Notice of Action in the Section 301 Investigation of France's Digital Services Tax, 43292-43297 [2020-15312]

Agencies

• Office of the United States Trade Representative

[Federal Register Volume 85, Number 137 (Thursday, July 16, 2020)]
[Notices]
[Pages 43292-43297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15312]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. USTR-2019-0009]


Notice of Action in the Section 301 Investigation of France's 
Digital Services Tax

AGENCY: Office of the United States Trade Representative.

ACTION: Notice.

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SUMMARY: On December 6, 2019, the U.S. Trade Representative announced a 
determination that France's Digital Services Tax (DST) is unreasonable 
or discriminatory and burdens or restricts U.S. commerce. This notice 
announces the U.S. Trade Representative's determination to take action 
in the form of additional duties of 25 percent on products of France 
specified in Annex A to this notice. The U.S. Trade Representative has 
further determined to suspend application of the additional duties for 
a period of up to 180 days.

DATES: July 10, 2020: The U.S. Trade Representative determined to take 
action in the form of additional duties of 25 percent on products of 
France specified in Annex A. January 6, 2021: The end of the 180-day 
suspension period for the additional duties.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Megan Grimball, Associate General Counsel 
at (202) 395-5725, Robert Tanner, Director, Services and Investment at 
(202) 395-6125, or Michael Rogers, Director, Europe and the Middle East 
at (202) 395-2684. For specific questions on customs classification or 
implementation of additional duties on products identified in Annex A 
to this notice, contact [email protected].

SUPPLEMENTARY INFORMATION:

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I. Proceedings in the Investigation

    On July 10, 2019, the U.S. Trade Representative initiated the 
investigation of France's DST pursuant to section 302(b)(1)(A) of the 
Trade Act of 1974, as amended (the Trade Act). See 84 FR 34042 (July 
16, 2019) (July 16 notice). The July 16 notice invited public comment 
on France's DST, including whether the tax would discriminate against 
U.S. companies, the retroactive application of the new tax, and whether 
France's DST diverged from norms reflected in the U.S. and 
international tax system. The Office of the United States Trade 
Representative (USTR) and the interagency Section 301 Committee held a 
hearing on August 19, 2019. Ten witnesses provided testimony, and 
interested persons filed 36 written submissions. Following a request by 
the U.S. Trade Representative, consultations were held with the 
Government of France on November 14, 2019.
    USTR published a comprehensive report on France's DST on December 
2, 2019, which is available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-frances-digital-services-tax. On December 6, 2019, based on the information obtained 
during the investigation and the advice of the Section 301 Committee, 
and as reflected in the December 2 report on the findings in the 
investigation, the U.S. Trade Representative determined that France's 
DST is unreasonable or discriminatory and burdens or restricts U.S. 
commerce, and therefore is actionable under sections 301(b) and 304 (a) 
of the Trade Act (19 U.S.C. 2411(b) and 2414(a)). See 84 FR 66856 
(December 6, 2019) (December 6 notice).
    The December 6 notice proposed that appropriate action would 
include additional ad valorem duties of up to 100 percent on products 
of France to be drawn from a list of 63 tariff subheadings of the 
Harmonized Tariff Schedule of the United States (HTSUS) included in the 
annex to that notice. The December 6 notice requested comments on the 
proposed action, as well as on other potential actions, including the 
imposition of fees or restrictions on services of France.
    USTR and the Section 301 Committee held a hearing regarding the 
proposed action on January 7 and 8, 2020. Thirty-seven witnesses 
provided testimony, and interested persons filed nearly 3,800 written 
comments. Transcripts from the August 2019 and January 2020 hearings 
are available on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-frances-digital-services-tax. The written public submissions are available on 
www.regulations.gov under docket number USTR-2019-0009.

