Notice of Determination and Request for Comments Concerning Action Pursuant to Section 301: France's Digital Services Tax, 66956-66960 [2019-26325]

Agencies

• Office of the United States Trade Representative

[Federal Register Volume 84, Number 235 (Friday, December 6, 2019)]
[Notices]
[Pages 66956-66960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26325]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. USTR-2019-0009]


Notice of Determination and Request for Comments Concerning 
Action Pursuant to Section 301: France's Digital Services Tax

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of determination, request for comments, and notice of 
public hearing.

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SUMMARY: The U.S. Trade Representative has determined that France's 
Digital Services Tax is unreasonable or discriminatory and burdens or 
restricts U.S. commerce. The U.S. Trade Representative proposes action 
in the form of additional duties of up to 100 percent on products of 
France to be drawn from the preliminary list in the Annex to this 
notice. The Office of the United States Trade Representative (USTR) 
seeks comments on this proposed action, as well as on other options 
including the imposition of fees or restrictions on services of France. 
The interagency Section 301 Committee will hold a public hearing in 
connection with the action to be taken under Section 301.

DATES: To be assured of consideration, the following schedule applies:
    December 30, 2019: Due date for submission of a request to appear 
at the public hearing and a summary of testimony.
    January 6, 2020: Due date for written comments.
    January 7, 2020: The Section 301 Committee will convene a public 
hearing in the main hearing room of the U.S. International Trade 
Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 
a.m.
    January 14, 2020: Due date for submission of post-hearing rebuttal 
comments.

ADDRESSES: You should submit written comments through the Federal 
eRulemaking Portal: https://www.regulations.gov. Follow the instructions 
for submissions in sections V and VI below. The docket number is USTR-
2019-0009. For issues with on-line submissions, please contact the USTR 
Section 301 line at (202) 395-5725.

FOR FURTHER INFORMATION CONTACT: For procedural questions concerning 
the submission of written comments or participating in the public 
hearing, please contact the USTR Section 301 line at (202) 395-5725. 
For questions concerning the investigation, please

[[Page 66957]]

contact Kate Hadley, Assistant General Counsel at (202) 395-4959, 
Robert Tanner, Director, Services and Investment at (202) 395-6125, or 
Michael Rogers, Director, Europe and the Middle East at (202) 395-2684.

SUPPLEMENTARY INFORMATION: 

I. Proceedings in the Investigation

    On March 6, 2019, the Government of France released a proposal for 
a 3 percent levy on revenues that certain companies generate from 
providing certain digital services to, or aimed at, persons in France 
(the Digital Services Tax, or the DST). The two houses of the French 
parliament passed DST bills on April 9 and May 21, 2019, and agreed on 
a final bill on July 4. President Emmanuel Macron signed the bill into 
law on July 24.
    On July 10, 2019, USTR initiated an investigation of the French DST 
pursuant to section 302(b)(1)(A) of the Trade Act of 1974, as amended 
(the Trade Act). The notice of initiation (84 FR 34042) solicited 
written comments on, inter alia, the following aspects of the French 
DST:
    1. Discrimination: Available evidence, including statements by 
French officials, indicates that the DST will amount to de facto 
discrimination against U.S. companies. For example, the revenue 
thresholds have the effect of subjecting to the DST larger companies, 
which, in the covered sectors, tend to be U.S. companies, while 
exempting smaller companies, particularly those that operate only in 
France.
    2. Retroactivity: The DST would be a substantively new tax that 
applies retroactively to January 1, 2019. This feature calls into 
question the fairness of the DST. Further, since the tax is 
retroactive, companies covered by the DST may not track the data 
necessary to calculate their potential liability back to the beginning 
of 2019.
    3. Unreasonable tax policy: The DST appears to diverge from norms 
reflected in the U.S. tax system and the international tax system in 
several respects. These apparent departures include: 
Extraterritoriality; taxing revenue not income; and a purpose of 
penalizing particular technology companies for their commercial 
success.

Interested persons filed 36 written submissions. USTR and the Section 
301 Committee convened a public hearing on August 19, 2019, during 
which witnesses provided testimony and responded to questions. The 
public submissions and a transcript of the hearing are available on 
www.regulations.gov in docket number USTR-2019-0009.
    Under Section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the Government of France regarding the 
issues involved in the investigation. Consultations were held on 
November 14, 2019.
    Based on information obtained during the investigation, including 
the public submissions and the public hearing, USTR and the Section 301 
Committee have prepared a comprehensive report on the acts, policies, 
and practices under investigation. The report is posted on the USTR 
website. The report supports findings that the French DST is 
unreasonable or discriminatory and burdens or restricts U.S. commerce.

