Mexico’s General Foreign Trade Rules For 2025
On Dec. 30, 2024, the Mexican Tax Administration Service (SAT) published in the Official Gazette of the Federation (DOF) the General Foreign Trade Rules for 2025, which seek to implement certain measures in order to optimize tax collection in Mexico and expand compliance standards. These rules will be in effect from Jan. 1 to Dec. 31, 2025.
This GT Alert highlights the most relevant changes to the General Foreign Trade Rules. Companies involved in Mexican foreign trade should timely review these provisions to enhance compliance. Adherence to the rules may also impact companies’ strategic planning, operating costs, and risk management activities.
General Considerations
ANAM Portal
Various guidelines that were previously released through the SAT Portal must now be managed through the National Customs Agency of Mexico (ANAM) Portal. Users should verify and follow the specific requirements stipulated in this new portal.Reference to Rules 1.6.28, 1.7.1, 1.7.7, 1.8.2, 1.9.4, 1.9.5, 1.9.6, 1.9.9, 1.9.11, 1.9.20, 1.9.21, 2.3.4, 2.3.8, 2.3.10, and 2.4.12 for 2025.
Changes of forms or procedure files
Various forms and/or files corresponding to foreign trade procedures were modified, so companies may need to carefully review their updated versions and ensure they comply with the requirements established in each case.Reference to Rules 1.1.10., 1.4.14., 2.2.6., 2.3.8., 3.1.26., 3.5.7., 4.2.2., 7.3.3. for 2025.
Considerations by Title, Chapter, and Rule
Title 1. General Provisions and Acts Prior to Dispatch
Chapter 1.2. Filing Promotions, Statements, Notices, and Forms
Submission of promotions, applications, or notices without format (Annex 2)
The 2025 rules explicitly specify the requirements that must be met by promotions, applications, or notices submitted in writing to the customs authority, in accordance with articles 18 and 18-A of the Federal Tax Code (CFF), strengthening clarity in their application.
The procedures established in Annex 2 (formats for foreign trade procedures) may continue to be presented via traditional means that were used before these documents had to be submitted to the authority’s digital platform or the tax mailbox.
However, new procedures must be submitted in writing to the competent authority, complying with the corresponding provisions. This situation will be maintained until the corresponding authority publishes the specific formats that must be used to carry out these procedures electronically.Reference to Rule 1.2.2. for 2025.
Chapter 1.6. Determination, Payment, Deferral, and Compensation of Contributions and Guarantees
Transfer and change of fixed asset regime, companies in the IMMEX Program
Neither the physical presentation nor the payment of the General Import Tax (IGI) is required for the transfer of goods classified as fixed assets between companies in the IMMEX Program (Manufacturing, Maquiladora, and Export Services Program), provided that certain requirements are met.
The section of the regulatory provision that allowed companies to offset the IGI payment made when transferring fixed asset goods temporarily imported before Jan. 1, 2001, was deleted. This rule applied only when the IGI had been paid at the time of the transfer, allowing its crediting on future imports.
The 2025 rules also establish that, when changing the regime from temporary to definitive importation of fixed asset goods under the IMMEX Program, the customs value declared in the temporary import declaration must be considered. This value can be reduced in proportion to the number of days in which the goods were deducted. If there are no authorized deduction percentages, it is assumed that the asset was deducted for 3,650 days.
The 2025 rules eliminate the portion that expressly referred to the possibility of applying the preferential rate of an authorized Sectoral Promotion Program (PROSEC) when changing the import regime from temporary to definitive, even for goods imported before Jan. 1, 2001, provided that the importer was registered in said program.Reference to Rule 1.6.10. for 2025.
Title 2. Entry, Exit, and Control of Goods
Chapter 2.3. Authorized Customs Facilities, Strategic Customs Facilities, and Operations within the Customs Facility
Obligations of strategic authorized customs facilities
Legal entities managing or operating a strategic authorized customs facility must henceforth comply with the “Guidelines for Infrastructure, Control, Surveillance, and Security, as well as Technological Recommendations regarding Closed-Circuit Television Cameras, Installations, and Systems, for Administrators and Operators of Strategic Authorized Customs Facilities.”Reference to Rule 2.3.4. for 2025.
Title 3. Customs Clearance of Goods
Chapter 3.7. Simplified Administrative Procedures
Obligations of courier and parcel companies
From now on, companies registered as courier and parcel services with ANAM must provide access to their risk analysis system through a written document submitted to the corresponding customs office, as well as to the General Directorate of Customs Investigation (DGIA) and the General Administration of Foreign Trade Audits (AGACE).
This document must be submitted within the month following registration or renewal in the Courier and Parcel Companies Registry. The document will be valid for six months and must be resubmitted whenever there is any modification related to system access.
According to the transitional provisions published in the DOF, companies currently operating under this scheme must submit the document no later than Jan. 31, 2025.Reference to Rule 3.7.4 for 2025.
Assessment of contributions for the import of goods through the simplified procedure carried out by courier and parcel companies
There are significant changes in the assessment of import contributions made by courier and parcel companies:
In general, the new regulations establish that the contributions caused by the importation of goods made through courier and parcel using the simplified procedure will be determined by applying a global rate of 19% to the goods’ value.
It should be noted that the 2024 rules allowed exemption from VAT and IGI when the imported goods did not exceed $50 USD, as long as they were not subject to non-tariff regulations and that the corresponding quota of the Customs Processing Fee (DTA) was covered.
However, the new 2025 provision limits the exemption from such taxes to goods whose value does not exceed $1 USD and that come from countries party to international instruments such as the FTA, PAAP, and TIPAT (a different scheme from the USMCA that will be specifically addressed), maintaining the same general requirements that were addressed in the previous paragraph. This amendment represents a tightening of the criteria for exemption, reducing the threshold for application of the facility.
Under the USMCA, goods whose value does not exceed $50 USD will not be subject to IGI and VAT payments and must comply with the general requirements referred to above. Merchandise with a value that exceeds that amount and does not exceed $117 USD will be subject to a preferential rate of 17%.Reference to Rule 3.7.35. for 2025.
Title 4. Customs Regimes
Chapter 4.2. Temporary Import Procedure to Return Abroad in the Same State
Return of foreign vehicles whose permit for entry or temporary importation of vehicles has expired
The 2025 rules include a change to the process of returning foreign vehicles whose temporary import permit has expired. Now, in addition to transmitting the B17 form, a folio must be generated after the transmission of the notice. Once done, the transfer of the vehicle to the border strip or region or to the customs office of departure for its return abroad may be carried out within a period of five days beginning the next business day after the notice is submitted.Reference to Rule 4.2.20. for 2025.
Chapter 4.5. Fiscal Warehouse
Destruction of bonded warehousing goods for display and sale
According to the 2025 rules, authorized legal entities must comply with the requirements established in the procedure sheet 111/LA “Notice for the destruction of goods from the tax warehouse for the exhibition and sale of goods,” contained in Annex 2, before being able to proceed with destruction. This change introduces an additional condition, as the notice is no longer sufficient on its own to authorize the destruction of goods—its presentation is subject to prior compliance with the specific requirements set out in the procedure sheet 111/LA.Reference to Rule 4.5.22. for 2025.
Chapter 4.6. Transit of Goods
Internal and international transits between customs, authorized customs sections, and international airports
The 2025 rules designate the transfer of goods in both directions between the customs section of the General Mariano Escobedo International Airport and the customs section of Salinas Victoria B (Interpuerto) as an international internal transit route.Reference to Rule 4.6.1. for 2025.
Obligations in international transits (Annex 16)
The 2025 rules account for the possibility of allowing the untimely arrival of goods, on a one-off occasion, when circumstances of force majeure or a fortuitous event arises that prevents compliance with the established deadlines. In these cases, the customs broker, customs agency, or person responsible for international transit must submit a written notice to the customs authorities explaining the reasons for the delay.Reference to Rule 4.6.20. for 2025.
Provisions Removed
Chapter 4.3. Temporary Import for Processing, Transformation, or Repair
Guarantee of the payment of taxes for the temporary importation of goods indicated in Annex II of the IMMEX Decree
The 2025 rules eliminate the stipulation that companies in the IMMEX Program, when temporarily importing sensitive goods referred to in Annex II of the Decree, had to guarantee the payment of contributions through bond policies issued by authorized institutions. These bonds had to meet specific requirements and be submitted electronically to the tax authorities.
This modification is related to the decree published in the DOF Dec. 19, 2024, through which the government made significant modifications to the IMMEX Decree, transferring various tariff items corresponding to textile products from Annex II (which includes sensitive goods) to Annex I, which lists those goods whose temporary importation under the IMMEX Decree is prohibited.
Notwithstanding the foregoing, goods such as sugar and steel continue to be included in Annex II, so companies importing these goods and others listed in Annex II should be aware of the implications of this modification.Reference to Rule 4.3.2. for 2024 eliminated.
Chapter 4.4. Temporary Export
Temporary export of livestock and research goods
The 2025 rules eliminate the explicit mention of the procedures and requirements for the temporary export of livestock and goods used in scientific research.Reference to Rule 4.4.4. for 2024 eliminated.
