On Friday, July 10, 2020, the Office of the US Trade Representative (“USTR”) issued a list of French goods worth $1.3 billion that will be subject to 25 percent tariffs if France begins collecting digital services tax (“DST”) from US companies next year.
These potential new tariffs are the result of a Section 301 investigation of France’s DST. The USTR initiated the investigation on July 10, 2019. Upon conclusion of the investigation last December, the USTR announced that it had determined that France’s DST would discriminate against US companies and burden or restrict US commerce. In the same announcement, the USTR threatened to impose tariffs on up to $2.4 billion worth of French goods. President Trump and French President Emmanuel Macron agreed to delay the imposition of US tariffs and defer collection of DST in 2020 as the Organization for Economic Cooperation and Development engaged in negotiations to establish a new taxing nexus.
On July 10, the USTR made its latest announcement, which specifies the subset of products that could be subject to tariffs, in order to ensure that the Administration complies with statutory deadlines in the US Section 301 statute. The USTR has announced that no duties will be imposed for six months and that the total amount of imports subject to duties will be $1.3 billion, which is consistent with the economic impact of the French DST on US companies. French goods that are potentially subject to these tariffs include soap, handbags, and makeup products. The list does not include other sensitive products such as French wine and cheese. According to the draft Federal Register notice published on Friday, the USTR will delay the application of tariffs for a period of up to 180 days (i.e., until January 6, 2021).
France is not the only country that could be subject to Section 301 actions in response to the threat of the application of a DST on American companies. The USTR has also launched Section 301 DST investigations into 10 other jurisdictions, including the European Union, Brazil, the United Kingdom, Turkey, and India. President Trump has previously used Section 301 to take action against China. (See our US-China Trade Developments resource page for further background.)