Notice of Action in the Section 301 Investigation of India's Digital Services Tax, 30356-30358 [2021-11858]

Agencies

[Federal Register Volume 86, Number 107 (Monday, June 7, 2021)]
[Notices]
[Pages 30356-30358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11858]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket Number USTR-2021-0003]


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

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Notice.

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SUMMARY: On January 6, 2021, the U.S. Trade Representative announced a 
determination that India'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 the products of India 
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: 
    June 2, 2021: The U.S. Trade Representative determined to take 
action in the form of additional duties of 25 percent on products of 
India specified in Annex A.
    November 29, 2021: The end of the 180-day suspension period for the 
additional duties.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Benjamin Allen, Thomas Au, or Patrick 
Childress, Assistant General Counsels at: (202) 395-9439, (202) 395-
0380, and (202) 385-9531, respectively; Robert Tanner, Director, 
Services and Investment at (202) 395-6125; or Brendan Lynch, Deputy 
Assistant U.S. Trade Representative for South and Central Asian Affairs 
at (202) 395-2851. For specific questions on customs classification or 
implementation of additional duties on products, contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Proceedings in the Investigation

    India has adopted a DST that imposes a two percent tax on revenue 
generated from a broad range of digital services offered in India, 
including digital platform services, digital content sales, digital 
sales of a company's own goods, data-related services, software-as-a-
service, and several other categories of digital services. India's DST 
only applies to ``non-resident'' companies. On June 2, 2020, the U.S. 
Trade Representative initiated an investigation of India's DST pursuant 
to section 302(b)(1)(A) of the Trade Act of 1974, as amended (Trade 
Act). See 85 FR 34709 (June 5, 2020) (notice of initiation). The notice 
of initiation solicited written comments on, inter alia, the following 
aspects of India's DST: Discrimination against U.S. companies; 
retroactivity; and possibly unreasonable tax policy. With respect to 
tax policy, USTR solicited comments on, inter alia, whether the DST 
diverged from principles reflected in the U.S. and international tax 
systems including extraterritoriality; taxing revenue not income; and a 
purpose of penalizing particular technology companies for their 
commercial success. Interested persons filed over 380 written 
submissions in response. The public submissions are available on 
www.regulations.gov in docket number USTR-2020-0022.
    Under section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the government of India regarding the 
issues involved in the investigation. Consultations were held on 
November 5, 2020. Based on information obtained during the 
investigation, USTR prepared a comprehensive report on India's DST, 
which is posted on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes. The report includes a full description of India's DST, and 
supports findings that India's DST is unreasonable and discriminatory 
and burdens or restricts U.S commerce. On January 6, 2021, based on the 
information obtained during the investigation and the advice of the 
Section 301 Committee, the U.S. Trade Representative determined that 
India'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. See 86 FR 2478 (January 12, 2021).
    On March 31, 2021, USTR issued a notice proposing that appropriate 
action would include additional ad valorem duties of up to 25 percent 
on products of India to be drawn from a list of 40 tariff subheadings 
of the Harmonized Tariff Schedule of the United States (HTSUS) included 
in the annex to that notice. The March 31, 2021 notice requested 
comments on the proposed action as well as on other potential actions 
in the investigation. Witnesses provided testimony at public hearings 
held on May 3 and May 10, 2021, and interested persons filed written 
comments. Transcripts from the hearings are available on the USTR 
website at: https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes. The written public 
submissions are available at: https://comments.ustr.gov/s/docket?docketNumber=USTR-2021-0003 and https://comments.ustr.gov/s/docket?docketNumber=USTR-2021-0008.