Additional Considerations
Chapter 1.10. Direct Firm and Legal Representative
Authorization for the transmission of customs declarations through the SEA, accreditation of legal representative, auxiliaries, and customs
Following the constitutional reform published Oct. 31, 2024, which modifies articles 25, 27, and 28 of the Political Constitution of the United Mexican States, the productive companies of the state are now considered state-owned public enterprises, losing their operational independence.
The 2025 rules incorporate this change.Reference to Rule 1.10.1. for 2025.
Publication of annexes
As a complement to the publication of the General Foreign Trade Rules for 2025, on Jan. 6, 2025, Annexes 3–9, 11, 12, 14–21, 23–26, and 28–30 were released in the DOF. These annexes contain key information on the classification of goods, valuation criteria, official formats, applicable tariffs, and operating procedures, among other aspects relevant to compliance with customs regulations.
Annex 13 was published together with the General Foreign Trade Rules for 2025 Dec. 30, 2024. Annexes 1, 2, 10, 22, and 27 are expected to be disseminated in the future.
These annexes establish guidelines and requirements applicable to foreign trade operations and companies should review their content in detail to assess their impact and comply with the 2025 provisions.
Provisions Removed
Chapter 1.4. Customs Brokers and Authorized Representatives
Authorization and extension of customs agents
The 2025 rules remove the provision that allowed individuals obtaining a customs broker license to designate authorized representatives in cases of the original broker’s death, permanent disability, or voluntary withdrawal. This change may restrict the continuity of customs operations by eliminating this right of action in exceptional situations.Reference to Rule 1.4.2. by 2025.
Authorization to amend the designation, ratification, and publication of customs broker patent by replacement
The 2025 rules remove the procedure that allowed a customs broker who ratified their retirement in a timely manner and received the Voluntary Retirement Agreement to access the benefit of obtaining the “Agreement for the granting of a customs broker patent by substitution.” The last date a customs broker could obtain this benefit was July 21, 2021.Reference to Rules 1.4.11. for 2024 eliminated.
Notice of incorporation of substitute customs broker to entities previously constituted by the customs agents they replace
Related to the removal of the above procedure, the 2025 rules also eliminate specific procedures for the incorporation of substitute customs agents to previously constituted entities.Reference to Rules 1.4.13. for 2024 eliminated.
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Reform to Mexico’s Federal Labor Law Related to Digital Platforms
Go-To Guide:
Mexico updates its Federal Labor Law to regulate digital platforms, ensuring standardized labor conditions and rights for gig economy workers.
The amendments introduce new definitions and rules, including flexible work schedules, digital contracts, and algorithmic management transparency.
Employers must provide social security, profit sharing, and training, while workers gain union rights and protection against discrimination.
Non-compliance with the new regulations may result in fines, with a phased implementation.
On Dec. 24, 2024, Mexico published amendments to its Federal Labor Law regarding digital platforms. These changes take effect 180 days after publication.
This GT Alert highlights significant modifications to the law and details the new definitions, penalties, and implementation timelines.
I.
Purpose
The amendments seek to establish a regulatory framework for digital platforms in Mexico that standardizes labor conditions for the employees working through these platforms. This includes compensation, effective access to social security, provision of benefits, implementation of security measures, and profit sharing. The regulation seeks to ensure that digital platform employees’ labor rights are protected under a legal framework.
The initiative focuses on regulating the “gig economy” platforms, meaning income generation outside a traditional work scheme. Nonetheless, these regulations have implications for other similar business models operating under unconventional work schemes. The regulation seeks not only to standardize working conditions for employees working for these types of platforms, but also to potentially apply to any company with a similar business model, ensuring wider labor protection within the digital industry.
II.
New Definitions
Chapter IX B is incorporated into the Federal Labor Law, which addresses the topic of work on digital platforms, along with the following definitions related to this modality:
1.
Digital platform: Computer systems that assign tasks or services to workers for third parties using information technologies as defined in article 330-A of the Federal Labor Law.
2.
Work on digital platforms: A subordinate employment relationship where workers provide physical services managed by a person or company through a digital platform.
3.
Employee: An individual who works on digital platforms, earning at least one monthly minimum wage in Mexico City.
4.
Effective working time: The period from when a worker accepts a task until they complete it. Employees who do not generate a monthly net income exceeding the amount specified in the preceding paragraph will be considered independent contractors.
5.
Algorithm: Automated decision-making systems that control and supervise digital platform workers.
III.
Changes
Employment Contract: Employers must use approved contract templates and can sign them digitally. Employers must submit the contract template to the Federal Center for Conciliation and Labor Registration for approval.
The contract should establish the equipment and work supplies provided, the percentage and amount the employer will pay the employee for each task service, work, or job, any bonuses that may be applicable, and health and safety obligations, among others.
Work Schedule: Schedules are flexible and discontinuous, with employment existing only during effective working time.
Salary: Pay is set per task and includes proportional amounts for rest days, vacations, and bonuses.
Social Security: Tips that individuals generate on digital platforms will not be considered part of the base salary for social security purposes. Employers must cover occupational risks during effective working time.
Profit Sharing: Workers with over 288 annual hours can participate in profit sharing.
Union Freedom: Workers can form or join unions.
Algorithmic Management: Employers must inform workers about how algorithms affect their employment.
Employer Obligations: Special obligations are included for digital platform employees, as well as for employers and individuals who manage or operate services through digital platforms.
Review Mechanisms: Digital platforms must provide employees with mechanisms to review decisions affecting their access to or connection with the platform. Autonomous personnel, not algorithms, must manage these mechanisms.
Special Causes of Termination: New reasons for justified termination include:
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submitting false data and;
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compromising user security;
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engaging in acts of dishonesty or misconduct, acts of violence, threats, insults, harassment, and/or sexual harassment, mistreatment, discriminatory acts, or other similar acts during and due to work; and
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repeatedly failing to comply with the accepted tasks, services, works, jobs, or work-related instructions without justified cause.
Training: Employers must provide necessary training and tools.
Gender Perspective: Companies must protect workers from gender-based discrimination and violence.
IV.
Fines
Violations will be subject to additional fines calculated based on the Unidad de Medida y Actualizacion (Unit of Measurement and Update UMA), which is the economic reference in pesos used to determine the amount of payments for obligations and scenarios outlined in federal laws, state laws, and any legal provisions arising from them. For 2025, the UMA is valued at $113.14 Mexican pesos.
2,000-25,000 UMAs for failing to register contracts before the Federal Center for Conciliation and Labor Registration.
1,000-25,000 UMAs for failing to issue or report modifications in the algorithmic management policy document.
250-5,000 UMAs for violating the provisions of Article 291-K concerning administrating and managing services through digital platforms.
500-25,000 UMAs for failing to implement the mechanisms outlined in Article 291-P regarding actions related to autonomous personnel rather than algorithms.
V.
Implementation Deadlines
This regulation will be implemented gradually.
The law becomes enforceable 180 days after its publication in the OGF.
Before being enforceable, the Mexican Social Security Institute and the National Housing Fund Institute for Employees will issue guidelines through a mandatory pilot test to be conducted five days after the law takes effect. The guidelines will establish general rules on employers’ contributions for employees hired through digital platforms.
The Mexican Social Security Institute will have 180 days from the rules’ publication date, to consider the results of the pilot test prepare additional compliance initiatives, which will be presented to the Legislative Branch for discussion.
The Ministry of Labor must, within five days of the rules’ effective date, establish the general provisions governing the net income calculation for employees, which is currently determined by tasks, services, or work performed.
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Third-Party Litigation Funding in England and Wales Post-PACCAR: Where are We Now?
In our earlier alert on third-party funding (TPF) and the UK Supreme Court’s decision in PACCAR, we discussed the initial industry reaction, subsequent litigation, and legislative reform proposals (at the time, through the remit of the Digital Markets, Competition and Consumers Bill (DMCC Bill) – introduced by the former, Conservative UK government under then Prime Minister, Rishi Sunak).
This alert provides an update on where we are now, following the publication of the Civil Justice Council (CJC) interim report and consultation on litigation funding, which confirmed that the current UK government will not be re-introducing the Litigation Funding Agreements (Enforceability) Bill (LFA Bill) any time soon—instead, looking at legislative reform in the round after the CJC’s final report is published in summer.
We therefore discuss the early indications around the CJC’s direction of travel and recent industry reaction as we await these all-important clarifications.
Recap
In July 2023 in PACCAR, the UK Supreme Court held that litigation funding agreements (LFAs) that entitle funders to payments based on the amount of damages recovered would be classified as damages-based agreements (DBAs). In turn, they would have to comply with the Damages-Based Agreements Regulations 2013 (DBA regime) or risk being deemed unenforceable. The decision brought the enforceability of many pre-existing LFAs into question and created large scale uncertainty within the TPF market. This was a particular problem for opt-out collective proceedings in the Competition and Appeals Tribunal (CAT), where DBAs are strictly prohibited (s.47C(8), Competition Act 1998).
