Termination of Action in the Section 301 Digital Services Tax Investigation of Turkey and Further Monitoring, 68295-68297 [2021-26116]

Agencies

• Office of the United States Trade Representative

[Federal Register Volume 86, Number 228 (Wednesday, December 1, 2021)]
[Notices]
[Pages 68295-68297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26116]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Termination of Action in the Section 301 Digital Services Tax 
Investigation of Turkey and Further Monitoring

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

ACTION: Notice.

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SUMMARY: On October 8, 2021, Turkey joined the United States and 134 
other jurisdictions participating in the OECD/G20 Inclusive Framework 
on Base Erosion and Profit Shifting in reaching a political agreement 
on a two-pillar solution to address tax challenges arising from the 
digitalization of the world economy. As part of Pillar 1, all parties 
agreed to remove existing digital services taxes and other relevant 
similar measures, and to coordinate the

[[Page 68296]]

withdrawal of these taxes. On November 22, 2021, the U.S. Department of 
the Treasury (Treasury) issued a joint statement with Turkey regarding 
a transitional approach to Turkey's Digital Service Tax (DST) prior to 
entry into force of Pillar 1. The joint statement reflects a political 
agreement that DST liabilities accrued during the transitional period 
will be creditable in defined circumstances against future taxes due 
under Pillar 1. Based on the commitment of Turkey to remove its DST 
pursuant to Pillar 1 and on Turkey's political agreement to the 
transitional approach prior to Pillar 1's entry into force, the U.S. 
Trade Representative has determined to terminate the section 301 action 
taken in the investigation of Turkey's DST. In coordination with 
Treasury, USTR will monitor implementation of the removal of Turkey's 
DST as provided for under Pillar 1 and the transitional approach as 
provided in the joint statement.

DATES: The additional duties on products of Turkey are terminated as of 
November 28, 2021.

FOR FURTHER INFORMATION CONTACT: For questions concerning this notice, 
please contact Benjamin Allen, Thomas Au, Patrick Childress, or Kate 
Hadley, Assistant General Counsels at (202) 395-9439, (202) 395-0380, 
(202) 395-9531, and (202) 395-3911, respectively, Robert Tanner, 
Director, Services and Investment at (202) 395-6125, or Michael Rogers, 
Director for Europe at (202) 395-2684.

SUPPLEMENTARY INFORMATION:

I. Proceedings in the Investigation

    For background on the proceedings in the section 301 investigation 
of Turkey's DST, please see prior notices including: 85 FR 34709 (June 
5, 2020); 86 FR 2480 (January 12, 2021); 86 FR 16822 (March 31, 2021); 
and 86 FR 30353 (June 7, 2021).
    On June 2, 2021, the U.S. Trade Representative determined to take 
action in the form of additional duties on certain products of Turkey 
and to immediately suspend those additional duties for up to 180 days. 
86 FR 30353 (June 7, 2021).

II. OECD/G20 Negotiations

    One-hundred forty-one jurisdictions are engaged in international 
tax negotiations under the OECD/G20 Inclusive Framework on Base Erosion 
and Profit Shifting. On October 8, 2021, Turkey joined the United 
States and 134 other participants in reaching political agreement on a 
Statement on a Two-Pillar Solution to Address the Tax Challenges 
Arising from the Digitalisation of the Economy. OECD/G20 Base Erosion 
and Profit Shifting Project, Statement on a Two-Pillar Solution to 
Address the Tax Challenges Arising from the Digitalisation of the 
Economy (Oct. 8, 2021) at https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.pdf (the OECD/G20 Two-Pillar 
Solution). The statement provides that Pillar 1 will be implemented 
through a multilateral convention. With respect to DSTs, the statement 
provides:

    The Multilateral Convention (MLC) will require all parties to 
remove all Digital Services Taxes and other relevant similar 
measures with respect to all companies, and to commit not to 
introduce such measures in the future. No newly enacted Digital 
Services Taxes or other relevant similar measures will be imposed on 
any company from 8 October 2021 and until the earlier of 31 December 
2023 or the coming into force of the MLC. The modality for the 
removal of existing Digital Services Taxes and other relevant 
similar measures will be appropriately coordinated.

