US – USTR to impose 25% duties under Sec. 301 against certain French products as result of France’s digital services tax [updated]

On July 16, 2020, the Office of the United States Trade Representative (USTR) published in the Federal Register a notice [Docket No. USTR-2019-0009] that announces USTR’s determination to take action in the form of additional duties of 25 percent on products of France specified in Annex A to the notice as a result of France’s Digital Service Tax (DST). USTR has further determined to suspend application of the additional duties for a period of up to 180 days, until January 6, 2021. The notice, had been posted on the USTR website on July 10.

USTR published a comprehensive report on France’s DST on December 2, 2019, which is available at the USTR website here.  On December 6, 2019, USTR announced a determination that France’s DST is unreasonable or discriminatory and burdens or restricts US commerce, and therefore is actionable under sections 301(b) and 304 (a) of the Trade Act (19 U.S.C. 2411(b) and 2414(a)). See 84 FR 66856 (December 6, 2019) (December 6 notice).

The December 6 notice proposed that appropriate action would include additional ad valorem duties of up to 100 percent on products of France to be drawn from a list of 63 tariff subheadings of the Harmonized Tariff Schedule of the United States (HTS or HTSUS) included in the annex to that notice. The December 6 notice requested comments on the proposed action, as well as on other potential actions, including the imposition of fees or restrictions on services of France.

After a hearing, and in accordance with the advice of the Trade Policy Staff Committee, USTR has determined that appropriate action is the imposition of ad valorem duties of 25 percent on products of France specified in Annex A to this notice. Annex A contains a list of 21 tariff subheadings, with an estimated trade value for calendar year 2019 of approximately $1.3 billion. In making this determination, USTR considered the public comments submitted in the investigation, as well as advice of advisory committees.

Additional duties of 25 percent on the products of France covered by the trade action should result in the collection of tariffs on goods of France at comparable, though somewhat lower amounts than the value of digital transactions covered by France’s DST and the amount of taxes assessed by France on US companies. France’s 3 percent DST covers transactions of US companies with estimated revenues of approximately $15 billion in 2020, with expected collections of approximately $450 million in taxes from US companies for activities during 2020, and over $500 million for activities during 2021. USTR will continue to monitor the effect of the trade action and the progress of discussions with France, and may adopt appropriate modifications.

In order to implement this determination, subchapter III of chapter 99 of the HTSUS is modified by Annex A of this notice, which contains products contained in a new HTS heading: 9903.90.01. Annex A has an effective date of January 6, 2021, which is 180 days after the determination of action. In the event the USTR determines that the suspension of the additional duties should be for less than a period of 180 days, USTR will issue a subsequent notice amending the effective date.

For informational purposes, Annex B contains a list of the tariff subheadings covered by the tariff action along with short product descriptions. In all cases, the formal language in Annex A governs the tariff treatment of products covered by the action.

The additional duties provided for in the new HTS heading established by Annex A apply in addition to all other applicable duties, fees, exactions, and charges.

Any product listed in Annex A, except any product that is eligible for admission under ‘domestic status’ as defined in 19 CFR 146.43, which is subject to the additional duty imposed by this determination, and is admitted into a US foreign trade zone on or after the effective date of the additional duties only may be admitted as ‘privileged foreign status’ as defined in 19 CFR 146.41. Such products will be subject upon entry for consumption to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.

The additional duties imposed by heading 9903.90.01 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50 and 9802.00.60 and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50 and 9802.00.60, the additional duties apply to the value of repairs, alterations or processing performed in France and as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.

Heading 9903.90.01 shall apply to all products of France that are classified in the subheadings enumerated below:

3304 covers certain beauty or make-up preparations and preparations for the care of the skin

3401 covers certain soap and similar products

4202 covers certain leather and plastic or textile handbags