Originally, there were proposals to restore the pre-PACCAR position through a last minute amendment to the DMCC Bill. By March 2024, this was a bill of its own—the LFA Bill. The LFA Bill was to be an integral part of the last government’s commitment to restoring the pre-PACCAR status quo, passing second reading in the House of Lords on 15 April 2024. However, it did not survive the pre-election wash up ahead of the dissolution of parliament on 30 May 2024, remaining indefinitely postponed under the new administration.
CJC Review of the TPF Market in England and Wales
In spring 2024, prompted by the PACCAR decision, the then Lord Chancellor called upon the CJC to conduct a wider review of the TPF market. At this time, the PACCAR decision was to be reversed via the LFA Bill, which, as above, later fell through on change of governments.
On 31 October 2024, the CJC published its much-anticipated interim report and consultation on litigation funding, as the first phase of the CJC review process. Being interim in nature, it seeks to identify the concerns within the current system of TPF in England and Wales and set up the key issues that the CJC is consulting on. Whilst only interim in nature, it does give an indication of the CJC’s (and, subsequently, the government’s) direction of travel.
Broadly, the interim report covers the development of TPF in England and Wales and the current self-regulatory model, approaches to the regulation of TPF across different jurisdictions, the relationship between costs and funding, and existing funding options.
There are 39 consultation questions that the CJC seeks input on, located at Appendix A.
In sum, these questions cover:
The benefits of TPF (namely, access to justice and equality of arms between parties to litigation).
The extent to which the current model of self-regulation works and whether there should be one homogenous regulatory framework applied to (i) all types of litigation and (ii) English-seated arbitration.
Whether and, if so, to what extent, a funder’s return on any third-party funding agreement should be subject to a cap.
How TPF should best be deployed relative to other sources of funding (including legal expenses insurance and crowd funding).
The role of the court in controlling the conduct of litigation support by TPF or similar funding arrangements.
What provision (including provision for professional legal services regulation), if any, needs to be made for the protection of claimants whose litigation is funded by TPF.
The extent to which the availability of TPF encourages specific forms of litigation.
Responses to the consultation are sought by 11:59 pm on Friday 31 January. The CJC will then issue a final report in summer with outcomes and recommendations.
Direction of Travel
Whilst the CJC report is only interim in nature, it does give us an indication of the CJC’s early thinking and the potential direction of travel. Some of these key themes are discussed below.
Self-Regulation
A large section of the CJC interim report focuses on the self-regulation of TPF in England and Wales through voluntary subscription to the ‘Code of Conduct for Litigation Funders’ published by the Association of Litigation Funders (ALF Code) and how this compares with other jurisdictions. The report notes that the current model of self-regulation was introduced in 2011, at a time when the TPF market was still beginning to develop, and notes that the TPF market has since expanded very significantly, especially in respect of funding collective proceedings and group litigation. On take up of the ALF Code, the report suggests that whilst an estimated 44 funders operate in England and Wales, only 16 are members of the ALF and thereby party to the ALF Code. Of these 16 members, eight are also members of the International Litigation Funders Association. Many commentators suggest that the interim report’s discussion of the current model of self-regulation may be indicative of the introduction of new legislation to regulate the TPF industry in the future.
PACCAR
The interim report doesn’t address the resolution of PACCAR specifically, which has sparked some criticism. Some commentators have referred to the fact that when the CJC’s original Terms of Reference were set in spring 2024, PACCAR was to be resolved via legislation which has since fallen away. The interim report offers no indication of whether PACCAR would be addressed in light of this.
The co-chair of the CJC review, Dr John Sorabji, has since suggested that whilst consideration of a litigation funding bill falls outside of the Terms of Reference, the CJC’s wider review of TPF industry includes consideration of the DBA regime, for which PACCAR will inevitably be considered.
Several challenges to LFAs are currently stayed in the Court of Appeal as the TPF market awaits a legislative solution to PACCAR. Many funders have since adopted some combination of the ‘multiples’ approach linked to sums invested, internal rates of return and compound interest rates, and creatively drafted clauses that seek to pre-empt a legislative resolution to PACCAR. For now, the TPF market will have to eagerly await the final report and any legislative solution that follows.
Funder Involvement in the Settlement of Disputes
The interim report notes that the nature of TPF means, on the one hand, that the ‘risk exists that funders will control the litigation’ and that ‘TPF discourages and undermines just settlement’. On the other hand, the report explains how the ALF Code makes provision for a dispute resolution procedure in these instances. Here, under the ALF Code the funder and funded are required to instruct a Kings Counsel (either jointly instructed, or as nominated by the Chairman of the Bar Council) to provide a binding opinion on the settlement proposal.
The debate around funder involvement in settlement has also been accelerated by recent headlines around the long running collective action in Merricks v Mastercard, in which the class representative, Walter Merricks, is said to have accepted a £200m settlement offer, much below the original claim value. The funder, Innsworth, has since publicly criticised the decision and written to the CAT ahead of the tribunal reviewing the terms of the settlement early this year.
There is currently no clarity as to whether—and if so to what extent—a funder’s interests will be considered a relevant factor in deciding whether a settlement is just and reasonable. Indeed, this may be the first case to decide the point.
Conclusion
The interim report has therefore provided much food for thought around the future direction of travel. Whilst only indicative at this stage, it looks as though we may be moving away from the model of self-regulation that has existed since 2011, that PACCAR is likely to be addressed in the context of a wider discussion of the existing DBA regime, and that Courts will soon be tasked with considering funder submissions around settlement terms.
Responses to the CJC consultation are open until 31 January. Consultees do not need to answer all questions if only some are of interest or relevance. The full list of consultation questions is available here.
China’s National Intellectual Property Administration Issues Guidelines for Patent Applications for AI-Related Inventions
On December 31, 2024, China’s National Intellectual Property Administration (CNIPA) issued the Guidelines for Patent Applications for AI-Related Inventions (Trial Implementation) (人工智能相关发明专利申请指引(试行)). The Guidelines follow up on CNIPA’s draft for comments issued December 6, 2024 in which only a week for comments were provided. The short comment period implied CNIPA did not actually want comments and is in contravention of the not-yet-effective Regulations on the Procedures for Formulating Regulations of the CNIPA (国家知识产权局规章制定程序规定(局令第83号)) requiring a 30-day minimum comment period. Highlights follow including several examples regarding subject matter eligibility.
There are four types of AI-related patent applications:
Patent applications related to AI algorithms or models themselves
Artificial intelligence algorithms or models, that is, advanced statistical and mathematical model forms, include machine learning, deep learning, neural networks, fuzzy logic, genetic algorithms, etc. These algorithms or models constitute the core content of artificial intelligence. They can simulate intelligent decision-making and learning capabilities, enabling computing devices to handle complex problems and perform tasks that usually require human intelligence.
Accordingly, this type of patent application usually involves the artificial intelligence algorithm or model itself and its improvement or optimization, for example, model structure, model compression, model training, etc.
Patent applications related to functions or field applications based on artificial intelligence algorithms or models
Patent applications related to the functional or field application of artificial intelligence algorithms or models refer to the integration of artificial intelligence algorithms or models into inventions as an intrinsic part of the proposed solution for products, methods or their improvements. For example: a new type of electron microscope based on artificial intelligence image sharpening technology. This type of patent application usually involves the use of artificial intelligence algorithms or models to achieve specific functions or apply them to specific fields.
Functions based on artificial intelligence algorithms or models refer to functions implemented using one or more artificial intelligence algorithms or models. They usually include: natural language processing, which enables computers to understand and generate human language; computer vision, which enables computers to “see” and understand images or videos; speech processing, including speech recognition, speech synthesis, etc.; knowledge representation and reasoning, which represents information and enables computers to solve problems, including knowledge graphs, graph computing, etc.; data mining, which calculates and analyzes massive amounts of data to identify information or laws such as potential patterns, trends or relationships. Artificial intelligence algorithms or models can be applied to specific fields based on their functions.
Field applications based on artificial intelligence algorithms or models refer to the application of artificial intelligence to various scenarios, such as transportation, telecommunications, life and medical sciences, security, commerce, education, entertainment, finance, etc., to promote technological innovation and improve the level of intelligence in all walks of life.
Patent applications involving inventions made with the assistance of artificial intelligence
Inventions assisted by artificial intelligence are inventions that are made using artificial intelligence technology as an auxiliary tool in the invention process. In this case, artificial intelligence plays a role similar to that of an information processor or a drawing tool. For example, artificial intelligence is used to identify specific protein binding sites, and finally obtains a new drug compound.
Patent applications involving AI-generated inventions
AI-generated inventions refer to inventions and creations generated autonomously by AI without substantial human contribution, for example, a food container autonomously designed by AI technology.
AI cannot be an inventor:
1. The inventor must be a natural person
Section 4.1.2 of Chapter 1 of Part 1 of the Guidelines clearly states that “the inventor must be an individual, and the application form shall not contain an entity or collective, nor the name of artificial intelligence.”
The inventor named in the patent document must be a natural person. Artificial intelligence systems and other non-natural persons cannot be inventors. When there are multiple inventors, each inventor must be a natural person. The property rights to obtain income and the personal rights to sign enjoyed by the inventor are civil rights. Only civil subjects that meet the provisions of the civil law can be the rights holders of the inventor’s related civil rights. Artificial intelligence systems cannot currently enjoy civil rights as civil subjects, and therefore cannot be inventors.
