Notice of Action in the Section 301 Investigation of Turkey's Digital Services Tax, 30353-30356 [2021-11861]

Agencies

• Office of the United States Trade Representative

[Federal Register Volume 86, Number 107 (Monday, June 7, 2021)]
[Notices]
[Pages 30353-30356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11861]


-----------------------------------------------------------------------

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket Number USTR-2021-0006]


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

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

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: On January 6, 2021, the U.S. Trade Representative announced a 
determination that Turkey'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 
Turkey 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 
Turkey 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 Michael Rogers, Director 
for Europe and the Middle East at (202) 395-2684. For specific 
questions on customs classification or implementation of additional 
duties on products, contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Proceedings in the Investigation

    Turkey has adopted a DST that applies to companies that during the 
previous calendar year, generated [euro]750 million or more in 
worldwide revenues and TRY 20 million or more in revenues deriving from 
the provision of digital services in Turkey. On June 2, 2020, the U.S. 
Trade Representative initiated an investigation of Turkey'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 Turkey'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 Turkey regarding the 
issues involved in the investigation. Consultations were held on 
September 29, 2020. Based on information obtained during the 
investigation, USTR prepared a comprehensive report on Turkey'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 Turkey's DST, and 
supports findings that Turkey'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 
Turkey'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 2480 (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 Turkey to be drawn from a list of 45 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 7, 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-2021-0006 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

[[Page 30354]]

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 products of Turkey specified in Annex A to this 
notice. Annex A contains a list of 32 tariff subheadings, with an 
estimated trade value for calendar year 2019 of approximately $310 
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 Turkey's DST 
and the amount of taxes assessed by Turkey on U.S. companies. Estimates 
indicate that the value of the DST payable by U.S.-based company groups 
to Turkey will be up to approximately $160 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 Turkey and the estimates 
of the amount of taxes assessed by Turkey.
    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 9903.90.06 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 Turkey, 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 27(a) and 27(b) to 
subchapter III of chapter 99 in numerical sequence:
    ``27 (a) For the purposes of heading 9903.90.06, products of 
Turkey, as specified in this note, shall be subject to additional 
duties as provided herein. All products of Turkey that are classified 
in the subheadings enumerated in this note are subject to the 
additional duties imposed by heading 9903.90.06. The duties imposed by 
heading 9903.90.06 shall be in addition to the general duty rates 
provided for in the applicable provisions of the tariff schedule.
    Products of Turkey 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 9903.90.06, 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 9903.90.06 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 Turkey 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 Turkey that are provided for in heading 9903.90.06 and 
classified in one of the subheadings enumerated in note 27(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 9903.90.06 shall apply to all products of Turkey that 
are classified in the subheadings enumerated below:

5701.10.16
5701.10.90
5701.90.10
5702.31.20
5702.42.10

[[Page 30355]]

5702.92.10
5702.99.05
5702.99.15
5703.20.20
5703.90.00
6302.22.20
6302.32.20
6802.21.10
6802.21.50
6802.92.00
6907.21.10
6907.21.90
6907.23.90
6907.30.20
6907.30.30
6907.30.90
6907.40.90
6910.10.00
6913.10.50
6913.90.50
7113.11.20
7113.19.50
7113.20.29
7113.20.50
7116.20.05
7117.19.90
7117.90.90''.

    2. by inserting the following new heading 9903.90.06 in numerical 
sequence, with the material in the new heading inserted in the columns 
of the HTSUS labeled ``Heading/Subheading'', ``Article Description'', 
and ``Rates of Duty 1-General'', respectively:

----------------------------------------------------------------------------------------------------------------
                                                                               Rates of duty
                                                         -------------------------------------------------------
      Heading/ subheading          Article description                      1
                                                         ---------------------------------------        2
                                                                General            Special
----------------------------------------------------------------------------------------------------------------
``9903.90.06...................  ``Articles the product   The duty provided
                                  of Turkey, as provided   in the applicable
                                  for in U.S. note 27(a)   subheading +
                                  to this subchapter and   25%''.
                                  as provided for in the
                                  subheadings enumerated
                                  in U.S. note 27(b) to
                                  this subchapter.
----------------------------------------------------------------------------------------------------------------

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''.