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)(2)(B) 
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 June 2, 2021.
    Pursuant to sections 301(b) and (c) of the Trade Act, and in 
accordance with the advice of the Section 301 Committee, the U.S. Trade 
Representative has determined that appropriate action is the imposition 
of ad valorem duties of 25 percent on

[[Page 30357]]

products of India specified in Annex A to this notice. Annex A contains 
a list of 26 tariff subheadings, with an estimated trade value for 
calendar year 2019 of approximately $119 million. 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 India's DST and the amount of taxes assessed by 
India on U.S. companies. Estimates indicate that the value of the DST 
payable by U.S.-based company groups to India will be up to 
approximately $55 million per year. The level of trade covered by the 
action takes into account estimates of the amount of tariffs to be 
collected on goods of India and the estimates of the amount of taxes 
assessed by India.
    Section 305(a) of the Trade Act 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 a delay is necessary or desirable . . . to obtain . . . [a] 
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 November 29, 2021) to allow 
additional time for multilateral and bilateral 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 is 
effective with respect to goods entered for consumption, or withdrawn 
from warehouse for consumption, on or after 12:01 a.m. eastern standard 
time on November 29, 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 9903.90.03 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 12:01 a.m. eastern standard time on November 29, 2021, 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 under the applicable HTSUS subheading.
    The U.S. Trade Representative will continue to monitor the effect 
of the trade action, the progress of discussions in the Organisation 
for Economic Co-operation and Development and G20, the progress of 
discussions with India, and may adopt appropriate modifications. If a 
modification to the action may be appropriate, the U.S. Trade 
Representative will consider the comments received in response to the 
March 31, 2021 notice.

Greta Peisch,
General Counsel, Office of the United States Trade Representative.

Annex A

    Effective with respect to goods entered for consumption, or 
withdrawn from warehouse for consumption, on or after 12:01 a.m. 
eastern standard time on November 29, 2021, subchapter III of chapter 
99 of the Harmonized Tariff Schedule of the United States (HTSUS) is 
modified:
    1. By inserting the following new U.S. notes 24(a) and 24(b) to 
subchapter III of chapter 99 in numerical sequence:
    ``24 (a) For the purposes of heading 9903.90.03, products of India, 
as specified in this note, shall be subject to additional duties as 
provided herein. All products of India that are classified in the 
subheadings enumerated in this note are subject to the additional 
duties imposed by heading 9903.90.03. The duties imposed by heading 
9903.90.03 shall be in addition to the general duty rates provided for 
in the applicable provisions of the tariff schedule.
    Products of India that are classified in the subheadings enumerated 
in this note and that are eligible for temporary duty exemptions or 
reductions under subchapter II to chapter 99 shall be subject to the 
additional duties imposed by heading 9903.90.03, and any such duty 
exemption or reduction shall apply only to the permanent general rate 
prescribed in provisions of chapters 1 through 97 of the tariff 
schedule.
    The additional duties imposed by heading 9903.90.03 do not apply to 
goods for which entry is properly claimed under a provision of chapter 
98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 
9802.00.50 and 9802.00.60 and heading 9802.00.80. For subheadings 
9802.00.40, 9802.00.50 and 9802.00.60, the additional duties apply to 
the value of repairs, alterations or processing performed in India and 
as described in the applicable subheading. For heading 9802.00.80, the 
additional duties apply to the value of the article less the cost or 
value of such products of the United States, as described in heading 
9802.00.80.
    Products of India that are provided for in heading 9903.90.03 and 
classified in one of the subheadings enumerated in note 24(b) to this 
subchapter shall continue to be subject to antidumping, countervailing 
or other duties (including duties imposed by other provisions of 
subchapter III of this chapter and safeguard duties set forth in 
provisions of subchapter IV of this chapter), fees, exactions and 
charges that apply to such products, as well as to the additional 
duties imposed herein.
    (b) Heading 9903.90.03 shall apply to all products of India that 
are classified in the subheadings enumerated below:

0306.16.00
0306.35.00
0306.95.00
1006.20.20
4421.91.40
4421.91.94
4503.10.40
4813.10.00
4813.90.00
7101.22.30
7101.22.60
7103.99.50
7104.90.50
7113.19.21
7113.19.25
7114.20.00
7116.20.05
7116.20.15
7410.21.30
9401.69.20
9401.69.40
9401.69.60
9401.69.80
9403.50.40
9403.50.90
9403.83.00''.

