Vietnam and the European Union are in the crosshairs of the United States government’s preeminent trade authority for allegedly selling counterfeit footwear and apparel exports into the U.S. market and undercutting American producers with violative policies.
The Office of the U.S. Trade Representative (USTR) on Thursday released its annual Special 301 report calling out the economies it says have failed to adequately protect and enforce intellectual property rights.
“We have rigorously reviewed our trading partners’ IP practices and expect to take action where needed to protect American innovators and creators globally,” said USTR Ambassador Jamieson Greer upon the report’s release. “Using all the enforcement tools we have to address unfair trade practices is a top priority.”
Vietnam was identified as a Priority Foreign Country (PFC), the highest tier on the list. The inclusion of the footwear sourcing powerhouse marks the first time in 13 years that any country has been listed in that category, which is reserved for nations “with the most egregious IP-related acts, policies, and practices with the greatest adverse impact on relevant U.S. products,” per the report.
Specifically, the U.S. government is concerned about the country’s perceived failure to provide effective enforcement of widespread counterfeiting, as well as the prevalence of online piracy, lack of border enforcement, lack of action against unlicensed software use and lack criminal punishment for cable and satellite signal theft.
Earning the PFC distinction means that Vietnam could be investigated by the USTR under Section 301 of the Trade Act of 1974—the same statute the administration is leveraging to pursue investigations into forced labor and industrial excess capacity, which could result in the potential punishment of hefty tariffs. The USTR will decide whether it wants to pursue that route in the next 30 days.
The Footwear Distributors and Retailers of America (FDRA) took particular exception to Vietnam being branded with a scarlet letter, indicating that an investigation could lead to higher footwear costs.
“The latest inflation data confirms what the footwear industry and American families are already feeling at the checkout counter. Footwear prices rose nearly 2.5 percent in March, the sharpest increase in more than three years, as tariffs continue to stack on top of higher energy costs and global instability,” said president and CEO Matt Priest.
Tariffs on shoes more than doubled over the past year, he added. “If policymakers are serious about easing inflationary pressure, the place to start is by pulling back on punitive trade policies that raise prices for working families without fixing the underlying problems.”
Vietnam’s new PFC status wasn’t the only surprise the report contained.
The European Union was added to the Watch List—its first appearance since 2009—with the USTR pointing to persistent trade deficits in food and agricultural trade. According to the agency, the EU’s system of geographical indications (GI), which are tags that indicate a product is from a certain region, have played a large part in fostering the imbalance. GIs apply to products that are only produced in a specific place, like Champagne or Roquefort cheese, for example.
The USTR argued that the system gives European producers a leg up in the U.S. market, but American producers aren’t afforded the same level of market access when selling into Europe. Now, the agency asserted, the EU is expanding the GI system beyond agricultural products to encompass goods like apparel, textiles and handicrafts, which could ding U.S. competitors.
Meanwhile, Guatemala remains on the Watch List in spite of efforts to address issues with IP enforcement.
“Despite a generally strong legal framework in place, resource constraints, inconsistent enforcement actions against counterfeiting of apparel and other products, as well as a lack of coordination among law enforcement agencies continue to result in insufficient” enforcement, the USTR wrote. Commercial-scale sales of counterfeit goods like clothing, sports shoes and accessories occur openly in the country, the report said, and law enforcement did little to curb the practice in 2025.
Indonesia found itself on the Priority Watch List—again—in 2026, maintaining a status it’s held for decades. According to the USTR, Indonesia has demonstrated subpar enforcement against the sale of counterfeit goods both in physical markets and on the web, as well as ineffective border enforcement, making the trafficking of illicit products rampant.
“As manufacturing has moved from China to Indonesia for goods such as footwear, local manufacturing of counterfeits has increased,” the report said. “Counterfeit sales have shifted online, but there are few investigations or enforcement actions against online sellers of pirated or counterfeit goods.”
Pakistan, too, has been on the Watch List multiple times and remains on it in 2026, as it’s made “limited substantive progress” on IP protections and enforcement. While the country’s government has registered several hundred cases against infringers, and Pakistani customs made 178 seizures related to IP violations at its border, “these efforts have yet to result in significant improvements, and serious concerns remain” with regard to the smuggling and sale of counterfeit products like clothing, footwear, toys and pharmaceuticals, among other categories, the report said.
“American innovators, creators, and brand owners rely on robust IP protection and enforcement,” Deputy USTR Ambassador Rick Switzer said upon the report’s release. “USTR will continue to press our trading partners to resolve trade barriers with respect to IP in their markets through our negotiations for Agreements on Reciprocal Trade and other engagements.”
American Apparel and Footwear Association president and CEO Steve Lamar weighed in on the government’s efforts to address violative behaviors by U.S. trade partners.
“Intellectual property protection and enforcement remain top priorities for U.S. apparel and footwear companies, as counterfeit clothing, footwear, and travel goods harm not only American brands, but also the millions of U.S. workers they employ,” he said. “Counterfeit goods are often produced in unsafe and environmentally harmful conditions, hurting workers and communities abroad as well.”
“USTR’s report plays an important role in identifying countries that fail to provide adequate IP protections or fair market access for U.S. companies that depend on those rights, but action at home is equally important,” he added, underscoring the need to advance domestic policy to shield shoppers from the impacts of counterfeit goods that make their way into the market. “Congress needs to prioritize advancing effective enforcement measures such as the SHOP Safe Act, the SCAM Act, and H.R. 4930, which recently passed the House,” he added.
The fashion and retail sectors have been hit hard by the economic turbulence of the past year, which have been propelled by seismic shifts in geopolitics and trade policy—including tariffs on prominent U.S. trading partners.
“If the government is serious about protecting Americans from IP infringement, it should focus on strengthening these practical tools and working collaboratively with Congress, rather than continuing to rely first on tariffs that add pressure to the global supply chain,” Lamar said.
