U.S. Trade Representative Robert Zoelick designated the former Soviet republic a "priority foreign country," which gives Kiev six months to straighten out its act, or face retaliation.

"For more than two years, the U.S. government has been urging the Ukrainian government to close down the pirates' CD production facilities currently exporting throughout Europe and enact legislation to adequately protect copyrighted works and sound recordings," Zoelick said in his annual report. "Despite many promises, including high-level commitments made in June 2000, the Ukrainian government has been unwilling or unable to curtail the activities of these pirates."

Ukraine remains the largest source of pirated optical media products in Central and Eastern Europe.

Copyright piracy in Ukraine is extensive and enforcement is severely lacking, resulting in increasing unauthorized production and export of CDs and CD-ROMs. Estimated losses to the U.S. music industry alone are $200 million a year, the report said.