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
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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