2. The inventor should make a creative contribution to the essential features of the invention
For patent applications involving artificial intelligence algorithms or models, functions or field applications based on artificial intelligence algorithms or models, the inventor refers to the person who has made creative contributions to the essential features of the invention.
For inventions assisted by AI, a natural person who has made a creative contribution to the substantive features of the invention can be named as the inventor of the patent application. For inventions generated by AI, it is not possible to grant AI inventor status under the current legal context in my country.
Examples of subject matter eligibility:
The solution of the claim should reflect the use of technical means that follow the laws of nature to solve technical problems and achieve technical effects
The “technical solution” stipulated in Article 2, Paragraph 2 of the Patent Law refers to a collection of technical means that utilize natural laws to solve the technical problems to be solved. When a claim records that a technical means that utilizes natural laws is used to solve the technical problems to be solved, and a technical effect that conforms to natural laws is obtained thereby, the solution defined in the claim belongs to the technical solution. On the contrary, a solution that does not use technical means that utilize natural laws to solve technical problems to obtain technical effects that conform to natural laws does not belong to the technical solution.
As an example and not a limitation, the following content describes several common situations where related solutions belong to technical solutions.
Scenario 1: AI algorithms or models process data with specific technical meaning in the technical field
If the drafting of a claim can reflect that the object processed by the artificial intelligence algorithm or model is data with a definite technical meaning in the technical field, so that based on the understanding of those skilled in the art, they can know that the execution of the algorithm or model directly reflects the process of solving a certain technical problem by using natural laws, and obtains a technical effect, then the solution defined in the claim belongs to the technical solution. For example, a method for identifying and classifying images using a neural network model. Image data belongs to data with a definite technical meaning in the technical field. If those skilled in the art can know that the various steps of processing image features in the solution are closely related to the technical problem of identifying and classifying objects to be solved, and obtain corresponding technical effects, then the solution belongs to the technical solution.
Scenario 2: There is a specific technical connection between the AI algorithm or model and the internal structure of the computer system
If the drafting of a claim can reflect the specific technical connection between the artificial intelligence algorithm or model and the internal structure of the computer system, thereby solving the technical problem of how to improve the hardware computing efficiency or execution effect, including reducing the amount of data storage, reducing the amount of data transmission, increasing the hardware processing speed, etc., and can obtain the technical effect of improving the internal performance of the computer system in accordance with the laws of nature, then the solution defined in the claim belongs to the technical solution.
This specific technical association reflects the mutual adaptation and coordination between algorithmic features and features related to the internal structure of a computer system at the technical implementation level, such as adjusting the architecture or related parameters of a computer system to support the operation of a specific algorithm or model, making adaptive improvements to the algorithm or model based on a specific internal structure or parameters of a computer system, or a combination of the two.
For example, a neural network model compression method for a memristor accelerator includes: step 1, adjusting the pruning granularity according to the actual array size of the memristor during network pruning through an array-aware regularized incremental pruning algorithm to obtain a regularized sparse model adapted to the memristor array; step 2, reducing the ADC accuracy requirements and the number of low-resistance devices in the memristor array through a power-of-two quantization algorithm to reduce overall system power consumption.
In this example, in order to solve the problem of excessive hardware resource consumption and high power consumption of ADC units and computing arrays when the original model is mapped to the memristor accelerator, the solution uses pruning algorithms and quantization algorithms to adjust the pruning granularity according to the actual array size of the memristor, reducing the number of low-resistance devices in the memristor array. The above means are algorithm improvements made to improve the performance of the memristor accelerator. They are constrained by hardware condition parameters, reflecting the specific technical relationship between the algorithm characteristics and the internal structure of the computer system. They use technical means that conform to the laws of nature to solve the technical problems of excessive hardware consumption and high power consumption of the memristor accelerator, and obtain the technical effect of improving the internal performance of the computer system that conforms to the laws of nature. Therefore, this solution belongs to the technical solution.
Specific technical associations do not mean that changes must be made to the hardware structure of the computer system. For solutions to improve artificial intelligence algorithms, even if the hardware structure of the computer system itself has not changed, the solution can achieve the technical effect of improving the internal performance of the computer system as a whole by optimizing the system resource configuration. In such cases, it can be considered that there is a specific technical association between the characteristics of the artificial intelligence algorithm and the internal structure of the computer system, which can improve the execution effect of the hardware.
For example, a training method for a deep neural network model includes: when the size of training data changes, for the changed training data, respectively calculating the training time of the changed training data in preset candidate training schemes; selecting a training scheme with the shortest training time from the preset candidate training schemes as the optimal training scheme for the changed training data, the candidate training schemes including a single-processor training scheme and a multi-processor training scheme based on data parallelism; and performing model training on the changed training data in the optimal training scheme.
In order to solve the problem of slow training speed of deep neural network models, this solution selects a single-processor training solution or a multi-processor training solution with different processing efficiency for training data of different sizes. This model training method has a specific technical connection with the internal structure of the computer system, which improves the execution effect of the hardware during the training process, thereby obtaining the technical effect of improving the internal performance of the computer system in accordance with the laws of nature, thus constituting a technical solution.
However, if a claim merely utilizes a computer system as a carrier for implementing the operation of an artificial intelligence algorithm or model, and does not reflect the specific technical relationship between the algorithm features and the internal structure of the computer system, it does not fall within the scope of Scenario 2.
For example, a computer system for training a neural network includes a memory and a processor, wherein the memory stores instructions and the processor reads the instructions to train the neural network by optimizing a loss function.
In this solution, the memory and processor in the computer system are merely conventional carriers for algorithm storage and execution. There is no specific technical association between the algorithm features involved in training the neural network using the optimized loss function and the memory and processor contained in the computer system. This solution solves the problem of optimizing neural network training, which is not a technical problem. The effect obtained is only to improve the efficiency of model training, which is not a technical effect of improving the internal performance of the computer system. Therefore, it does not constitute a technical solution.
Scenario 3: Using artificial intelligence algorithms to mine the inherent correlations in big data in specific application fields that conform to the laws of nature
When artificial intelligence algorithms or models are applied in various fields, data analysis, evaluation, prediction or recommendation can be performed. For such applications, if the claims reflect that the big data in a specific application field is processed, and artificial intelligence algorithms such as neural networks are used to mine the inherent correlation between data that conforms to the laws of nature, and the technical problem of how to improve the reliability or accuracy of big data analysis in a specific application field is solved, and the corresponding technical effects are obtained, then the solution of the claim constitutes a technical solution.
The means of using artificial intelligence algorithms or models to conduct data mining and train artificial intelligence models that can obtain output results based on input data cannot directly constitute technical means. Only when the inherent correlation between the data mined based on artificial intelligence algorithms or models conforms to the laws of nature, the relevant means as a whole can constitute technical means that utilize the laws of nature. Therefore, it is necessary to clarify in the scheme recorded in the claims which indicators, parameters, etc. are used to reflect the characteristics of the analyzed object in order to obtain the analysis results, and whether the inherent correlation between these indicators, parameters, etc. (model input) mined by artificial intelligence algorithms or models and the result data (model output) conforms to the laws of nature.
For example, a food safety risk prediction method obtains and analyzes historical food safety risk events to obtain header entity data and tail entity data representing food raw materials, edible items, and food sampling poisonous substances, and their corresponding timestamp data; based on each header entity data and its corresponding tail entity data, and its corresponding entity relationship carrying timestamp data representing the content level, risk or intervention of each type of hazard, corresponding four-tuple data is constructed to obtain a corresponding knowledge graph; the knowledge graph is used to train a preset neural network to obtain a food safety knowledge graph model; and the food safety risk at the prediction time is predicted based on the food safety knowledge graph model.
The background technology of the program description records that the existing technology uses static knowledge graphs to predict food safety risks, which cannot reflect the fact that food data in actual situations changes over time and ignores the influence between data. Those skilled in the art know that food raw materials, edible items or food sampling poisons will gradually change over time. For example, the longer the food is stored, the more microorganisms there are in the food, and the content of food sampling poisons will increase accordingly. When the food contains a variety of raw materials that can react chemically, the chemical reaction may also cause food safety risks at some point in the future over time. This program predicts food safety risks based on the inherent characteristics of food changing over time, so that timestamps are added when constructing the knowledge graph, and a preset neural network is trained based on entity data related to food safety risks at each moment to predict food safety risks at the time to be predicted. It uses technical means that follow the laws of nature to solve the technical problem of inaccurate prediction of food safety risks at future time points, and can obtain corresponding technical effects, thus constituting a technical solution.
If the intrinsic correlation between the indicator parameters mined by artificial intelligence algorithms or models and the prediction results is only subject to economic laws or social laws, it is a case of not following the laws of nature. For example, a method of estimating the regional economic prosperity index using a neural network uses a neural network to mine the intrinsic correlation between economic data and electricity consumption data and the economic prosperity index, and predicts the regional economic prosperity index based on the intrinsic correlation. Since the intrinsic correlation between economic data and electricity consumption data and the economic prosperity index is subject to economic laws and not natural laws, this solution does not use technical means and does not constitute a technical solution.