II. Determination on the Act, Policy, or Practice Under Investigation

    Based on the information obtained during the investigation and the 
advice of the Section 301 Committee, and as reflected in the publicly 
available report on the findings in the investigation, the U.S. Trade 
Representative has made the following determination under sections 
301(b) and 304(a) of the Trade Act (19 U.S.C. 2411(b) and 2414(a)): The 
act, policy, or practice covered in the investigation, namely the 
French DST, is unreasonable or discriminatory and burdens or restricts 
U.S. commerce, and is thus actionable under section 301(b) of the Trade 
Act. In particular:
    1. The French DST is intended to, and by its structure and 
operation does, discriminate against U.S. digital companies, including 
due to the selection of services covered and the revenue thresholds.
    2. The French DST's retroactive application is unusual and 
inconsistent with prevailing tax principles and renders the tax 
particularly burdensome for covered U.S. companies.
    3. The French DST's application to revenue rather than income 
contravenes prevailing tax principles and is particularly burdensome 
for covered U.S. companies.
    4. The French DST's application to revenues unconnected to a 
physical presence in France contravenes prevailing international tax 
principles and is particularly burdensome for covered U.S. companies.
    5. The French DST's application to a small group of digital 
companies contravenes international tax principles counseling against 
targeting the digital economy for special, unfavorable tax treatment.

III. Action To Be Taken in the Investigation

    Section 301(b) provides that upon determining that the acts, 
policies, and practices under investigation are actionable and that 
action is appropriate, the U.S. Trade Representative shall take all 
appropriate and feasible action authorized under section 301(c), 
subject to the specific direction, if any, of the President regarding 
such action, and all other appropriate and feasible action within the 
power of the President that the President may direct the U.S. Trade 
Representative to take under section 301(b), to obtain the elimination 
of that act, policy, or practice.
    Section 301(c)(1)(B) of the Trade Act authorizes the U.S. Trade 
Representative to impose duties on the goods of the foreign country 
subject to the investigation. Pursuant to sections 301(b) and (c), the 
U.S. Trade Representative proposes to determine that action is 
appropriate and that appropriate action would include the imposition of 
additional ad valorem duties of up to 100 percent on certain products 
of France.
    In determining the appropriate action, the U.S. Trade 
Representative may take account of the level of harm to the U.S. 
economy caused by France's DST. USTR seeks public comments on the level 
of harm, including DST payments owed by U.S. companies, the annual 
growth rate of such payments, and other effects, such as compliance 
costs.
    The Annex to this notice contains a preliminary list of 63 tariff 
subheadings, with an estimated import trade value for calendar year 
2018 of approximately $2.4 billion. The U.S. Trade Representative 
proposes to draw a final list of products subject to additional duties 
from this preliminary list.
    Section 301(c)(1)(B) of the Trade Act also authorizes the U.S. 
Trade Representative to impose fees or restrictions on the services of 
the goods of the foreign country subject to the investigation. In light 
of the fact that the actionable act, policy, or practice of France 
involves a tax on U.S. service providers, the U.S. Trade Representative 
is considering whether to impose fees or restrictions on services of 
France. As noted below, USTR invites public comments on this matter.

IV. Request for Public Comments

    In accordance with section 304(b) of the Trade Act (19 U.S.C. 
2414(b)), USTR invites comments from interested persons with respect to 
whether action is appropriate, and if so, the appropriate action to be 
taken. To be assured of consideration, you must submit written comments 
on the proposed action in response France's acts, policies, and 
practices by January 6, 2020, and post-hearing rebuttal comments by 
January 14, 2020.

