(Reuters) – United States on Thursday, China's third largest e-commerce platform added to its list of "infamous markets" for intellectual property rights violations and held China on its priority piracy and counterfeiting watch list.
FILE PHOTO: Colin Huang, founder and CEO of online group dispenser Pinduoduo, speaks during the company's stock exchange debut on the Nasdaq Stock Market in New York during an event in Shanghai, China on July 26, 2018. Yin Liqin / CNS via REUTERS  The US Trade Representative's office placed Pinduoduo.com, which USTR described as the third-largest number of users, on its blacklist of commercial marketplaces that did not prevent the sale of counterfeit products. It also listed the Alibaba Group's taobao.com, China's largest e-commerce platform.
USTR's annual review of trading partners' protection of intellectual property rights and so-called "infamous markets" comes as the United States and China are involved in negotiations to end a fight for campaigns that have driven supply chains and cost both countries billions of dollars. The two countries are due to resume negotiations in Beijing next week.
China's listing "reflects the urgent need to address a number of intellectual property concerns," a USTR official told reporters on a call to discuss the report.
He noted long-standing concerns expressed by the Trump administration in the trade negotiations, including "forced" technology transfer requirements, widespread copyright infringement and "violent" piracy and counterfeiting.
The civil servant refused to discuss how the conversation with China went, but said there was the possibility of further action using Section 301 of the 1974 Commercial Law. Chinese goods during the act.
By Pinduoduo.com, the USTR stated in the report: "Many (price-priced) price-conscious shoppers are apparently aware of the prevalence of counterfeit products on pinduoduo.com, but are nevertheless attracted by the cheap goods on platform."
As Responding to the report, a Pinduoduo spokeswoman called counterfeit goods "an industrial problem" and said it would work with trade unions, trademark owners and regulators to help clean up its site.
"To ensure a world-class consumer experience, we have introduced one of the strictest penalties for counterfeit merchants in our industry in China who have worked closely with law enforcement and employed technologies to proactively shut down suspicious products" spokeswoman said in a declaration.
While Alibaba has taken steps to resolve counterfeit products being offered and sold on the Taobao marketplace, companies continue to see extensive violations that USTR said.
An Alibaba spokesman said the company disagreed with the USTR's decision to keep it on the list, considering its practice as "best in class" by industry members.
"In fact, zero trade associations called for our inclusion in the report this year. We will continue to lead this fight against counterfeiting," Brion Tingler, head of external affairs, said in an emailed statement.
A total of 36 countries were on this year's overall trading partner list, justifying further bilateral engagement on these issues, including Russia and India.
In addition, USTR raised Saudi Arabia to include it among 11 countries on the priority list. The bump-up in Saudi Arabia's status as a concern was partly due to an illegal pirated content service called BeoutQ, the report said.
Despite "extensive engagement" in Saudi Arabia by both US governments and private stakeholders, the treatment of intellectual property rights "continued to deteriorate," USTR said.
Canada was removed as a priority due to commitments in the trade and trade agreement between the United States and Canada and Mexico, adopted in 2018. However, it remained on the overall monitoring list. Tajikistan was removed from the list because of "concrete steps" to improve its intellectual property regime, the agency said.
USTR also called free trade zones as places where counterfeiting can be fierce. In thousands of such zones across 130 economies, including in Hong Kong, Dubai and Singapore, manufacturers and logistics companies are subject to different customs rules and duties than they are elsewhere.
The more "barrier-free" environment can take out illegal activity such as the trading and manufacturing of counterfeit and pirated goods without proper supervision, the USTR said.
Reporting by Chris Prentice in New York and David Lawder in Washington; Additional reporting by Josh Horwitz in Shanghai; Editing Sonya Hepinstall and Christopher Cushing