------------------------------------------------------------------------
        HTSUS  subheading                   Product description
------------------------------------------------------------------------
5701.10.16.......................  Carpets & other textile floor
                                    coverings, hand-knotted or hand-
                                    inserted, w/ov 50% by weight of the
                                    pile of fine animal hair, nesoi.
5701.10.90.......................  Carpets and other textile floor
                                    coverings, of wool or fine animal
                                    hair, not hand-hooked, not hand
                                    knotted during weaving.
5701.90.10.......................  Carpet and other textile floor
                                    covering, knotted, of text.
                                    materials (not wool/hair), pile
                                    inserted & knotted during weaving or
                                    knitting.
5702.31.20.......................  Carpets and other textile floor
                                    coverings of pile construction,
                                    woven, not tufted or flocked, not
                                    made up, of wool/fine animal hair,
                                    nesoi.
5702.42.10.......................  Wilton, velvet and like floor
                                    coverings of pile construction,
                                    woven, not tufted or flocked, made
                                    up, of man-made textile materials.
5702.92.10.......................  Hand-loomed carpet & other textile
                                    floor coverings, not of pile
                                    construction, woven, made up, of man-
                                    made textile materials.
5702.99.05.......................  Hand-loomed carpets and other textile
                                    floor coverings, not of pile
                                    construction, woven, made up, of
                                    cotton.
5702.99.15.......................  Carpets and other textile floor
                                    coverings, not of pile construction,
                                    woven, made up, of cotton, nesoi.
5703.20.20.......................  Carpets and other textile floor
                                    coverings, tufted, whether or not
                                    made up, of nylon or other
                                    polyamides, nesoi.
5703.90.00.......................  Carpets and other textile floor
                                    coverings, tufted, whether or not
                                    made up, of other textile materials
                                    nesoi.
6302.22.20.......................  Bed linen, not knitted or crocheted,
                                    printed, of manmade fibers, nesoi.
6302.32.20.......................  Bed linen, not knitted or crocheted,
                                    not printed, of manmade fibers,
                                    nesoi.
6802.21.10.......................  Worked monumental or building stone &
                                    arts. thereof, of travertine, simply
                                    cut/sawn, w/flat or even surface.
6802.21.50.......................  Worked monumental or building stone &
                                    arts. thereof, of marble or
                                    alabaster, simply cut/sawn, w/flat
                                    or even surface.
6802.92.00.......................  Worked monumental or building stone &
                                    arts. thereof, of calcareous stone,
                                    nesoi, further worked than simply
                                    cut/sawn.
6907.21.10.......................  Unglazed ceramic flags and paving,
                                    hearth or wall tiles, other than
                                    those of subheading 6907.30 and
                                    6907.40, of H2O absorp coeff by wt
                                    <=0.5%.
6907.21.90.......................  Glazed ceramic flags and paving,
                                    hearth or wall tile, o/t subheading
                                    6907.30 and 6907.40, of a H2O absorp
                                    coeff by wt <=0.5%, nesoi.
6907.23.90.......................  Glazed ceramic flags and paving,
                                    hearth or wall tiles, o/t subheading
                                    6907.30 and 6907.40, of a H2O absorp
                                    coeff by wt >10%, nesoi.
6907.30.20.......................  Glazed ceramic mosaic cubes, o/t
                                    subheading 6907.40, having <=3229
                                    cubes per m2, surf area in sq w/side
                                    <7cm.
6907.30.30.......................  Glazed ceramic mosaic cubes, o/t
                                    subheading 6907.40, having surface
                                    area <38.7cm2, surf area in sq w/
                                    side <7cm.
6907.30.90.......................  Glazed ceramic mosaic cubes nesoi, o/
                                    t subheading 6907.40.
6907.40.90.......................  Glazed finishing ceramics nesoi.
6910.10.00.......................  Porcelain or china ceramic sinks,
                                    washbasins, baths, bidets, water
                                    closet bowls, urinals & siml.
                                    sanitary fixtures.
6913.10.50.......................  Porcelain or china (o/than bone
                                    china) ornamental articles, nesoi.
6913.90.50.......................  Ceramic (o/than porcelain, china,
                                    ceramic tile or earthenware)
                                    ornamental articles, nesoi.
7113.11.20.......................  Silver articles of jewelry and parts
                                    thereof, nesoi, valued not over $18
                                    per dozen pieces or parts.
7113.19.50.......................  Precious metal (o/than silver)
                                    articles of jewelry and parts
                                    thereof (o/t necklaces of gold, and
                                    clasps and parts thereof), whether
                                    or not plated or clad with precious
                                    metal, nesoi.
7113.20.29.......................  Base metal clad w/gold necklaces and
                                    neck chains, nesoi.
7113.20.50.......................  Base metal clad w/precious metal
                                    articles of jewelry and parts
                                    thereof (o/t necklaces of gold, and
                                    clasps and parts thereof), nesoi.
7116.20.05.......................  Jewelry articles of precious or
                                    semiprecious stones, valued not over
                                    $40 per piece.

[[Page 30356]]

 
7117.19.90.......................  Imitation jewelry (o/than cuff links
                                    and studs, toy jewelry, religious
                                    articles & rope, curb, cable, chain,
                                    etc.), of base metal (wheth. or n/
                                    plated w/prec.metal), nesoi.
7117.90.90.......................  Imitation jewelry not of base metal
                                    or plastics, nesoi, over 20 cents/
                                    dozen pcs or pts, o/t toy jewelry or
                                    of plastics.
------------------------------------------------------------------------

[FR Doc. 2021-11861 Filed 6-4-21; 8:45 am]
BILLING CODE 3290-F1-P