US commission investigates possible violations

The U.S. International Trade Commission is investigating whether Samsung Electronics and LG Electronics are violating tariff rules by importing mobile phones and other handheld wireless devices containing digital cameras and related components that infringe on patents held by Eastman Kodak Co.

The investigation is based on a complaint filed by Eastman Kodak (nyse: EK - news - people ) in November and names six companies as respondents: Samsung Electronics Company Ltd. of South Korea; Samsung Electronics America Inc. of Ridgefield Park, N.J.; Samsung Telecommunications America LLC of Richardson, Texas; LG Electronics, Inc. of South Korea; LG Electronics USA Inc. of Englewood Cliffs, N.J.; and LG Electronics MobileComm USA Inc. of San Diego.

Separately, the U.S. International Trade Commission said it is investigating whether more than a dozen companies are violating tariff rules by importing flash memory chips and products containing flash memory chips that allegedly infringe on patents held by Spansion Inc. (nasdaq: SPSN - news - people ) of Sunnyvale, Calif.

The investigation is based on a complaint filed in November by Spansion about the importation of flash memory chips used in USB drives, digital cameras, phones, music players and computers. Among the respondents named in the investigation are Samsung, Apple Inc. (nasdaq: AAPL - news - people ), Research In Motion Ltd. (nasdaq: RIMM - news - people ) and Sony Corp. (nyse: SNE - news - people )

None of these companies immediately responded to requests for comment.

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The Chinese government is stirring trade tensions with Washington with a plan to require foreign computer security technology to be submitted for government approval, in a move that might require suppliers to disclose business secrets.

Rules due to take effect May 1 require official certification of technology widely used to keep e-mail and company data networks secure. Beijing has yet to say how many secrets companies must disclose about such sensitive matters as how data-encryption systems work. But Washington complains the requirement might hinder imports in a market dominated by U.S. companies, and is pressing Beijing to scrap it.

"There are still opportunities to defuse this, but it is getting down to the wire," said Duncan Clark, managing director of BDA China Ltd., a Beijing technology consulting firm. "It affects trade. It's potentially really wide-scale."

Beijing tried earlier to force foreign companies to reveal how encryption systems work and has promoted its own standards for mobile phones and wireless encryption.

Those attempts and the new demand reflect Beijing's unease about letting the public keep secrets, and the government's efforts to use its regulatory system to help fledgling Chinese high-tech companies compete with global high-tech rivals. Yin Changlai, the head of a Chinese business group sanctioned by the government, has acknowledged that the rules are meant to help develop China's infant computer security industry by shielding companies from foreign rivals that he said control 70 percent of the market.

The computer security rules cover 13 types of hardware and software, including database and network security systems, secure routers, data backup and recovery systems and anti-spam and anti-hacking software. Such technology is enmeshed in products sold by Microsoft Corp. (nasdaq: MSFT - news - people ), Cisco Systems Inc. (nasdaq: CSCO - news - people ) and other industry giants.

Giving regulators the power to reject foreign technologies could help to promote sales of Chinese alternatives. But that might disrupt foreign manufacturing, research or data processing in China if companies have to switch technologies or move operations to other countries to avoid the controls. Requiring disclosure of technical details also might help Beijing read encrypted e-mail or create competing products.

Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.

The Labor Department reported Thursday that jobless claims shot up by 32,000 last week to a seasonally adjusted 516,000, the highest total in seven years. The tally was much higher than analysts expected and a further indication of how much the labor market is deteriorating amid the shrinking economy. The government reported last week that the unemployment rate surged to a 14-year high of 6.5 percent in October.

Meanwhile, the Commerce Department said the trade deficit declined by a bigger-than-expected amount in September, falling by 4.4 percent to $56.5 billion as imports experienced a record plunge.

The import decline was led by a huge fall in imported oil as the average price for crude dropped by a record $12.41 per barrel and the volume of shipments fell to the lowest level in five years. But demand for other types of imports also fell, with imported cars and car parts dropping to the lowest level in more than five years, an indication that foreign automakers are feeling the pinch hitting U.S. consumers.

President-elect Barack Obama has said that dealing with the worst financial crisis to hit this country in seven decades will be his No. 1 priority when he takes office, and his Democratic allies in Congress were laying the groundwork for changes with hearings scheduled Thursday.

The House Oversight Committee will examine the role hedge funds may have played in recent market turbulence. Among those scheduled to testify was billionaire investor George Soros, chairman of Soros Fund Management.

Meanwhile, the Senate Banking Committee will hear from executives of a number of financial institutions including Bank of America (nyse: BAC - news - people ), JPMorgan Chase (nyse: JPM - news - people ) and Wells Fargo (nyse: WFC - news - people ) on the issue of how the government's $700 billion rescue effort is operating, and particularly whether the government should be requiring more commitments on the use of the money to address rising mortgage foreclosure problems.