Chinese companies in better understanding the 
United States IPR environment. 
 
Pearson Outlines ITC Role and its Independence 
--------------------------------------------- - 
 
¶8. (SBU) Chairman Pearson replied that the ITC was an 
independent agency with good analytic skills that 
sometimes lacked enough data to fully understand 
China's economy.  He agreed that section 337 
litigation is expensive.  He said 337 was not intended 
to protect American firms and looked forward to the 
day when a Chinese firm finds a United States firm 
infringing on its patent via a product imported from 
Mexico, in which case it could bring a 337 complaint 
against the United States firm.  Pearson said he 
doesn't pretend to understand the DOC's methodologies 
and that United States law did not permit the ITC to 
pick its own data.  That said, while DOC finds unfair 
pricing 90 percent of the time, ITC conducts the next 
step in the case - determining whether the pricing had 
injured United States firms.  Over the past ten years, 
ITC had found that to be the case just 47 percent of 
the time.  He noted that 332 investigations did not 
lead to remedies, only an economic analysis to better 
understand the situation.  Members of Congress rely on 
the ITC to provide reports with balanced views, 
allowing time for political pressures to dissipate. 
For the study that Congressman Rangel had requested, 
it would be helpful to collaborate with the Chinese 
institutes and agencies that had the information. 
 
RANDT