[[Page 66958]]

    USTR requests comments with respect to any issue related to the 
action to be taken in this investigation. With respect to action in the 
form of additional duties, USTR invites comments regarding:
     The specific products to be subject to increased duties, 
including whether products listed in the Annex should be retained or 
removed, or whether products not currently on the list should be added.
     The level of the increase, if any, in the rate of duty.
     The level of the burden or restriction on the U.S. economy 
resulting from the DST.
     The appropriate aggregate level of trade to be covered by 
additional duties.
    In commenting on the inclusion or removal of particular products on 
the list of products subject to the proposed additional duties, USTR 
requests that commenters address specifically whether imposing 
increased duties on a particular product would be practicable or 
effective to obtain the elimination of France's acts, policies, and 
practices, and whether imposing additional duties on a particular 
product would cause disproportionate economic harm to U.S. interests, 
including small- or medium-size businesses and consumers.
    With respect to action in the form of fees or restrictions on 
services of France, USTR seeks comments on issues such as:
     Which services would be covered by a fee or restriction.
     If a fee is imposed, the rate (flat or percentage) of the 
fee, and the basis upon which any fee would be applied.
     If a restriction is imposed, the form of such restriction.
     Whether imposing fees or restrictions on services of 
France would be practicable or effective to obtain the elimination of 
France's acts, policies, and practices.

V. Hearing Participation

    The Section 301 Committee will convene a public hearing in the main 
hearing room of the U.S. International Trade Commission, 500 E Street 
SW, Washington, DC 20436, beginning at 9:30 a.m. on Tuesday, January 7, 
2020. You must submit requests to appear at the hearing by December 30, 
2019. The request to appear must include a summary of testimony, and 
may be accompanied by a pre-hearing submission. Remarks at the hearing 
may be no longer than five minutes to allow for possible questions from 
the Section 301 Committee.
    All submissions must be in English and sent electronically via 
www.regulations.gov. To submit a request to appear at the hearing via 
www.regulations.gov, enter docket number USTR-2019-0009. In the `type 
comment' field, include the name, address, email address, and telephone 
number of the person presenting the testimony. Attach a summary of the 
testimony, and a pre-hearing submission if provided, by using the 
`upload file' field. The file name should include the name of the 
person who will be presenting the testimony. In addition, please submit 
a request to appear by email to [email protected]. In the subject 
line of the email, please include the name of the person who will be 
presenting the testimony, followed by `Request to Appear'. Please also 
include the name, address, email address, and telephone number of the 
person presenting testimony.

VI. Procedures for Written Submissions

    All submissions must be in English and sent electronically via 
www.regulations.gov. To submit comments via www.regulations.gov, enter 
docket number USTR-2019-0009 on the home page and click ``search.'' The 
site will provide a search results page listing all documents 
associated with this docket. Find a reference to this Notice and click 
on the link entitled `comment now! For further information on using the 
www.regulations.gov website, please consult the resources provided on 
the website by clicking on ``'how to use regulations.gov' on the bottom 
of the home page. USTR will not accept hand-delivered submissions.
    The www.regulations.gov website allows users to submit comments by 
filling in a `type comment' field or by attaching a document using an 
`upload file' field. USTR prefers that you submit comments in an 
attached document. If you attach a document, it is sufficient to type 
`see attached' in the `type comment' field. USTR strongly prefers 
submissions in Adobe Acrobat (.pdf). If you use an application other 
than Adobe Acrobat (or Word (.doc)), please indicate the name of the 
application in the `type comment' field.
    File names should reflect the name of the person or entity 
submitting the comments. Please do not attach separate cover letters to 
electronic submissions; rather, include any information that might 
appear in a cover letter in the comments themselves. Similarly, to the 
extent possible, please include any exhibits, annexes, or other 
attachments in the same file as the comment itself, rather than 
submitting them as separate files.
    Do not submit comments containing business confidential information 
(BCI) via www.regulations.gov. Instead, you should email any comments 
containing BCI to [email protected]. The file name of the business 
confidential version should begin with the characters `BC'. Any page 
containing BCI must be clearly marked `BUSINESS CONFIDENTIAL' on the 
top of that page and the submission should clearly indicate, via 
brackets, highlighting, or other means, the specific information that 
is business confidential. If you request business confidential 
treatment, you must certify in writing that disclosure of the 
information would endanger trade secrets or profitability, and that the 
information would not customarily be released to the public. Filers of 
submissions containing BCI also must submit a public version of their 
comments. The file name of the public version, which you must submit on 
www.regulations.gov, should begin with the character `P'. The `BC' and 
`P' should be followed by the name of the person or entity submitting 
the comments or rebuttal comments. If these procedures are not 
sufficient to protect BCI or otherwise protect business interests, 
please contact the USTR Section Hotline 301 line at (202) 395-5725 to 
discuss whether alternative arrangements are possible.
    USTR will post submissions in the docket for public inspection, 
except BCI. You can view submissions on the https://www.regulations.gov 
website by entering docket number USTR-2019-0009 in the search field on 
the home page.