The full text is available here (Chinese only).
Ethiopia Opens Its Banking Sector to Foreign Banks and Investors After Half a Century of Protectionism
Introduction
With a rapidly growing population of 120 million people, Ethiopia is the fifth-largest economy in Africa by GDP, making it an attractive destination for foreign investment in the banking sector. On December 17, 2024, the Ethiopian Parliament approved the new Banking Business law, which allows foreign banks and foreigners to rejoin the Ethiopian market after an absence of half a century. This proclamation provides various avenues for foreigners to enter the Ethiopia market, marking a significant step in opening one of the last remaining sectors in the country to foreign investment. This move signals a shift from a protectionist to a more liberal policy approach by the government.
Overview of Ethiopia’s Investment Climate
In 2020, Ethiopia introduced a new investment law to expand opportunities for foreign investment. Previously, only specifically identified sectors were open to foreigners. The new law restricted only a few sectors to domestic investors, while all other sectors are available for foreign investment. In 2024, the Ethiopian Investment Board issued a directive further permitting foreign investment in industries that were previously restricted to domestic investment, including export, import, wholesale, and retail trade,.
Additionally, the Ethiopian government has liberalized sectors that were previously monopolized by the state, such as telecommunications and logistics. This initiative has expanded foreign investment opportunities across multiple industries. Investors now have the option to acquire shares, enter joint ventures, or invest through the Ethiopian Investment Holdings (EIH), which functions as the strategic investment arm of the Ethiopian government.
These reforms indicate Ethiopia’s move towards economic liberalization by attracting foreign direct investment, including the recent significant shift in opening the financial sector to foreign investment.
The New Banking Business Proclamation
The recent 2024 proclamation aims to enhance the banking industry’s competitiveness and efficiency by allowing foreign investment.
The proclamation allows foreign banks to enter the Ethiopian market by establishing subsidiaries, opening branches or representative offices, or acquiring shares in domestic banks. It also permits foreign nationals to buy shares in Ethiopian banks.
A foreign bank or strategic investor can acquire up to 40% of shares in a domestic bank, while foreign individuals can hold up to 7%, and entities can hold up to 10%. The total foreign investment is capped at 49%.
Foreign banks entering Ethiopia must invest as foreign direct investment (FDI) using foreign currency, with the capital fully paid in cash up front. Additionally, Ethiopian organizations partially owned by foreign nationals must invest through FDI based on their foreign ownership percentage, also in foreign currency.
Potential Benefits and Challenges
Enabling foreign investment in Ethiopia’s financial sector is projected to bring numerous benefits and challenges. One potential advantage is the increased competition and efficiency. The entry of foreign banks is expected to encourage competition, leading local banks to improve their efficiency, service delivery, and technological advancements. Additionally, the introduction of diverse financial products by foreign banks, such as derivatives, trade finance, and specialized credit facilities, can diversify the local financial market.
Another benefit is the transfer of knowledge and skills. The involvement of foreign banks introduces professionals and practices to the Ethiopian financial sector. This exposure to international banking standards, risk management frameworks, and digital technologies can enhance the financial ecosystem. Additionally, foreign banks can support the inflow of FDI by connecting with global financial markets, integrating Ethiopia’s economy into the international financial system.
However, the entry of foreign banks also poses several challenges. One significant concern is the risk of market domination. Foreign banks, with their substantial resources, advanced systems, and international networks, could potentially overshadow local banks, leading to market imbalances and reduced competition in the long term. This dominance may stifle domestic financial institutions, hindering their growth and development.
Economic risks are another challenge, as increased foreign bank participation exposes Ethiopia’s economy to external risks such as exchange rate volatility and potential capital flight. The resource disparity between foreign and local banks is also a concern. Foreign banks’ access to sophisticated technologies and funding could widen the gap, restricting domestic banks’ ability to compete effectively and exacerbating financial service inequalities.
Lastly, the integration of foreign banks necessitates robust regulatory frameworks and institutional capacity to monitor and mitigate associated risks. Addressing these regulatory challenges is crucial to ensure the stability and sustainability of Ethiopia’s financial sector.
The enactment of the banking business represents a significant milestone in Ethiopia’s investment landscape, opening the financial sector to foreign investment after half century of protectionist policy. By allowing foreign banks to enter its financial sector, Ethiopia aims to enhance competitiveness, diversify financial services, and integrate its economy into the global financial system.
5 Trends to Watch: 2025 EU Data Privacy & Cybersecurity
Full Steam Ahead: The European Union’s (EU) Artificial Intelligence (AI) Act in Action — As the EU’s landmark AI Act officially takes effect, 2025 will be a year of implementation challenges and enforcement. Companies deploying AI across the EU will likely navigate strict rules on data usage, transparency, and risk management, especially for high-risk AI systems. Privacy regulators are expected to play a key role in monitoring how personal data is used in AI model training, with potential penalties for noncompliance. The interplay between the AI Act and the General Data Protection Regulation (GDPR) may add complexity, particularly for multinational organizations.
Network and Information Security Directive (NIS2) Matures: A New Era of Cybersecurity Regulation — The EU’s NIS2 Directive will enter its enforcement phase, expanding cybersecurity obligations for critical infrastructure and key sectors. Companies must adapt to stricter breach notification rules, risk management requirements, and supply-chain security mandates. Regulators are expected to focus on cross-border coordination in response to major incidents, with early cases likely setting important precedents. Organizations will likely face increasing scrutiny of their cybersecurity disclosures and incident response protocols.
The Evolution of Data Transfers: Toward a Unified Framework — After years of turbulence, 2025 may mark a turning point for transatlantic and global data flows. The EU-U.S. Data Privacy Framework will face ongoing reviews by the European Data Protection Board (EDPB) and potential legal challenges, but it offers a clearer path forward. Meanwhile, the EU may continue striking adequacy agreements with key trading partners, setting the stage for a harmonized approach to cross-border data transfers. Companies will need robust mechanisms, such as Standard Contractual Clauses and emerging Transfer Impact Assessments (TIAs), to maintain compliance.
Consumer Rights Expand Under the GDPR’s Influence — The GDPR continues to set the global benchmark for privacy laws, and 2025 will see the ripple effect of its influence as EU member states refine their own data protection frameworks. Enhanced consumer rights, such as the right to explanation in algorithmic decision-making and stricter opt-in requirements for data use, are anticipated. Regulators are also likely to target dark patterns and deceptive consent mechanisms, driving companies toward greater transparency in their user interfaces and data practices.
Digital Markets Act Meets GDPR: Privacy in the Platform Economy — The Digital Markets Act (DMA), fully enforceable in 2025, will bring sweeping changes to large online platforms, or “gatekeepers.” Interoperability mandates, restrictions on data combination across services, and limits on targeted advertising will intersect with GDPR compliance. The overlap between DMA and GDPR enforcement will challenge platforms to adapt their practices while balancing privacy obligations. This regulatory synergy may reshape data monetization strategies and set a precedent for digital market governance worldwide.
OFAC Relaxes Sanctions Against Post-Assad Syria – For Now
The US government signals careful optimism with a new general license authorizing some previously prohibited transactions, including many (but not all) transactions with Syrian governing institutions, for the next six months.
After a month of speculation about how US sanctions policy will treat the new leaders of Syria who swept into power in early December and sent Bashar al-Assad into exile, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has issued General License 24 under the Syria Sanctions Regulations (SySR), the Global Terrorism Sanctions Regulations (GTSR), and the Foreign Terrorist Organizations Sanctions Regulations (FTOSR) on January 6. With certain exceptions, the license temporarily authorizes:
Transactions with governing institutions in Syria following December 8, 2024.
Transactions in support of the sale, supply, storage, or donation of energy, including petroleum, petroleum products, natural gas, and electricity, to or within Syria.
Transactions that are ordinarily incident and necessary to processing the transfer of noncommercial, personal remittances to Syria, including through the Central Bank of Syria.
The license, which currently expires July 7, covers transactions that would otherwise be prohibited not only by the SySR, but also by the GTSR and the FTOSR, given that the new leaders of Syria are part of Hay’at Tahrir al-Sham (HTS), which currently remains a designated terrorist group under those other sanctions programs.
What Is NOT Authorized?
General License 24 does not cover:
Financial transfers to any person blocked pursuant to the GTSR, FTOSR, or SySR other than for (i) paying taxes, fees, or import duties to Syrian governing institutions; (ii) paying the wages of Syrian governing institution employees provided they are not listed on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List; or (iii) purchasing/receiving permits, licenses, public utility services, or other public services in Syria.
The unblocking of any property that has already been blocked pursuant to US sanctions regulations.
Any transactions involving military or intelligence entities, or any persons acting on their behalf.
Importation of Syrian-origin petroleum or petroleum products into the United States.
Any transactions for or on behalf of the Government of the Russian Federation or the Government of Iran or related to the transfer or provision of Iranian- or Russian-origin goods, technology, software, funds, financing, or services.
