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Hearing of Subcommittee on Courts, the Internet, & Intellectual Property of the House Judiciary Committee - International Piracy:Intellectual Property


Location: Washington, DC

Hearing of Subcommittee on Courts, the Internet, & Intellectual Property of the House Judiciary Committee - International Piracy:Intellectual Property


REP. BRAD SHERMAN (D-CA): Thank you.

REP. BERMAN: Recognized for five minutes.

REP. SHERMAN: Mr. Yager, what percentage of the incoming cargo do we inspect, and who pays for the inspections?

MR. YAGER: At the present time, Mr. Sherman, what -- 100 percent of the cargo is inspected, at least, in terms of the paperwork it is not obviously open. So the first thing is, for security purposes they look at all -- (cross talk.)

REP. SHERMAN: Okay. Let me ask the question this way. What percentage of the cargo do we actually open up the container, look what's inside, and make sure we don't have counterfeit disks inside?

MR. YAGER: In terms of intellectually property protection it is much less that one percent of the --

REP. SHERMAN: Much less than one -- now who pays for the inspection?

MR. YAGER: In general, the inspections are performed by CBP officers, either at the port or in warehouse locations near the port. But the costs and the delay are borne by the shippers and ultimately the --

REP. SHERMAN: The cost -- so if my container is opened and looked at, I pay for that as an extra fee?

MR. YAGER: There is not an extra fee, there is a delay. And obviously any time the cargo is --

REP. SHERMAN: Okay. I'm talking not about the delay. I'm talking about -- you know, there is a guy, he is looking.

MR. YAGER: That's right. These are --

REP. SHERMAN: So he is getting a salary. Who is paying for that?

MR. YAGER: This is the U.S. customs service, the U.S. customs officials are the ones who are doing inspection.

REP. SHERMAN: And so that's out of general tax revenue?

MR. YAGER: Correct.


I'm going to mispronounce your last name. Ms. Espinel. Is it a -- would it be a violation of WTO for us to say that the owner of the container -- that we impose a fee on each container coming in? We use those fees exclusively to look inside every container.

MS. ESPINEL: That is an excellent question. And I want to make sure that my answer is as accurate as possible. So if I may, I would like to get back to on that so that we can give you a precise and accurate answer. It is not obvious to me that there is any WTO issue that would arise from that, but I don't want to give you a definitive answer.

REP. SHERMAN: So you have a situation then where the importers of this country, and ultimately all of those who consume imported products, which means all of us, are imposing a host of risks and costs on America. The risks of weapons of mass destruction, the risk of pirated products, toys with lead in them.

And we're not doing anything to open the boxes, we just bring them in. We look at less than 1 percent and there we may just, you know, pass a Geiger counter over it to make sure that if there is a nuclear weapon inside at least they've been smart enough to shield it with lead.

So if we wanted to present people from importing pirated disks, and fraudulent break pads, and all the other illegal products, not to mention drugs, coming into this country. We'd actually have to open the package, open the containers that would cost money, and that cost would be borne by our importers which I might add would help us on the balance of payments situation where right now all of the costs, societal costs of piracy et cetera are not borne by the importers but rather borne by the society at large.

Have we ever threatened China with loss of access to U.S. markets if they do not -- I don't care what agreements they sign because that's absolutely meaningless. It's -- but if they actually don't create a circumstance where everybody I talked to go visits Beijing says as they're walking around they're tripping over stands selling pirated movies, pirated music et cetera.

What does China have to lose, and why are they laughing at us so hard when we fail to do anything?

MS. ESPINEL: I think China is one of the most important trading relationships that we have. And --

REP. SHERMAN: Excuse me. Aren't our exports to China about the size of our exports to Belgium?

MS. ESPINEL: But the Chinese economy, the Chinese imports -- not just our export economy Chinese imports are essential to our economy.

REP. SHERMAN: Okay. If you think that you get rich by importing, then the Chinese trade relationship is critically important. If you think you get rich by -- a society gets rich by high corporate profits then China is important.

But if you think in terms of U.S. jobs better focus on Belgium, that is to say exports are what creates jobs. So please -- in any case, it's an important trading relationship, at least in one direction. What are -- what have we threatened the Chinese with?

MS. ESPINEL: And I understand the frustration that you're expressing.

I think before taking action to shutdown Chinese market access to the United States, we have to look very carefully at the consequences that it would have on U.S. consumers, on the U.S. public as a whole. But your comment that China --

REP. SHERMAN: Yeah, somebody might actually get a job in the textile industry. It could happen.

MS. ESPINEL: Your comment that China is laughing at us, I would respectfully disagree with.

REP. SHERMAN: (Laughs).

MS. ESPINEL: I would agree that China needs to do more.

REP. SHERMAN: Have you had your hearing checked?

MS. ESPINEL: But China has made progress, China is not in the same situation, and I think that is in part because of U.S. pressure. But I think that is also because the Chinese government has recognized that its reputation as a manufacturing source around the world, the primary manufacturing source of counterfeit and pirated goods, is not a benefit to it. That is not at all to say --

REP. SHERMAN: Are you saying that any American diplomat, just walking around the streets of Beijing, will not, without even looking for it, run into pirated goods for sale?

MS. ESPINEL: I would -- I'm not disagreeing at all that there is a massive problem in China and that you will find counterfeit and pirated goods quite easily in China.

The Chinese authorities have taken some actions against this, but clearly they've not done enough, and they remain.

REP. SHERMAN: But so -- these actions they've taken, that you've bought off on for the most part, and apologize for here, are so ineffective that it's easier to buy pirated goods in China than it is to buy chewing gum here in the United States.

MS. ESPINEL: I would also want to take this opportunity to point out that while we have various fora that we have been encouraging the Chinese to do a better job here, one of the most effective tools that we have at USTR, and, of course -- is WTO dispute settlement.

And we have recently filed cases against China at the WTO. That is something the Chinese government is obviously quite displeased with our doing so.

REP. SHERMAN: They're quite displeased because they tell. You they put on an act in front of you, and you buy it.

They're quite displeased because they can walk into a room, point to the most recent highly ineffectual action you've taken, pound the table, cry, if they're really good actors, and convince you that way that your ineffectual actions are somehow having some effect, and then leave, and then laugh, but only behind your back.

MS. ESPINEL: Well, I would say that it is certainly our hope that the cases we have brought at the WTO will not be as ineffectual as you seem to think that they will be.

We have rights at the WTO. We chose to exercise those rights when it became clear that we were going to be able to resolve some of our differences with China.

And it is my personal belief that these cases, while certainly not addressing the entire IP issue in China, will be effective in increasing enforcement in China.

REP. SHERMAN: I yield back. My time has expired.

REP. BERMAN: If extra time would bring a consensus --


REP. SHERMAN: If I could have just 30 seconds, I would like to commend to the chair, the bill that's been introduced in the Senate, and three of us introduced in the House and that is the Intellectual Property Rights Enforcement Act. And I hope that we either pass that separately or, better yet, put it in a larger package. And I think that will put us -- that we'll have a strong support in the Senate for that approach.


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