II. Determination of Action To Be Taken in the Investigation

    In accordance with section 301(b) of the Trade Act, the U.S. Trade 
Representative has determined that action is appropriate in this 
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) of 
the Trade Act, 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 
304(a)(1)(B)(2) provides that the U.S. Trade Representative shall make 
the determination of what action to take on or before the date that is 
12 months after the date on which the investigation was initiated, or 
in this case, by July 10, 2020.
    Pursuant to sections 301(b) and (c) of the Trade Act, and in 
accordance with the advice of the Trade Policy Staff Committee, the 
U.S. Trade Representative has determined that appropriate action is the 
imposition of ad valorem duties of 25 percent on products of France 
specified in Annex A to this notice. Annex A contains a list of 21 
tariff subheadings, with an estimated trade value for calendar year 
2019 of approximately $1.3 billion. In making this determination, the 
U.S. Trade Representative considered the public comments submitted in 
the investigation, as well as advice of advisory committees.
    In determining the level of trade covered by the additional duties, 
the U.S. Trade Representative considered the value of digital 
transactions covered by France's DST and the amount of taxes assessed 
by France on U.S. companies. France's 3 percent DST covers transactions 
of U.S. companies with estimated revenues of approximately $15 billion 
in 2020, with expected collections of approximately $450 million in 
taxes from U.S. companies for activities during 2020, and over $500 
million for activities during 2021. Additional duties of 25 percent on 
the products of France covered by the trade action should result in the 
collection of tariffs on goods of France at comparable, though somewhat 
lower amounts. The U.S. Trade Representative will continue to monitor 
the effect of the trade action and the progress of discussions with 
France, and may adopt appropriate modifications.
    Section 305(a) of the Trade Act (19 U.S.C. 2415(a)), provides, in 
pertinent part, that the U.S. Trade Representative may delay 
implementation of the action to be taken for up to 180 days ``if the 
Trade Representative determines that substantial progress is being 
made, or that a delay is necessary or desirable to obtain United States 
rights or satisfactory solution with respect to the acts, policies, or 
practices that are the subject of the action.'' Pursuant to section 
305(a), the U.S. Trade Representative has determined to suspend the 
additional duties for up to 180 days (that is, up to January 6, 2021) 
to allow additional time for bilateral and multilateral discussions 
that could lead to a satisfactory resolution of this matter.
    In order to implement this determination, subchapter III of chapter 
99 of the HTSUS is modified by Annex A of this notice. Annex A has an 
effective date of January 6, 2021, which is 180 days after the 
determination of action. In the event the U.S. Trade Representative 
determines that the suspension of the additional duties should be for 
less than a period of 180 days, USTR will issue a subsequent notice 
amending the effective date.
    For informational purposes, Annex B contains a list of the tariff 
subheadings covered by the tariff action along with short product 
descriptions. In all cases, the formal language in Annex A governs the 
tariff treatment of products covered by the action.
    As specified in Annex A, products provided for in new HTSUS heading 
9903.90.01, will be subject to an additional ad valorem duty of 25 
percent. The additional duties provided for in the new HTSUS heading 
established by Annex A apply in addition to all other applicable 
duties, fees, exactions, and charges. Any product listed in Annex A, 
except any product that is eligible for admission under `domestic 
status' as defined in 19 CFR 146.43, which is subject to the additional 
duty imposed by this determination, and is admitted into a U.S. foreign 
trade zone on or after the effective date of the additional duties only 
may be admitted as `privileged foreign status' as defined in 19 CFR 
146.41. Such products will be subject upon entry for consumption to any 
ad valorem rates of duty or quantitative limitations related to the 
classification

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under the applicable HTSUS subheading.
    The U.S. Trade representative will continue to monitor the effects 
of the trade action and the progress made toward resolution of this 
matter. If a modification to the action may be appropriate, the U.S. 
Trade Representative will consider the comments received in response to 
the December 6 notice.

Joseph Barloon,
General Counsel, Office of the United States Trade Representative.
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[FR Doc. 2020-15312 Filed 7-15-20; 8:45 am]
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