Notice of Action in the Section 301 Investigation of Spain's Digital Services Tax, 30358-30361 [2021-11863]

Agencies

[Federal Register Volume 86, Number 107 (Monday, June 7, 2021)]
[Notices]
[Pages 30358-30361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11863]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket Number USTR-2021-0005]


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

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

ACTION: Notice.

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SUMMARY: On January 14, 2021, the U.S. Trade Representative announced a 
determination that Spain'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 Spain 
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 
Spain 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,

[[Page 30359]]

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

    Spain has adopted a DST that applies a three percent tax on certain 
digital services revenues related to online advertising services, 
online intermediary services, and data transmission services. Companies 
with worldwide revenues of [euro]750 million or more and [euro]3 
million in certain digital services revenues are subject to the DST. On 
June 2, 2020, the U.S. Trade Representative initiated an investigation 
of Spain'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 Spain'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 Spain regarding the 
issues involved in the investigation. Consultations were held on 
December 17, 2020. Based on information obtained during the 
investigation, USTR prepared a comprehensive report on Spain'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 Spain's DST, and 
supports findings that Spain's DST is unreasonable and discriminatory 
and burdens or restricts U.S commerce. On January 14, 2021, based on 
the information obtained during the investigation and the advice of the 
Section 301 Committee, the U.S. Trade Representative determined that 
Spain'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 6407 (January 21, 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 Spain to be drawn from a list of 36 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 
on May 3 and May 6, 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-2021-0005 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 products of Spain specified in 
Annex A to this notice. Annex A contains a list of 27 tariff 
subheadings, with an estimated trade value for calendar year 2019 of 
approximately $324 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 
Spain's DST and the amount of taxes assessed by Spain on U.S. 
companies. Estimates indicate that the value of the DST payable by 
U.S.-based company groups to Spain will be up to approximately $155 
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 
Spain and the estimates of the amount of taxes assessed by Spain.
    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 9903.90.05 will be 
subject to an additional ad valorem duty of 25 percent. The additional 
duties provided for in the new HTSUS heading

[[Page 30360]]

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 Spain, 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 26(a) and 26(b) to 
subchapter III of chapter 99 in numerical sequence:
    ``26 (a) For the purposes of heading 9903.90.05, products of Spain, 
as specified in this note, shall be subject to additional duties as 
provided herein. All products of Spain that are classified in the 
subheadings enumerated in this note are subject to the additional 
duties imposed by heading 9903.90.05. The duties imposed by heading 
9903.90.05 shall be in addition to the general duty rates provided for 
in the applicable provisions of the tariff schedule.
    Products of Spain 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 9903.90.05, 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 9903.90.05 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 Spain 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 Spain that are provided for in heading 9903.90.05 and 
classified in one of the subheadings enumerated in note 26(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 9903.90.05 shall apply to all products of Spain that 
are classified in the subheadings enumerated below:

0306.16.00
0306.17.00
0307.52.00
1605.21.05
1605.21.10
1605.55.05
4202.21.90
4202.22.15
4203.30.00
6402.99.31
6403.51.30
6403.51.60
6403.51.90
6403.59.30
6403.59.60
6403.59.90
6403.99.90
6404.19.39
6404.20.40
6404.20.60
6405.90.90
6504.00.60
6505.00.08
6505.00.15
6505.00.30
7013.99.80
7013.99.90''.

    2. by inserting the following new heading 9903.90.05 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
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``9903.90.05...................  ``Articles the product   The duty provided
                                  of Spain, as provided    in the applicable
                                  for in U.S. note 26(a)   subheading +
                                  to this subchapter and   25%''.
                                  as provided for in the
                                  subheadings enumerated
                                  in U.S. note 26(b) to
                                  this subchapter.
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[[Page 30361]]

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.
0306.17.00.......................  Other shrimps and prawns, cooked in
                                    shell or uncooked, dried, salted or
                                    in brine, frozen.
0307.52.00.......................  Octopus, frozen.
1605.21.05.......................  Shrimp & prawns not in airtight
                                    containers: Fish meat and prepared
                                    meals.
1605.21.10.......................  Shrimp & prawns not in airtight
                                    containers: Other than fish meat and
                                    prepared meals.
1605.55.05.......................  Octopus, as containing fish meat or
                                    prepared meals.
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.
4203.30.00.......................  Belts and bandoliers with or without
                                    buckles, of leather or of
                                    composition leather.
6402.99.31.......................  Footwear w/outer soles & uppers of
                                    rubber or plastics, nesoi, n/cov.
                                    ankle, w/ext. surf. of uppers o/90%
                                    rubber or plastics, nesoi.
6403.51.30.......................  Footwear w/outer soles and uppers of
                                    leather, nesoi, covering the ankle,
                                    welt.
6403.51.60.......................  Footwear w/outer soles and uppers of
                                    leather, nesoi, covering the ankle,
                                    n/welt, for men, youths and boys.
6403.51.90.......................  Footwear w/outer soles and uppers of
                                    leather, nesoi, covering the ankle,
                                    n/welt, for persons other than men,
                                    youths and boys.
6403.59.30.......................  Footwear w/outer soles and uppers of
                                    leather, not covering the ankle,
                                    welt, nesoi.
6403.59.60.......................  Footwear w/outer soles and uppers of
                                    leather, not cov. ankle, n/welt, for
                                    men, youths and boys.
6403.59.90.......................  Footwear w/outer soles and uppers of
                                    leather, not cov. ankle, n/welt, for
                                    persons other than men, youths and
                                    boys.
6403.99.90.......................  Footwear w/outer soles of rubber/
                                    plastics/comp. leather & uppers of
                                    leather, n/cov. ankle, for persons
                                    other than men, youths and boys,
                                    val. over $2.50/pair.
6404.19.39.......................  Footwear w/outr sole rub/plast & upp.
                                    textile, nesoi, w/open toes/heels or
                                    slip-on, >10% by wt. rub./plast not
                                    subj note 5 ch 64.
6404.20.40.......................  Footwear w/outer soles of leather/
                                    comp. leath., n/o 50% by wt. rub./
                                    plast. or rub./plast./text. & 10%+
                                    by wt. rub./plast., val. o/$2.50/pr.
6404.20.60.......................  Footwear w/outer soles of leather/
                                    comp. leather & uppers of textile,
                                    nesoi.
6405.90.90.......................  Footwear, nesoi, w/outer soles and
                                    uppers o/than leather/comp. leather/
                                    text. not disposable.
6504.00.60.......................  Hats and headgear, plaited or
                                    assembled from strips of veg. fibers
                                    or unspun fibrous veg. materials and/
                                    or paper yarn, not sewed.
6505.00.08.......................  Hats and headgear made up from felt
                                    made from hat forms or hat bodies of
                                    6501, except of fur felt.
6505.00.15.......................  Hats and headgear, of cotton and/or
                                    flax, knitted.
6505.00.30.......................  Hats and headgear, of wool, knitted
                                    or crocheted or made up from knitted
                                    or crocheted fabric.
7013.99.80.......................  Glassware for toilet/office/indoor
                                    decor. or similar purposes, nesoi, n/
                                    cut or engraved, valued over $3 but
                                    n/over $5 each.
7013.99.90.......................  Glassware for toilet/office/indoor
                                    decor. or similar purposes, nesoi, n/
                                    cut or engraved, valued over $5
                                    each.
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[FR Doc. 2021-11863 Filed 6-4-21; 8:45 am]
BILLING CODE 3290-F1-P