III. Joint Statement

    On November 22, 2021, the United States and Turkey issued a joint 
statement that describes a political compromise reached on a 
transitional approach to existing Unilateral Measures while 
implementing Pillar 1. Joint Statement from the United States and 
Turkey Regarding a Compromise on a Transitional Approach to Existing 
Unilateral Measures During the Interim Period Before Pillar 1 Is in 
Effect, U.S. Dep't of the Treas. (Nov. 22, 2021) at https://home.treasury.gov/news/press-releases/jy0500. Under the transitional 
approach in the joint statement, DST liability that accrues during the 
transitional period prior to implementation of Pillar 1 will be 
creditable in defined circumstances against future taxes due under 
Pillar 1. See id. (citing Joint Statement from the United States, 
Austria, France, Italy, Spain, and the United Kingdom Regarding a 
Compromise on a Transitional Approach to Existing Unilateral Measures 
During the Interim Period Before Pillar 1 is in Effect, U.S. Dep't of 
the Treas. (Oct. 21, 2021) at https://home.treasury.gov/news/press-releases/jy0419). In return, the United States commits to terminating 
the existing section 301 trade action on goods of Turkey, and not to 
impose further trade actions against Turkey with respect to its 
existing DST until the earlier of the date the Pillar 1 multilateral 
convention comes into force or December 31, 2023. Id.

IV. Termination of Action

    Section 307 of the Trade Act of 1974, as amended (Trade Act) (19 
U.S.C. 2417), provides that ``[t]he Trade Representative may modify or 
terminate any action, subject to the specific direction, if any, of the 
President with respect to such action, that is being taken under 
section [301] of this title if . . . such action is being taken under 
section [301(b)] of this title and is no longer appropriate.'' The U.S. 
Trade Representative has found that that the political agreement of 
Turkey to the OECD/G20 Two-Pillar Solution, which provides for the 
removal of DSTs upon entry into force of Pillar 1, and the transitional 
approach in the joint statement provide a satisfactory resolution of 
the matters covered by the section 301 investigation of Turkey's DST. 
Accordingly, pursuant to section 307 of the Trade Act, the U.S. Trade 
Representative has determined that the suspended trade action in this 
investigation is no longer appropriate and that the action should be 
terminated.
    The U.S. Trade Representative's determination was made in 
consultation with Treasury and considers the advice of the interagency 
Section 301 Committee, consultations with representatives of the 
domestic industry concerned, and public comments and advisory committee 
advice received during the investigation.
    In order to implement the termination of the section 301 action in 
the investigation of Turkey's DST, subchapter III of chapter 99 of the 
Harmonized Tariff Schedule of the United States (HTSUS) is modified by 
the Annex to this notice.

V. Ongoing Monitoring

    Section 306(a) of the Trade Act (19 U.S.C. 2416(a)) provides that 
``[t]he Trade Representative shall monitor the implementation of each 
measure undertaken, or agreement that is entered into, by a foreign 
country to provide a satisfactory resolution of a matter subject to 
investigation. . . .'' Section 306(b) (19 U.S.C. 2416(b)) provides that 
``[i]f, on the basis of the monitoring carried out under subsection 
(a), the Trade Representative considers that a foreign country is not 
satisfactorily implementing a measure or agreement referred to in 
subsection (a), the Trade Representative shall determine what further 
action the Trade Representative shall take under section [301(a)].'' 
Pursuant to section 306(a) of the Trade Act, the U.S. Trade 
Representative, in coordination with Treasury, will monitor the 
implementation of the

[[Page 68297]]

political agreement on an OECD/G20 Two-Pillar Solution as pertaining to 
DSTs, the commitments under the joint statement, and associated 
measures. Pursuant to section 306(b) of the Trade Act, if the U.S. 
Trade Representative, in consultation with Treasury, subsequently 
considers that Turkey is not satisfactorily implementing these 
political agreements or associated measures, then the U.S. Trade 
Representative will consider further action under section 301.

Annex

    The U.S. Trade Representative has decided to terminate the 
additional duties under heading 9903.90.06 of the HTSUS on articles the 
product of Turkey, as provided for in U.S. notes 27(a) and 27(b) to 
subchapter III of chapter 99 of the HTSUS. The termination of these 
additional duties is effective on November 28, 2021.
    In accordance with this determination, the U.S. Trade 
Representative has determined to modify the HTSUS by: (1) Deleting U.S. 
notes 27(a) and 27(b) to subchapter III of chapter 99 of the HTSUS; and 
(2) by deleting HTSUS heading 9903.90.06. The modifications of the 
HTSUS are effective on November 28, 2021. Any provisions of previous 
notices issued in this investigation that are inconsistent with this 
notice are superseded to the extent of such inconsistency.

Greta Peisch,
General Counsel, Office of the United States Trade Representative.
[FR Doc. 2021-26116 Filed 11-30-21; 8:45 am]
BILLING CODE 3290-F2-P