The Office of the U.S. Trade Representative (USTR) held a public hearing on January 7 regarding tariffs proposed under Section 301 — of up to 100% on $2.4 billion in French goods — in response to France's 3% Digital Services Tax (DST). The USTR had held a previous hearing on the DST in August 2019 before it proposed tariffs on December 2 as a US-France agreement to forestall a trade war expired.

The proposal — made in conjunction with a report concluding that the DST is unreasonable, discriminatory and burdens US commerce — targets French products including wine, cast-iron cookware and handbags. Representatives of those industries testified before the USTR. Additionally, business groups representing technology and other industries affected by the French DST, effective beginning in 2019, continued to suggest that the tax sets a harmful precedent and that unilateral efforts should be abandoned in favor of the BEPS 2.0 effort spearheaded by the OECD.

Sam Rizzo of the Information Technology Industry Council noted that since the last USTR hearing other nations, including Italy and Austria, have joined France in imposing DSTs. He asserted that France and other nations should withdraw individual measures and work toward a multilateral approach through the OECD. Treasury officials asked witnesses about the nature of countries' discriminatory taxes, and USTR officials asked witnesses about potential compliance costs.

Faye Gooding, former CEO of Le Creuset of America, highlighted the company's operations in South Carolina, and that the company's largest workforce is in the US. The burden of the new tariffs would fall on its US employees, she said, and could result in a hiring freeze, economic hardship on business partners, suspension of capital improvement projects and cancellation of equipment purchases.

Nate Herman of the American Apparel & Footwear Association (AAFA) said that the group agrees neither with the DST nor the US retaliatory proposal to increase taxes on handbags imported from France and commented on the incongruity in catching handbags in a dispute over digital taxes. He said handbags are generally no longer made in the US and that French bags have a cachet, but that American workers will nonetheless be negatively affected if the US tariffs take effect. "This is quite a literally a tax that hits Americans in the pocketbook," he quipped.

Alcoholic beverage industry representatives suggested that the tariffs will hit Americans as a tax and will result in reduced supply and fewer consumer choices. They also said that French wines are sold in the US by US distributors and retailers, who will be harmed by additional tariffs.

The hearing came as French Finance Minister Bruno Le Maire reiterated this week that the tariffs would be met with retaliation. Additionally, Politico on January 7 quoted Le Maire as saying that he hoped for an OECD agreement within weeks as leaders prepare to convene at the World Economic Forum in Davos the week of January 20. It was also reported that Le Maire said that he recently spoke to Treasury Secretary Steven Mnuchin regarding the DST and that tensions between the two nations are seen as complicating prospects for a multilateral deal.

A witness list follows, though the hearing was to be truncated due to weather concerns in Washington.

PANEL 1 1. Sam Rizzo, Information Technology Industry Council 2. Rachael Stelly, Computer & Communications Industry Association 3. Gary Sprague, Baker & McKenzie 4. Marianne Rowden, American Association of Exporters and Importers

PANEL 2 1. Faye Gooding, Le Creuset of America 2. Joanna Rosenberg, Zwilling J.A. Henckels & Staub 3. George Kakaty, Bernardaud NA, Inc. 4. Nate Herman, American Apparel & Footwear Association (AAFA)

PANEL 3 1. Jeff Zacharia, National Association of Wine Retailers 2. Richard Blau, Sokolin LLC 3. William Tomaszewski, Wine.com 4. Benjamin Aneff, Tribeca Wine Merchants 5. David Waldenberg, BNP Distributing Company

PANEL 4 1. Peter Weygandt, Weygandt-Metzler Importing, Ltd. 2. Michelle DeFeo, Laurent-Perrier US Inc. 3. Annette Peters, Domains and Appellations & Bourget Imports 4. James Federico, VINTUS 5. Barkley Stuart, Southern-Glazer's Wine & Spirits 6. Jenny Lefcourt, Jenny & Francois Selections

PANEL 5 1. Philip Burkhart, Latitude Wines 2. Eric Faber, Cutting Edge Selections 3. Timothy Gagnon, Selection Masscale 4. Michael Daniels, Vintage 59 5. Mary Taylor, Mary Taylor Wine 6. Christy Frank, Copake Wine Works

PANEL 6 1. David Bowler, Bowler Wine 2. Edward Swain, Devenish Wines 3. Geoffroy Ducroux, Avant Garde 4. Lyle Fass, Fass Selections 5. Eben Lillie, Chambers Street Wine

PANEL 7 1. Peter Vitaliano, National Milk Producers Federation 2. Antoine Marsot, INTERVALexport 3. Emily Lyons, Cheese Importers Association of America 4. Philip Kafarakis, Specialty Food Association 5. Thomas Gellert, Gellert Global Group 6. Jessica Wasserman, Bel Brands USA 7. Mark Baumgarten, Materne North America

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