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Volume XI, Number 204

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C’est La Vie: New Section 301 Tariffs on French Goods — Originally Set to Go Into Effect on January 6 — Are Indefinitely Suspended

On January 7, 2021, the United States Trade Representative (USTR) announced that new tariffs on certain French products are indefinitely suspended. According to USTR, the duties — which resulted from a Section 301 investigation of France’s Digital Services Tax (DST) and were set to take effect on January 6, 2021 — are being set aside as a means of “promot[ing] a coordinated response” to other DSTs that have been proposed or adopted in the European Union (EU) and multiple countries.

Background

On July 16, 2019, USTR initiated a Section 301 investigation regarding the DST passed in July 2019 by the French Parliament, which imposes a 3% additional tax on gross revenues derived from advertising targeted toward French users based on user data and certain digital services provided to French users.

In December 2019, after completing its investigation, USTR issued a report with the following conclusions:

  • The DST discriminates against U.S. companies.

  • The DST is inconsistent with international tax principles due to its retroactivity, extraterritorial application, and emphasis on revenue rather than income.

  • The DST would target numerous large U.S. companies.

Per these conclusions, USTR proposed ad valorem duties of up to 100% on certain French imports covering 63 tariff subheadings with an approximate trade value of $2.4 billion.

On July 16, 2020, following a notice and comment period, USTR tailored its original proposal and announced the imposition of ad valorem duties of 25% on specified French products, including cosmetics, soaps, handbags and organic body wash.

USTR Announces Indefinite Suspension

USTR’s announcement, set out in a notice to be published in the Federal Register, provides that the Section 301 duties on French goods (as detailed in Annex A of the July 16, 2020, notice) are “suspended indefinitely.” Notably, due to a delay in publishing the suspension and miscommunication between the agencies, the tariff schedule was temporarily updated to reflect the new Chapter 99 retaliatory duties, which caused some confusion.

According to USTR, the suspension was prompted by a desire to coordinate a response to multiple Section 301 investigations. As explained in our previous client alert, on June 5, 2020, USTR announced the initiation of Section 301 investigations into DSTs proposed or enacted by the EU, Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. Although USTR recently issued similar findings related to its investigations of the DSTs adopted in India, Italy and Turkey, no specific actions are being taken again those countries at this time. The remaining investigations are ongoing, although USTR says it expects to announce their “progress or completion … in the near future.”

Ultimately, the USTR’s suspension of further actions against the French DST will push the final decision to the incoming Biden administration, which will then decide how to address the issue, including whether to apply retaliatory duties to oppose the DSTs implemented in multiple jurisdictions or seek a negotiated resolution or multilateral agreement through the Organization for Economic Cooperation and Development.

Faegre Drinker will continue to closely monitor these developments and provide timely updates as developments warrant. If you have any questions about these matters, please contact any member of Faegre Drinker’s Customs and International Trade team.

 

© 2021 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume XI, Number 8
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About this Author

Douglass Heffner, International trade lawyer, Drinker Biddle
Partner

Douglas J. Heffner litigates customs and international trade matters including antidumping duty, countervailing duty and safeguard cases. He represents foreign companies in Canada, Europe, Japan and Mexico, as well as domestic producers in industries that range from high-tech to heavy industry, to consumer and industrial goods. He also represents trade associations, government agencies and embassies in a broad range of matters.

202-230-5802
James Sawyer Trade Attorney Faegre Drinker Biddle & Reath Chicago, IL
Partner

James Sawyer counsels clients on critical import compliance issues and duty-savings opportunities, balancing business realities with effective internal control processes to meet importers’ legal obligations. He advises in all areas of U.S. import law and regulation, including tariff classification, valuation, origin determination and marking, free trade agreements and duty preference programs, and enforcement. James is a co-leader of Faegre Drinker's Chicago team.

Import Compliance Counsel

James frequently counsels clients on strategic sourcing and import compliance issues...

312-569-1156
Carolyn Bethea Corporate Attorney Drinker Biddle Law Firm
Associate

Carolyn M. Bethea advises clients at both the administrative and appellate level on a wide variety of customs and international trade matters, particularly involving antidumping and countervailing duty proceedings, safeguard proceedings, and export compliance.

Before joining Drinker Biddle, Carrie was a senior international trade compliance analyst at the U.S. Department of Commerce, International Trade Administration in Washington, D.C., where she administered U.S. trade remedy laws via the conduct of antidumping and countervailing duty...

202-230-5330
Matthew R. Kinsman Business Attorney Faegre Drinker Biddle & Reath Indianapolis, IN
Associate

Matthew Kinsman is an experienced advocate and counselor, representing clients on a wide variety of complex business matters, particularly those involving customs and international trade. Matt’s wide-ranging experience as a federal law clerk, congressional staff member and private sector consultant informs his practice.

Government Affairs and Regulatory Experience

Matt draws on a sophisticated understanding of the federal legislative and regulatory processes to advance clients’ government affairs goals. Matt previously served on the legislative staff of U.S. Senator Olympia...

317-237-1142
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