New investments in Syria (which OFAC broadly defines as a commitment or contribution of funds or other assets or a loan or extension of credit), except contributions for salaries or wages of Syrian governing institution employees who are not listed on the SDN List.
The bottom line is: except for the three specific categories of authorized activities, all previous economic sanctions concerning Syria still apply. We also think it is wise to assume that it remains prohibited to facilitate any of the activities listed above that are specifically carved out of General License 24’s authorization. Additionally, those seeking to export commodities, software, or technology to Syria must still follow the Syria-specific requirements in the Export Administration Regulations implemented by the US Department of Commerce’s Bureau of Industry and Security.
Helpful New FAQs
Along with the new general license, OFAC released several new FAQs that give some much-appreciated clarity to the state of economic sanctions against Syria. Our top takeaways from the OFAC answers are:
The purpose of General License 24 is ensuring that US sanctions “do not impede essential governance-related services in Syria following the fall of Bashar al-Assad on December 8, 2024, including for the provision of public services or certain transactions related to energy or personal remittances” (FAQ 1205).
General License 24 authorizes transactions with a governing institution (with the exceptions noted above), even if it’s operated by a sanctioned individual (FAQ 1208).
Syrian “governing institutions” are broadly defined to include “departments, agencies, and government-run public service providers (including public hospitals, schools, and utilities) at the federal, regional local level” across all of Syria. (FAQ 1206).
Previous general licenses, including those that that broadly authorize NGO operations in Syria, are still in effect, and may overlap with General License 24 (FAQs 1212 and 1209).
Conclusions
It appears OFAC will take a wait-and-see approach to decide how to deal with the new HTS-led government in the long term. But for the next six months, General License 24 offers long-awaited sanctions relief (temporary, and carefully circumscribed) for Syria’s new leaders, US persons and entities operating in Syria, and above all, the Syrian people.
MiCAR in der Praxis: BaFin veröffentlicht Merkblatt für Krypto-Dienstleistungen
Die Bundesanstalt für Finanzdienstleistungsaufsicht („BaFin„) hat zum Jahresbeginn ein Merkblatt zu den Kryptowerte-Dienstleistungen gemäß der neuen EU-Verordnung über Märkte für Kryptowerte („MiCAR„) veröffentlicht. Diese Verordnung gilt seit dem 30. Dezember 2024 unmittelbar für Krypto-Dienstleister in der EU.
Das Merkblatt bietet Klarstellungen zu den erlaubnispflichtigen Krypto-Dienstleistungen und den Anforderungen an Anbieter. Die wesentlichen Punkte im Überblick:
Definitionen von Krypto-Dienstleistungen: Die BaFin präzisiert die erlaubnispflichtigen Kryptowerte-Dienstleistungen und verknüpft diese mit den bereits bekannten Wertpapierdienstleistungen der MiFID II.
Zulassung von Krypto-Dienstleistern: Das Merkblatt enthält detaillierte Informationen, ab wann eine Zulassungspflicht besteht und welche Unternehmen zulassungsfähig sind.
Notifizierung: Unternehmen mit bestehenden Lizenzen (z. B. Kredit- oder Wertpapierinstitute) können bestimmte Kryptowerte-Dienstleistungen ohne gesonderte Erlaubnis erbringen, müssen dies jedoch der BaFin gemäß den Vorgaben der MiCAR anzeigen (sog. „Notifizierung„). Die genauen Anforderungen an die Notifizierung werden im Merkblatt erläutert.
Das Merkblatt bietet Krypto-Unternehmen eine praktische Orientierungshilfe, um die neuen regulatorischen Anforderungen der MiCAR sicher und effizient zu erfüllen.
EU Taxonomy Developments: EU Platform on Sustainable Finance Call for Feedback on Draft Report on New Activities and Updated Technical Screening Criteria
On 8 January 2025, the EU Platform on Sustainable Finance (PSF) published a draft report and launched a call for feedback on proposed updates to the EU taxonomy. This includes revisions to the Climate Delegated Act and new technical screening criteria. Stakeholders are invited to submit feedback by 5 February 2025.
Key areas sought for feedback include:
Technical Screening Criteria (TSC): Updates to the criteria and Do No Significant Harm (DNSH) requirements to improve usability.
Revised Energy-Related Thresholds: Adjustments to support ensuring consistency and relevance.
Harmonization Efforts: Aligning activity titles and descriptions between Mitigation and Adaptation Annexes.
New Activities and Criteria: Proposals for activities in mining and smelting.
The PSF has noted that the most useful and valuable feedback that can be incorporated should be evidence-based and substantiated, concrete, and explain usability issues or provide recommendations for criteria or usability improvement.
Whilst this is not an official European Commission consultation, part of the PSF’s mandate is to provide recommendations to the European Commission on simplifying the EU Taxonomy and the wider sustainable finance framework. The review of this legislation fulfils the legal requirement to revisit criteria for transitional activities every three years, while continuing to develop technical screening criteria for new activities. The PSF’s Technical Working Group is said to have incorporated usability feedback from targeted stakeholder consultations, but this public consultation is aimed to obtain additional feedback and to further enhance the EU Taxonomy’s usability.
USTR Removes WeChat From List of Notorious Markets for Counterfeiting and Piracy, Adds Douyin
On January 8, 2025, the Office of the United States Trade Representative (USTR) released the 2024 Review of Notorious Markets for Counterfeiting and Piracy. Of note, the USTR removed Weixin (WeChat), a social media ‘super-app’ from the Review. Nonetheless, “China continues to be the number one source of counterfeit products in the world. Counterfeit and pirated goods from China, together with transshipped goods from China to Hong Kong, China, accounted for 84% of the value (measured by manufacturer’s suggested retail price) and 90% of the total quantity of counterfeit and pirated goods seized by U.S. Customs and Border Protection (CBP) in 2023.” Five China-based online markets remain on the list with Douyin (TikTok) replacing WeChat.
China-related excerpts from the Review regarding online markets follow. The full text is available here.
BAIDU WANGPAN
This cloud storage service is operated by Baidu, the largest search-engine provider in China. Users of this service are able to share links to files stored on their accounts with other users, and infringing content is reportedly disseminated widely through social media and other piracy linking sites. Baidu has been the subject of several copyright infringement cases in China brought by other content distributors, but right holders report little change in the site’s enforcement measures. Although Baidu has several tools to take down unauthorized content, according to right holders, procedures for filing complaints are applied unevenly and lack transparency. Additionally, takedown times are reportedly lengthy, and right holders often have to repeatedly follow-up with Baidu to ensure that pirated content does not reappear on the platform. Right holders report little progress in Baidu’s actions to suspend or terminate repeat infringers.
DHGATE
Headquartered in China. DHgate is one of the largest business-to-business cross-border e-commerce platforms in China, although it primarily serves purchasers outside of the country. This year, stakeholders have welcomed the introduction of a pilot IP enforcement program that includes a new portal for complaints, new procedures for screening of products and of prospective sellers, and enhanced penalties for repeat and high-volume infringers. Stakeholders have also expressed appreciation for DHgate’s efforts to increase engagement and collaboration with right holders. In its submission for this year’s List, DHgate described its significant investment in AI-based screening tools to detect and remove counterfeit goods, its vendor verification process that screens and blacklists repeat infringers, its pilot program and other efforts to resolve right holder complaints, and its efforts to cooperate with law enforcement authorities, including publishing a law enforcement guide and assisting with several investigations involving health and safety matters. DHgate’s reported successes also include proactively removing twice as many listings for infringing goods in 2023 as compared to 2022. However, some stakeholders continue to report that the platform contains a high volume of counterfeits and the repeat infringer policy is ineffective. They also note the platform appears to connect Chinese sellers and manufacturers specializing in counterfeits with wholesale buyers outside of China. Although some brand owners have successfully reduced counterfeits through collaboration with DHgate, others have reported mixed results. Sellers of counterfeit goods reportedly continue to evade detection by using code words and digitally blurred logos. DHgate has implemented policies to regulate influencers promoting products listed on its platform through posting on third-party websites, and right holders indicate that they need more time to determine the impact of these policies. Given that many stakeholders welcomed DHgate’s recent initiatives but continue to raise concerns, DHgate should further work to improve its proactive detection procedures, seller vetting process, and screening for repeat infringers.
DOUYIN SHANGCHENG (DOUYIN MALL)
Douyin Shangcheng (Douyin Mall) is a shopping platform under Douyin, the Chinese online platform offering short-form video, live stream, and e-commerce functionalities owned by ByteDance, also the parent company of Tiktok. Douyin has upgraded its e-commerce functions to include Douyin Mall as both a standalone application and an integrated feature accessible from the Douyin application. Douyin Mall allows users to scroll through suggested products or search for products and click through the Douyin Mall interface to view short videos or livestream videos about the products. From such videos or livestreams, users can use the shopping cart function to conduct purchases. Douyin contends that it has notice and takedown mechanisms, with multiple reporting portals for right holders to submit complaints, as well as a one-stop “IPPRO” platform for right holders to submit and manage IP infringement reports. Douyin also described its efforts to screen proactively for specific terms, to train proactive identification 25 models to target counterfeit products or sellers, and to cooperate with right holders and enforcement authorities, including on the pursuit of criminal cases offline. However, stakeholders have described a “rocketing” increase in the amount of counterfeit goods on the platform, an ineffective notice and takedown system, and reported lengthy delays in response to takedown requests, with little to no feedback on right holders’ complaints. Douyin should address concerns about the prevalence of counterfeits on its platform, including questions about the effectiveness of its proactive screening mechanisms and its system for managing IP infringement complaints.
