December 3, 2019 USTR proposes additional duties in response to French DST On December 2, the Office of the United States Trade Representative (USTR) proposed additional duties of up to 100% on certain French products with an approximate trade value of $2.4 billion in response to the French Digital Services Tax (DST). USTR is also seeking comments on whether to impose fees or restrictions on French services. The proposal was made in a Federal Register notice explaining that, for reasons set forth in a report prepared in conjunction, the French DST is unreasonable, discriminatory, and burdens US commerce. The list of French products subject to potential duties includes 63 tariff subheadings, covering items like cheese, Champagne, cosmetics, handbags and cast-iron cookware. The value of any action through either duties or fees may take into account the level of harm to the US economy resulting from the DST, USTR said. The report reiterated the Administration's long-standing opposition to the DST as intended to target certain US digital companies and not French companies. It further said the French DST, like the EU DST proposal, targets Internet advertising and digital interfaces, covering online marketplaces and some subscription services, where US companies are dominant. USTR's action coincides with the expiration of a US-France agreement reached over the summer to forestall a trade war over the French DST. In August, President Trump and French President Emmanuel Macron discussed the potential for OECD agreement on a broader rewrite of international transfer pricing rules that could replace digital sales taxes like the French tax, and France had previously stated that its unilateral digital tax would be repealed if such broader agreement was reached. The bill introducing the 3% DST, applied to revenue derived from specific digital activities by companies with revenue of more than €750 million worldwide and €25 million in France, was signed by President Macron on July 24. USTR initiated a Section 301 investigation of the tax July 10 and held a public hearing on August 19. The new notice said the DST would be a substantively new tax that applies retroactively to January 1, 2019. USTR Robert Lighthizer said in a statement that his office is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy and Turkey. " The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies, " he said. A public hearing has been set for Tuesday, January 7, 2020, regarding proposed action to be taken in the investigation. The notice is attached. The report is available here. ———————————————
——————————————— Section 301: France’s Digital Services Tax
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