Joseph Barloon,
General Counsel, Office of the U.S. Trade Representative.

Annex

    Note: All products that are classified in the 8-digit 
subheadings of the HTS that are listed in this Annex are covered by 
the proposed action. The product descriptions that are contained in 
this Annex are provided for informational purposes only, and are not 
intended to delimit in any way the scope of the proposed action. Any 
questions regarding the scope of a particular HTS subheading should 
be referred to U.S. Customs and Border Protection. In the product 
descriptions, the abbreviation ``nesoi'' means ``not elsewhere 
specified or included''.


[[Page 66959]]



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       HTS subheading                    Product description
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0403.10.90.................  Yogurt, not in dry form, whether or not
                              flavored or containing add fruit or cocoa.
0404.10.05.................  Whey protein concentrates.
0405.10.10.................  Butter subject to quota pursuant to chapter
                              4 additional U.S. note 6.
0405.10.20.................  Butter not subject to general note 15 and
                              in excess of quota in chapter 4 additional
                              U.S. note 6.
0405.90.10.................  Fats and oils derived from milk, other than
                              butter or dairy spreads, subject to quota
                              pursuant to chapter 4 additional U.S. note
                              14.
0406.10.84.................  Fresh cheese, and substitutes for cheese,
                              cont. cows milk, nesoi, o/0.5% by wt. of
                              butterfat, descr in add U.S. note 16 to
                              Ch. 4, not GN15.
0406.10.88.................  Fresh cheese, and substitutes for cheese,
                              cont. cows milk, nesoi, o/0.5% by wt. of
                              butterfat, not descr in add U.S. note 16
                              to Ch. 4, not GN 15.
0406.10.95.................  Fresh cheese, and substitutes for cheese,
                              not cont. cows milk, nesoi, o/0.5% by wt.
                              of butterfat.
0406.20.10.................  Roquefort cheese, grated or powdered.
0406.30.48.................  Edam and gouda cheese, processed, not
                              grated or powdered, not subject to gen
                              note 15 or add. U.S. note 20 to Ch. 4.
0406.30.51.................  Gruyere-process cheese, processed, not
                              grated or powdered, subject to add. U.S.
                              note 22 to Ch. 4.
0406.30.53.................  Gruyere-process cheese, processed, not
                              grated or powdered, not subject to gen
                              note 15 or add. U.S. note 22 to Ch. 4.
0406.30.89.................  Processed cheese (incl. mixtures), nesoi, w/
                              cow's milk, not grated or powdered,
                              subject to add U.S. note 16 to Ch. 4, not
                              GN15.
0406.40.54.................  Blue-veined cheese, nesoi, in original
                              loaves, subject to add. U.S. note 17 to
                              Ch. 4.
0406.90.08.................  Cheddar cheese, nesoi, subject to add. U.S.
                              note 18 to Ch. 4.
0406.90.12.................  Cheddar cheese, nesoi, not subject to gen.
                              note 15 of the HTS or to add. U.S. note 18
                              to Ch. 4.
0406.90.16.................  Edam and gouda cheese, nesoi, subject to
                              add. U.S. note 20 to Ch. 4.
0406.90.41.................  Romano, Reggiano, Parmesan, Provolone, and
                              Provoletti cheese, nesoi, from cow's milk,
                              subject to add. U.S. note 21 to Ch. 4.
0406.90.42.................  Romano, Reggiano, Parmesan, Provolone, and
                              Provoletti cheese, nesoi, from cow's milk,
                              not subj to GN 15 or Ch. 4 U.S. note 21.
0406.90.46.................  Swiss or Emmentaler cheese with eye
                              formation, nesoi, subject to add. U.S.
                              note 25 to Ch. 4.
0406.90.48.................  Swiss or Emmentaler cheese with eye
                              formation, nesoi, not subject to gen. note
                              15 or to add. U.S. note 25 to Ch. 4.
0406.90.56.................  Cheeses, nesoi, from sheep's milk in
                              original loaves and suitable for grating.
0406.90.57.................  Pecorino cheese, from sheep's milk, in
                              original loaves, not suitable for grating.
0406.90.90.................  Cheeses & subst. for cheese (incl. mixt.),
                              nesoi, w/or from swiss, emmentaler or
                              gruyere, subj. to add. U.S. note 22 to Ch.
                              4, not GN15.
0406.90.95.................  Cheeses & subst. for cheese (incl. mixt.),
                              nesoi, w/cows milk, w/butterfat o/0.5% by
                              wt, subject to Ch. 4 U.S. note 16 (quota).
0406.90.97.................  Cheeses & subst. for cheese (incl. mixt.),
                              nesoi, w/cows milk, w/butterfat o/0.5% by
                              wt, not subject to Ch. 4 U.S. note 16, not
                              GN15.
0406.90.99.................  Cheeses & subst. for cheese (incl. mixt.),
                              nesoi, w/o cows milk, w/butterfat o/0.5%
                              by wt, not GN15.
2204.10.00.................  Sparkling wine, made from grapes.
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, 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, with or without shoulder strap or
                              without handle, with outer surface of
                              reptile leather.
4202.21.60.................  Handbags, with or without shoulder strap or
                              without handle, with outer surface of
                              leather, composition or patent leather,
                              nesoi, n/o $20 ea.
4202.21.90.................  Handbags, with or without shoulder strap or
                              without handle, with outer surface of
                              leather, composition or patent leather,
                              nesoi, over $20 ea.
4202.22.15.................  Handbags, with or without shoulder straps
                              or without handle, with outer surface of
                              sheeting of plastics.
4202.22.40.................  Handbags with or without shoulder strap or
                              without handle, with outer surface of
                              textile materials, wholly or in part of
                              braid, nesoi.
4202.22.45.................  Handbags with or without shoulder strap or
                              without handle, with outer surface of
                              cotton, not of pile or tufted construction
                              or braid.
4202.22.60.................  Handbags with or w/o shoulder strap or w/o
                              handle, outer surface of veg. fibers, exc.
                              cotton, not of pile or tufted construction
                              or braid.
4202.22.70.................  Handbags with or w/o shoulder strap or w/o
                              handle, with outer surface containing 85%
                              or more of silk, not braided.
4202.22.81.................  Handbags with or without shoulder strap or
                              without handle, with outer surface of MMF
                              materials.
4202.22.89.................  Handbags with or without shoulder strap or
                              without handle, with outer surface of
                              textile materials nesoi.
6911.10.10.................  Porcelain or china hotel, restaurant &
                              nonhousehold table and kitchenware.
6911.10.15.................  Bone china household table & kitchenware
                              valued n/o $31.50/doz. pcs.
6911.10.25.................  Bone china household table & kitchenware
                              valued o/$31.50/doz. pcs.
6911.10.35.................  Porcelain or china (o/than bone china)
                              househld tabl. & kitch.ware in sets in
                              which aggregate val. of arts./U.S. note
                              6(b) n/o $56.
6911.10.37.................  Porcelain or china (o/than bone china)
                              househld tabl. & kitch.ware in sets in
                              which aggregate val. of arts./U.S. note
                              6(b) o/$56 n/o $200.

