USTR Maintains China on Priority Watch List in 2026 Special 301 Report Amid Persistent IP and Trade Concerns

The Office of the United States Trade Representative (USTR) published its 2026 Special 301 Report on April 30, 2026, following its annual review under Section 182 of the Trade Act of 1974. The report evaluates the adequacy and effectiveness of intellectual property (IP) protection and enforcement among U.S. trading partners, categorizing them based on the level of concern into Priority Foreign Country, Priority Watch List, or Watch List.

For the 2026 review, USTR examined over 100 trading partners. Notably, Vietnam was designated a Priority Foreign Country for the first time in thirteen years. Six countries, including China, were placed on the Priority Watch List, while nineteen countries were listed on the Watch List. The report also noted changes in country status: Argentina and Mexico were downgraded from the Priority Watch List to the Watch List due to improvements in IP policy, Bulgaria was removed from the Watch List, and the European Union (EU) was added, reflecting concerns over pharmaceutical legislation, geographical indications, and digital copyright implementation.

Ambassador Jamieson Greer emphasized the importance of using enforcement tools to address unfair trade practices, while Ambassador Rick Switzer stated that USTR will continue to negotiate with trading partners to resolve IP-related trade barriers.

China remains on the Priority Watch List in 2026 and is subject to ongoing monitoring under Section 306 of the Trade Act of 1974. The report underscores that reforms in China aimed at improving IP protection and enforcement progressed slowly during 2025. USTR expressed continued concerns about the implementation of China’s amended Criminal Law, Copyright Law, and Patent Law, as well as persistent issues involving technology transfer, trade secrets, counterfeiting, online piracy, patent and related policies, bad faith trademarks, and geographical indications.

The report highlights statements by Chinese officials, including President Xi Jinping’s October 2024 remarks about pursuing an IP path with “Chinese characteristics,” which have raised questions about the fair application of IP protection and enforcement to foreign rights holders. The May 2024 “Promotion Plan for the Construction of an IP Power” and subsequent policy directives were cited as further evidence of China’s focus on technological self-reliance and shaping global IP rules to align with domestic priorities.

On technology transfer, the report references the October 2025 initiation of a Section 301 investigation to determine whether China has fulfilled its commitments under the United States-China Economic and Trade Agreement (Phase One Agreement), particularly those related to technology transfer and IP. The report also notes that China has not fully implemented or has only partially implemented several commitments from the Phase One Agreement, including those concerning trade secrets, patents, pharmaceutical-related IP, trademarks, copyrights, and geographical indications.

Regarding trade secrets, USTR identifies ongoing weaknesses in judicial enforcement and incomplete implementation of the amended Criminal Law. The April 2025 joint interpretation by the Supreme People’s Court and Supreme People’s Procuratorate, which requires proof of actual losses or illegal gains to meet the criminal threshold for trade secret misappropriation, is highlighted as a concern. The report calls for further changes to facilitate criminal investigations and prosecutions and criticizes the June 2025 amendments to the Anti-Unfair Competition Law for not increasing administrative penalties for trade secret misappropriation.

Stakeholders continue to report significant enforcement challenges in China, including high evidentiary burdens, limited discovery, difficulties in enforcing agreements related to trade secrets and confidential business information, and challenges in obtaining deterrent-level damages awards. The risk of unauthorized disclosures of trade secrets and confidential business information by government personnel and third-party experts remains a serious concern, particularly in industries such as software, manufacturing, and cosmetics.

The report identifies China as the world’s leading source of counterfeit and pirated goods, with China and Hong Kong together accounting for over 87% of the value of counterfeit and pirated goods seized by U.S. Customs and Border Protection in Fiscal Year 2025. The manufacture, domestic sale, and export of counterfeit goods—including medicines, fertilizers, pesticides, and under-regulated pharmaceutical ingredients—are described as widespread. The report also points to the availability of counterfeit goods on e-commerce platforms and online piracy facilitated by illicit streaming devices and mini Video on Demand facilities.

Additional concerns include restrictions on foreign investment in online publishing and audiovisual services, lack of transparency in patent prosecution, opaque standards-setting processes, “secure and controllable” policies affecting information and communications technology products, administration of geographical indications, and decreasing publication of court decisions over the past five years.

The report details the history of U.S. actions under Section 301 and at the World Trade Organization (WTO) to address China’s unfair acts, policies, and practices related to technology transfer, IP, and innovation. It notes that, while China made certain regulatory revisions in response to U.S. challenges, many issues remain unresolved. USTR continues to monitor China’s compliance with its Phase One Agreement commitments and is evaluating the effectiveness of existing tariffs and other measures imposed in response to China’s practices.

Draft regulations and policy documents, such as the August 2020 draft Guiding Opinions on Strengthening the Protection of Trade Secrets and Confidential Business Information in Administrative Licensing and the April 2025 draft Regulations on Protection of Trade Secrets, have yet to be finalized or are criticized for containing broad exceptions that could undermine enforcement.

The USTR’s 2026 Special 301 Report concludes that China must undertake comprehensive reforms to address the full range of fundamental changes required to improve its IP landscape and provide a level playing field for foreign rights holders.