"Special 301" is the part of U.S. trade law that requires the U.S. Trade Representative (USTR) to identify countries that deny adequate and effective protection for intellectual property rights (IPR) or that deny fair and equitable market access for U.S. persons who rely on IPR. Once "identified," the country could face bilateral U.S. trade sanctions if changes are not made to theaddress U.S. concerns.

Under Special 301, countries that have the most onerous or egregious acts, policies, or practices, or whose acts, policies, or practices have the greatest adverse impact (actual or potential) on relevant U.S. products and are not engaged in good faith negotiations to address these problems, must be identified as "priority foreign countries."

USTR must decide which countries to identify each year in a Special 301 review that is issued within 30 days after the release of the United States' annual National Trade Estimate Report, generally done around March 31. If a trading partner is identified as a priority foreign country, USTR must decide within the following 30 days whether to initiate an investigation of those acts, policies, and practices that were the basis for the identification.

Within six months of the date that the investigation is initiated, USTR must determine -- after investigation and consultations -- if the circumstances that prompted the original action still exist. If the determination is affirmative, then USTR must decide what action, if any, to take. The actions can include bilateral trade sanctions under Section 301 of the Trade Act of 1974. The deadline for making this determination can be extended to nine months from the date of initiation if USTR decides that complex or complicated issues are involved or if substantial progress is being made.

USTR maintains separate categories for countries about which the United States has concerns regarding IPR protection, but that either no longer merit priority status or that have not been so designated. Countries with practices that have less of an impact but that are still very serious are placed on a "priority watch list." These countries are the focus of increased bilateral discussions concerning the problem areas.

USTR uses a separate "watch list" for countries about which the United States has concerns regarding the pace of progress in implementing IPR protection and providing comparable market access for U.S. products. There is also an "other observations" category for countries having practices that concern USTR enough to mention them in the annual review report.

In the USTR annual Special 301 review, countries can be moved up to priority status or moved to a different list or completely removed from the lists.

Out-of-cycle reviews can be, and often are, conducted at any time during the year. These reviews are the same as the regular annual review: priority foreign countries are identified, and other countries can be added or removed from the watch lists.

On May 1, 1998, USTR announced that, as a result of the annual Special 301 review, 14 countries and the European Union were placed on the priority watch list, and 30 countries and the Hong Kong Special Administrative Region were designated for the watch list. Seventeen other countries were cited under the "other observations" category.

USTR also announced that the Section 301 investigation of Paraguay, begun when that country was identified as a priority foreign country in January 1998, will continue. Additionally, it announced that the United States will initiate dispute settlement actions within the World Trade Organization (WTO) against Greece and the European Community because of piracy of U.S. television programs and films. This is the 10th time the United States has taken an IPR-related dispute to the WTO.

USTR further stated that it will monitor China's compliance with bilateral IPR agreements. Since China is not yet a WTO member, USTR may move directly to trade sanctions if there is a slippage in China's enforcement of bilateral agreements.