[[Page 66960]]

 
6911.10.38.................  Porcelain or china (o/than bone china)
                              househld tabl. & kitch.ware in sets in
                              which aggregate val. of arts./U.S. note
                              6(b) o/$200.
6911.10.41.................  Porcelain or china (o/than bone china)
                              hsehld steins w/pewter lids, decanters,
                              punch bowls, spoons & rests, salt/pepper
                              sets, etc.
6911.10.45.................  Porcelain or china (o/than bone china)
                              household mugs and steins w/o attached
                              pewter lids.
6911.10.52.................  Porcelain or china (o/than bone china)
                              hsehld tabl/kit.ware n/in specif.sets,cups
                              o/$8 but n/o $29/dz, saucers o/$5.25 but n/
                              o $18.75/dz, etc.
6911.10.58.................  Porcelain or china (o/than bone china)
                              hsehld tabl/kit ware n/in specif. sets,
                              cups o/$29/dz, saucers o/$18.75/dz, bowls
                              o/$33/dz, etc.
6911.10.60.................  Porcelain or china (o/than bone china)
                              household serviette rings.
6911.10.80.................  Porcelain or china (o/than bone china)
                              household tableware & kitchenware, not in
                              specified sets, nesoi.
6911.90.00.................  Porcelain or china (o/than bone china)
                              household and toilet articles (other than
                              tableware or kitchenware), nesoi.
7323.92.00.................  Cast iron, table, kitchen or o/household
                              arts. and parts thereof, enameled.
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[FR Doc. 2019-26325 Filed 12-5-19; 8:45 am]
BILLING CODE 3290-F0-P