PINDUODUO
Headquartered in China. Pinduoduo, a social commerce app, is one of the largest e-commerce platforms in China. Right holders report that Pinduoduo continues to offer a high volume of counterfeit goods on their platform. As in previous years, stakeholders continue to highlight concerns about Pinduoduo’s unwillingness to engage with brand owners to resolve issues or develop improved processes. Although the platform claims to have implemented anti-counterfeiting initiatives to assist with accurate product descriptions and combat misinformation from merchants, right holders convey that excessive delays in takedowns remain a problem and can take up to two weeks or more. Other longstanding issues remain unresolved, including onerous evidentiary requirements and lack of proactive measures to screen sellers and listings, as well as lack of transparency with enforcement processes, such as penalty mechanisms and decisions rejecting takedown requests. This year, right holders again noted Pinduoduo’s ineffective seller vetting and raised concerns about the platform’s reported practice of labeling sponsored listings as “authorized sellers,” giving the appearance of legitimacy to counterfeit products and misleading consumers into believing that they are purchasing from the legitimate manufacturer or a licensed distributor. Right holders also continue to report difficulties in receiving information and support from Pinduoduo in pursuing follow-on investigations to uncover the manufacturing and distribution channels of the counterfeit goods.
TAOBAO
Taobao, one of the largest e-commerce platforms in the world, is Alibaba’s platform for Chinese consumers. Alibaba has proactively engaged with right holders and the U.S. Government to improve its anti-counterfeiting processes and tools across its platforms, including Taobao. Although Alibaba emphasizes its ongoing engagement with enforcement authorities to combat the sale of counterfeits, right holders continue to express concern that a recent structural reorganization by Alibaba has left the platform with fewer anti-counterfeiting resources to conduct investigations. Right holders recognized Alibaba’s investment in anticounterfeiting measures and industry engagement efforts in recent years, but they also continued to report high volumes of counterfeit products and pirated goods, such as PDF copies of books. Right holders highlighted the need for improvements to address the site’s infringement reporting process and stringent criteria required for takedown notices, such as the requirement to identify specific piracy indicators within listings that infringers have kept deliberately vague. Furthermore, stakeholders convey that despite their ability to report obvious counterfeits that they identify on the platform for fast processing, high-quality counterfeits that are sold at prices similar to their authentic counterparts are not easily identified. Alibaba contends that its automated reporting platform is user friendly and only requires right holders to upload registration certificates to prove their rights or document their unregistered copyrights by filling out a specific form. USTR will continue to monitor the transparency and effectiveness of Taobao’s anti-counterfeiting efforts, including the evidentiary requirements for takedown requests.
Weekly IRS Roundup December 23 – December 27, 2024
Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 23, 2024 – December 27, 2024.
December 23, 2024: The IRS released Internal Revenue Bulletin 2024-52, which includes the following:
Treasury Decision 10015: These final regulations update the previous regulations under Section 48 of the Internal Revenue Code (Code), which provides for an investment tax credit for energy property (energy credit), and respond to changes made by the Inflation Reduction Act of 2022 (IRA).
The final regulations update the types of energy property eligible for the energy credit, including additional types of energy property added by the IRA; clarify the application of new credit transfer rules to recapture because of failure to satisfy the prevailing wage requirements, including notification requirements for eligible taxpayers; and include qualified interconnection costs in the basis of certain lower-output energy properties.
The final regulations also provide rules generally applicable to energy property, such as rules regarding functionally interdependent components, property that is an integral part of an energy property, application of the “80/20 rule” to retrofitted energy property, dual use property, ownership of components of an energy property, energy property that may be eligible for multiple federal income tax credits, and the election to treat qualified facilities eligible for the renewable electricity production credit under Code Section 45 as property eligible for the energy credit.
Notice 2024-82, which sets forth the 2024 Required Amendments List. The list applies to both individually designed plans under Code Section 401(a) and individually designed plans that satisfy the requirements of Code Section 403(b).
Notice 2024-86, which announces the extension of certain timeframes under the Employee Retirement Income Security Act of 1974 and the Code for group health plans; disability and other welfare plans; pension plans; and participants, beneficiaries, qualified beneficiaries, and claimants of these plans affected by Hurricane Helene, Tropical Storm Helene, or Hurricane Milton.
Revenue Procedure 2024-42, which updates the list of jurisdictions with which the United States has in effect a relevant information exchange agreement or an automatic exchange relationship under Treasury Regulation §§ 1.6049-4(b)(5) and 1.6049-8(a).
Announcement 2024-42, which provides a copy of the competent authority arrangement entered into by the competent authorities of the US and the Kingdom of Norway under paragraph 2 of Article 27 (Mutual Agreement Procedure) of the Convention between the US and Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Property, signed on December 3, 1971.
The IRS issued a notice of proposed rulemaking, setting forth proposed regulations related to the definition of “qualified nonpersonal use vehicles.” Qualified nonpersonal use vehicles are excepted from the substantiation requirements that apply to certain listed property. The proposed regulations add unmarked vehicles used by firefighters or members of a rescue squad or ambulance crew as a new type of qualified nonpersonal use vehicle. The regulations affect governmental units that provide firefighter or rescue squad or ambulance crew member employees with unmarked qualified nonpersonal use vehicles and the employees who use those vehicles. Comments on the proposed regulations are due by March 3, 2025.
The IRS acquiesced to Green Rock LLC v. Internal Revenue Serv., 104 F.4th 220 (11th Cir. 2024). In that case, the US Court of Appeals for the Eleventh Circuit held that notices identifying certain conservation easement arrangements as reportable transactions are invalid under the Administrative Procedure Act because they failed to follow notice-and-comment rulemaking procedures.
December 23, 2024: The US Department of the Treasury and the IRS released final regulations regarding supervisory approval of penalties assessed pursuant to Code Section 6751(b). Section 6751(b) provides that no penalty “shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination….” The final regulations clarify the application of Section 6751(b) as to the timing of supervisory approval, the identities of the individual who first proposes the penalty and their supervisor, the requirement that the approval be “personally approved (in writing)” by the supervisor, and other aspects of the statute.
December 27, 2024: The IRS announced via Notice 2025-3 transitional relief with respect to the reporting of information and backup withholding on digital assets for digital asset brokers providing trading front-end services.
ESG and Supply Chains in 2024: Key Trends, Challenges, and Future Outlook
In 2024, supply chains remained a critical focal point for companies committed to environmental, social, and governance (ESG) principles. Given their significant contribution to a company’s environmental footprint and social impact, supply chains have become an essential area for implementing sustainable and ethical practices.
Advancements in technology, evolving regulatory frameworks, and innovative corporate strategies defined the landscape of ESG in supply chains this year. However, challenges such as data reliability, cost pressures, and geopolitical risks persisted in 2024. Here are seven observations highlighting progress, challenges, and potential future directions in ESG and supply chains.
1. Regulatory and Market Drivers
Governments and international organizations introduced stringent regulations in 2024, compelling companies to prioritize ESG considerations in their supply chains. These policies aimed to address environmental degradation, human rights abuses, and climate-related risks while fostering greater transparency and accountability.
EU’s Corporate Sustainability Due Diligence Directive (CSDDD): The European Union’s CSDDD came into force, mandating companies operating in the EU to identify, prevent and mitigate adverse human rights and environmental impacts throughout their supply chains. This regulation required businesses to map their suppliers, assess risks, and implement corrective actions, driving improvements in traceability and supplier accountability.
U.S. Uyghur Forced Labor Prevention Act (UFLPA): In the United States, the Department of Homeland Security’s enforcement of the UFLPA intensified. This act targeted goods produced with forced labor, particularly in China’s Xinjiang region, and placed the burden of proof on companies to demonstrate compliance. Businesses were required to adopt rigorous traceability systems to ensure their products were free from forced labor.
Carbon Border Adjustment Mechanisms (CBAMs): Carbon tariffs, implemented by the EU and other regions, incentivized companies to measure and reduce the carbon intensity of imported goods. These mechanisms encouraged businesses to collaborate with suppliers to lower emissions and adopt cleaner technologies.
2. Advances in Supply Chain Traceability and Transparency
Technological innovations were central to advancing supply chain traceability and transparency, enabling companies to identify risks, ensure compliance, and improve sustainability performance.
Blockchain Technology: Blockchain emerged as a cornerstone of supply chain transparency. By creating immutable records of transactions and product origins, blockchain technology provided stakeholders with verifiable proof of ethical sourcing and environmental compliance. Companies used blockchain to authenticate claims about sustainability, such as the origin of raw materials and the environmental credentials of finished goods.
