By statute, the annual report must identify a list of "Priority Foreign Countries", those countries judged to have inadequate intellectual property laws; these countries may be subject to sanctions. In addition, the report contains a "Priority Watch List" and a "Watch List", containing countries whose intellectual property regimes are deemed of concern.
The Special 301 Sub-Committee of the Trade Policy Staff Committee (TPSC) advises the U.S. Trade Representative on which countries to designate as "priority foreign countries" or to include in the watchlists. The Special 301 Sub-Committee is chaired by the Office of the United States Trade Representative (USTR) and its members include the Department of Commerce, the Patent and Trademark Office, the Department of State, the Department of Health and Human Services, the Department of Agriculture, the Copyright Office, the Council of Economic Advisers, and other agencies. U.S. companies provide extensive comments in the annual National Trade Estimate Report. The Special 301 Sub-Committee also takes the views of foreign governments and the views of U.S. embassies on intellectual property rights.
U.S. companies and intellectual property owners, including copyrights, patents and trademarks, can submit complaints to the Trade Compliance Centre, which provides a template for such complaints, or the country or industry desk at the International Trade Administration (ITA) of the U.S. Department of Commerce. The ITA then reviews trade-related complaints with co-operation from the Office of General Counsel and the U.S. Patent and Trademark Office. The complaint can not be in relation to disputes between companies on intellectual property rights, but must be about instances where a country has violated an international agreement with the United States. Complaints can be made in relation to the intellectual property law of the country, judicial or administrative procedures that discriminate against the US company, and failure to enforce intellectual property laws, particularly in relation to trade in counterfeit goods, and lately online copyright infringement. Complaints do not need to reference specific international agreements or provisions that are being breached. Complaints will focus on a country's failure to protect the intellectual property rights of a US company or lack of intellectual property rights relates market access. Complaints are expected to include a description of the efforts the company has made to enforce its intellectual property rights in that country and provide estimates of economic losses resulting from the infringement of intellectual property rights in that country.
Most countries included in the Priority Watch List and Watch List between 1996 and 2000 were requested by Pharmaceutical Research and Manufacturers of America (PhRMA) or the International Intellectual Property Alliance (IIPA). According to Andres Guadamuz of the University of Edinburgh, the IIPA, which represents the U.S. media industry, urged the U.S. government to consider countries like Indonesia, Brazil, and India for inclusion in the Special 301 Watchlist in early 2010 because they either mandated or suggested the use of open-source software.