    2. by inserting the following new heading 9903.90.03 in numerical 
sequence, with the material in the new heading inserted in the columns 
of the HTSUS labeled ``Heading/Subheading'',

[[Page 30358]]

``Article Description'', and ``Rates of Duty 1-General'', respectively:

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                                                                               Rates of duty
                                                         -------------------------------------------------------
      Heading/ subheading          Article description                      1
                                                         ---------------------------------------        2
                                                                General            Special
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``9903.90.03...................  ``Articles the product   The duty provided
                                  of India, as provided    in the applicable
                                  for in U.S. note 24(a)   subheading +
                                  to this subchapter and   25%''.
                                  as provided for in the
                                  subheadings enumerated
                                  in U.S. note 24(b) to
                                  this subchapter.
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Annex B

    Note: 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 action. In all cases, the formal 
language in Annex A governs the tariff treatment of products covered by 
the action. Any questions regarding the scope of particular HTSUS 
subheadings should be referred to U.S. Customs and Border Protection. 
In the product descriptions, the abbreviation ``nesoi'' means ``not 
elsewhere specified or included''.

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        HTSUS  subheading                   Product description
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0306.16.00.......................  Cold-water shrimps and prawns, cooked
                                    in shell or uncooked, dried, salted
                                    or in brine, frozen.
0306.35.00.......................  Cold water shrimps and prawns, shell-
                                    on or peeled, live, or chilled.
0306.95.00.......................  Other shrimps and prawns, shell-on or
                                    peeled.
1006.20.20.......................  Basmati rice, husked.
4421.91.40.......................  Blinds, shutters, screens and shades
                                    of bamboo, other than those with
                                    wooden frames in the center of which
                                    are fixed louver boards or slats.
4421.91.94.......................  Edge-glued lumber of bamboo.
4503.10.40.......................  Corks and stoppers of natural cork,
                                    tapered & of a thickness (or length)
                                    greater than the maximum diam., over
                                    19 mm maximum diam., nesoi.
4813.10.00.......................  Cigarette paper in the form of
                                    booklets or tubes.
4813.90.00.......................  Cigarette paper, whether or not cut
                                    to size, nesoi.
7101.22.30.......................  Cultured pearls, worked, graded and
                                    temporarily strung for convenience
                                    of transport.
7101.22.60.......................  Cultured pearls, worked, not strung,
                                    mounted or set.
7103.99.50.......................  Precious or semiprecious stones,
                                    nesoi, worked, whether or not
                                    graded, but n/strung (ex. ungraded
                                    temporarily strung), mtd. or set.
7104.90.50.......................  Synth. or reconstruct. precious or
                                    semiprecious stones, wkd, whether or
                                    not graded, but n/strung (ex.
                                    ungraded temp. strung), mtd./set,
                                    nesoi.
7113.19.21.......................  Gold rope necklaces and neck chains.
7113.19.25.......................  Gold mixed link necklaces and neck
                                    chains.
7114.20.00.......................  Goldsmiths' or silversmiths' wares of
                                    base metal clad with precious metal.
7116.20.05.......................  Jewelry articles of precious or
                                    semiprecious stones, valued not over
                                    $40 per piece.
7116.20.15.......................  Jewelry articles of precious or
                                    semiprecious stones, valued over $40
                                    per piece.
7410.21.30.......................  Refined copper foil, clad laminates,
                                    w/thickness of 0.15 mm or less,
                                    backed.
9401.69.20.......................  Seats nesoi, of bent-wood.
9401.69.40.......................  Chairs nesoi, w/teak frames, not
                                    upholstered.
9401.69.60.......................  Chairs nesoi, w/wooden frames (o/than
                                    teak), not upholstered.
9401.69.80.......................  Seats (o/than chairs) nesoi, w/wooden
                                    frames, not upholstered.
9403.50.40.......................  Furniture (o/than 9401 or 9402) of
                                    bentwood nesoi, of a kind used in
                                    the bedroom.
9403.50.90.......................  Furniture (o/than 9401 or 9402) of
                                    wood (o/than bentwood), of a kind
                                    used in the bedroom & not designed
                                    for motor vehicle use.
9403.83.00.......................  Rattan furniture and parts thereof.
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[FR Doc. 2021-11858 Filed 6-4-21; 8:45 am]
BILLING CODE 3290-F1-P