Artificial Intelligence (AI): AI played a transformative role in supply chain management, helping companies analyze supplier risks, predict disruptions, and optimize logistics for lower emissions. AI-powered tools also enabled real-time monitoring of supply chain activities, such as emissions tracking, labor compliance, and waste reduction.
Internet of Things (IoT): IoT sensors provided granular, real-time data on supply chain metrics, such as energy consumption, shipping efficiency, and waste generation. This technology enabled companies to address inefficiencies and enhance the sustainability of their operations.
3. Responsible Sourcing Practices
Responsible sourcing became a cornerstone of supply chain ESG efforts, with companies adopting ethical and sustainable procurement practices to address environmental and social risks.
Raw Material Sourcing: Businesses focused on sourcing raw materials like cobalt, palm oil, and timber from certified suppliers to ensure compliance with environmental and labor standards. Industry-specific certifications, such as the Forest Stewardship Council and the Roundtable on Sustainable Palm Oil, gained prominence.
Fair Trade and Ethical Labor: Companies partnered with organizations promoting fair wages, equitable treatment, and safe working conditions. Certifications like Fair Trade and Sedex Responsible Business Practices helped businesses verify their commitment to ethical labor practices throughout their supply chains.
Local Sourcing: To reduce carbon footprints and enhance supply chain resilience, some companies prioritized local sourcing of raw materials and components. This shift minimized emissions from transportation and provided economic support to local communities.
4. Decarbonizing Supply Chains
As companies pursued net-zero commitments, decarbonizing supply chains became a top priority in 2024. Key strategies included:
Supplier Engagement: Companies collaborated with suppliers to reduce emissions through energy efficiency measures, renewable energy adoption, and low-carbon manufacturing techniques.
Sustainable Logistics: Businesses invested in cleaner transportation methods, such as electric vehicles, hydrogen-powered trucks, and optimized shipping routes. The rise of “green corridors” for shipping exemplified collaborative efforts to decarbonize freight transport.
Circular Economy Integration: Companies embraced circular economy principles, focusing on reusing materials, designing for recyclability, and minimizing waste. Circular supply chains not only reduced environmental impact, but also created cost-saving opportunities and new revenue streams.
5. Challenges in ESG Supply Chain Management
Despite progress, companies faced significant challenges in implementing ESG principles across their supply chains.
Data Gaps and Inconsistencies: Collecting reliable ESG data from multitiered supply chains remains a critical hurdle. Smaller suppliers often lack the tools or expertise to comply with reporting requirements, leading to incomplete transparency and inconsistent metrics.
Cost Pressures: Implementing sustainable practices, such as adopting renewable energy or traceability technologies, requires significant upfront investment. These costs are particularly burdensome for small and medium-sized enterprises (SMEs) and create financial tension for larger companies balancing competitive pricing.
Geopolitical Risks: Trade restrictions, regional conflicts, and sanctions disrupt global supply chains, complicating compliance with ESG regulations like forced labor bans or carbon tariffs. Navigating these challenges requires constant adaptation to volatile geopolitical landscapes.
Greenwashing Risks: Increasing regulatory and public scrutiny amplifies the consequences of unverified sustainability claims. Missteps in ESG disclosures expose companies to legal risks, reputational damage, and loss of stakeholder trust.
Supply Chain Complexity: Global supply chains are vast and intricate, often spanning multiple tiers and regions. Mapping these networks to monitor ESG compliance and identify risks such as labor violations or environmental harm is a resource-intensive challenge.
Technological Gaps Among Suppliers: While advanced technologies like blockchain improve traceability, many smaller suppliers lack access to these tools, creating disparities in ESG data collection and compliance across the supply chain.
Resistance to Change: Suppliers in regions with weaker regulatory frameworks often resist adopting ESG principles due to limited awareness, operational costs, or lack of incentives, requiring significant corporate investment in education and capacity-building.
Market Demand for Low-Cost Goods: Consumer demand for affordable products often conflicts with the higher costs of implementing sustainable practices, especially in competitive industries such as fast fashion and consumer electronics.
Resource Scarcity and Climate Impacts: Extreme weather events, rising energy costs, and material shortages – exacerbated by climate change – disrupt supply chains and increase the difficulty of maintaining ESG commitments.
Measurement and Reporting Challenges: A lack of universally accepted metrics for critical ESG indicators, such as Scope 3 emissions or biodiversity impact, complicates efforts to measure progress and report transparently across supply chains.
6. Leading Examples of ESG-Driven Supply Chains
In 2024, several organizations across various industries demonstrated innovative approaches to integrating ESG principles into their supply chains. These efforts highlighted best practices in sustainability, transparency, and ethical procurement, including a number of the recent advances noted above.
Outdoor Apparel Brand: A leading outdoor apparel company prioritized fair labor practices and reduction of environmental-related impacts in its supply chain. The brand collaborates with suppliers and other brands to develop and utilize tools to measure and communicate their environmental impacts, which allows for industry-wide benchmarking and large-scale improvement.
Global Food and Beverage Producer: A major food and beverage producer expanded its regenerative agriculture program by collaborating with farmers to enhance soil health, reduce greenhouse gas emissions, and promote biodiversity. Additionally, the company leveraged blockchain technology to ensure traceability in its supply chains for commodities such as coffee and cocoa, strengthening its commitment to sustainability.
Global Furniture Retailer: A prominent furniture retailer invested heavily in renewable energy and circular design principles to decarbonize its supply chain by reducing, replacing and rethinking. A formal due diligence system employs dozens of wood supply and forestry specialists to assure that wood is sourced from responsibly managed forests.
Multinational Technology Company: A technology giant implemented energy-efficient practices across its supply chain, including transitioning to renewable energy sources for manufacturing facilities and using AI-powered tools to optimize logistics, with a goal of becoming carbon neutral across its entire supply chain by 2030.
Consumer Goods Manufacturer: A global consumer goods manufacturer introduced water-saving technologies into its supply chain, particularly in regions facing water scarcity. The company also prioritized reducing plastic waste by incorporating recycled materials into its packaging and partnering with local recycling initiatives.
Global Shipping Firm: A logistics and shipping company adopted low-carbon transportation technologies, such as green fuel for its vessels, decarbonizing container terminals, electric powered vehicles for landside transport, and optimized routes to minimize emissions. The firm also collaborated with industry partners to develop “green corridors” that support cleaner and more sustainable freight transport.
7. Future Directions in ESG and Supply Chains
Integrating ESG principles into supply chain management is expected to continue evolving, with the following trends among those shaping the future:
AI-Powered Supply Chains: Artificial intelligence will transform supply chain management by predicting risks, optimizing logistics, and enhancing sustainability. Advanced analytics will enable businesses to identify inefficiencies and implement targeted improvements, reducing emissions and ensuring ethical practices. There will, however, be challenges accounting for the growing number of laws and regulations worldwide governing AI’s use and development.
Circular Economy Models: Supply chains will embrace circular economy principles, focusing on waste reduction, material reuse, and extended product life cycles. Closed-loop systems and upcycling initiatives will mitigate environmental impacts while creating new revenue streams.
Blockchain-Enabled Certification Programs: Blockchain technology will enhance transparency and accountability by providing real-time verification of ESG metrics, such as emissions reductions and ethical sourcing. This will foster trust among consumers, investors and regulators.
Supply Chain Readiness Level (SCRL) Analysis: ESG benefits will continue to flow from the steps taken by the Biden Administration to strengthen America’s supply chains over the past four years. Additionally, the Department of Energy’s Office of Manufacturing and Energy Supply Chains SCRL tool that was recently rolled out to evaluate global energy supply chain needs and gaps, quantify and eliminate risks and vulnerabilities, and strengthen U.S. energy supply chains is expected to facilitate decarbonization of supply chains.
Decentralized Energy Solutions: Decentralized energy systems, including on-site renewable energy installations and energy-sharing networks, will reduce dependence on traditional power grids. These solutions will decarbonize supply chains while promoting sustainability.
Nature-Based Solutions: Supply chains will integrate nature-based approaches, such as agroforestry partnerships and wetland restoration, to enhance biodiversity and provide environmental services like carbon sequestration and water filtration.
Advanced Water Stewardship: Companies will adopt innovative water management practices, including water recycling technologies and watershed restoration projects, to address water scarcity and ensure sustainable supplies for all stakeholders.
Scope 3 Emissions Reduction: Businesses will prioritize reducing emissions across their value chains by collaborating with suppliers, setting science-based targets, and implementing robust carbon accounting tools.
Industry-Wide Collaboration Platforms: Collaborative platforms will enable companies to share sustainability data and best practices and develop sector-specific solutions. This approach will help address systemic challenges, such as decarbonizing aviation or achieving sustainable fashion production.
Developments in ESG and supply chains in 2024 reflect a growing recognition of their critical role in achieving sustainability goals. From enhanced regulatory frameworks and technological innovations to responsible sourcing and decarbonization efforts, companies are making strides toward more sustainable and ethical supply chains.
However, challenges such as data gaps, cost pressures, and geopolitical risks highlight the complexities of this transformation. By addressing these issues and embracing future opportunities, businesses can create resilient, transparent, and sustainable supply chains that drive both success in business and environmental and social progress.