Late Friday night, the Office of the U.S. Trade Representative announced the imposition of a 25% import duty on various French products in response to that country’s new Digital Services Tax, which Washington says discriminates against U.S. tech firms such as Google, Facebook and Apple Inc.
Earlier this year, the leaders of the two countries struck a truce in their dispute over the issue, whereby France agreed to defer collection of its digital services levy until the end of 2020. In return, the U.S. agreed to postpone any retaliatory tariffs through the end of 2020.
Accordingly, beginning on January 6, 2021, the USTR will begin levying additional duties of 25% on $1.3 billion worth of French products covered by 21 Harmonized Tariff Schedule subheadings listed in Annex A to the July 10, 2020 Federal Register notice.
The dispute arises from new legislation introduced last year by France aimed at stopping multinationals from avoiding taxes by setting up headquarters in low-tax EU countries. Currently, tech giants like Google and Facebook pay nearly no tax in countries such as France where they have large sales.
The pioneering digital services tax would impose a 3% annual levy on French revenues of digital companies with yearly global sales worth more than €750 million (US$855 million) and French revenue exceeding €25 million (US$28 million).
Following an investigation into the impact of the new tax on U.S. companies, the USTR determined that the DST is “unreasonable or discriminatory, burdens or restricts U.S. commerce” and is actionable under Section 301 of the Trade Act of 1974. According to the USTR, France’s DST would cost affected U.S. firms approximately $450 million in taxes for activities during 2020 and over $500 million for activities during 2021.
Scope of Coverage
The French products scheduled for January 2021 tariffs over the DST include the following:
3304.10.00: Lip make-up preparations
3304.20.00: Eye make-up preparations
3304.30.00: Manicure or pedicure preparations
3304.91.00: Beauty or make-up powders, whether or not compressed
3304.99.50: Beauty or make-up preparations & preparations for the care of the skin, excl. medicaments but incl. sunscreen or sun tan preparations, not elsewhere specified or indicated (nesoi)
3401.11.10: Castile soap in the form of bars, cakes or molded pieces or shapes
3401.11.50: Soap, nesoi; organic surface-active products used as soap, in bars, cakes, pieces, soap-impregnated paper, wadding, felt, for toilet use
3401.19.00: Soap; organic surface-active products used as soap, in bars, cakes, pieces; soap impregnated paper, wadding, felt, not for toilet use
3401.20.00: Soap, not in the form of bars, cakes, molded pieces or shapes
3401.30.10: Organic surface-active products for wash skin, in liquid or cream, contain any aromatic/mod aromatic surface-active agent, put up for retail
3401.30.50: Organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, nesoi
4202.21.30: Handbags, w/ outer surface of reptile leather
4202.21.60: Handbags, w/ outer surface of leather, composition or patent leather, nesoi, n/o $20 ea.
4202.21.90: Handbags, w/ outer surface of leather, composition or patent leather, nesoi, over $20 ea.
4202.22.15: Handbags, w/ outer surface of sheeting of plastics
4202.22.40: Handbags, w/ outer surface of textile materials, wholly or in part of braid, nesoi
4202.22.45: Handbags, w/ outer surface of cotton, not of pile or tufted construction or braid
4202.22.60: Handbags, w/ outer surface of veg. fibers, exc. cotton, not of pile or tufted construction or braid
4202.22.70: Handbags, w/ outer surface containing 85% or more of silk, not braided
4202.22.81: Handbags, w/ outer surface of MMF materials
4202.22.89: Handbags, w/ outer surface of textile materials nesoi
Need More Information?
Should you have any questions about this issue and how your imports may be affected, don’t hesitate to contact one of our knowledgeable trade experts to discuss your needs.