Section 301 Tariffs Are Not Just for China
By Margaret Lange
By now, most of us have all heard about Section 301 tariffs. More than likely, that would be related to imports from China. Certainly, this was the first action taken by the Trump Administration as a response to the findings of the investigation into China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974. However, additional Section 301 tariffs have been implemented, or are under consideration, on lists of products from the EU and several other trading partner countries.
EU – Large Civil Aircraft WTO Dispute
The U.S. won a fifteen-year running case at the World Trade Organization (WTO) over damages incurred by EU subsidies paid to Airbus by the governments of Germany, France, Spain and the United Kingdom. The WTO arbitrator calculated that the U.S. has been harmed by $7.5 Billion annually by the subsidies provided to the EU large civil aircraft domestic industry.
Although the WTO ruling allowed the U.S. to hit the EU with up to 100% tariffs on $7.5 Billion in EU goods annually, the U.S. Trade Representative (USTR) announced, in the October 9, 2019 Federal Register, the implementation of tariffs of 10% and 25% on a list of 160 goods imported from the EU. The additional Section 301 tariffs went into effect on October 18, 2019. Although the case before the WTO is based on aircraft subsidies, consumer goods make up a substantial portion of the list and are at the higher 25% tariff. As of July 22, 2020, U.S. Customs and Border Protection (CBP) Trade Statistics indicate that over $600 million in Section 301 tariffs have been collected on imports of the listed products from the EU.
On June 26, 2020, the USTR posted a Review of Action related to the WTO Large Civil Aircraft dispute. The USTR is considering modifying the list of products currently subject to the Section 301 action. The USTR opened a comment period for interested parties to submit comments on whether any products on the original list should be removed or whether the rate of duty should be increased up to 100%. The USTR was also seeking comments on whether Section 301 duties, of up to 100%, should be imposed on the additional products listed in Annex II and Annex III of the notice. The comment period closed on July 26, 2020 and nearly 21,000 comments were submitted through the Public Docket.
The USTR is currently reviewing the submitted comments and will make a determination related to increasing the tariffs, or adding products to the action. See the full lists of products subject to this review in Annexes I, II and III here.
France’s Digital Service Tax
In July of 2019, the USTR began a Section 301 an investigation of France’s Digital Services Tax (DST). In March of 2019, the Government of France release a proposal to impose a 3% tax on revenues generated from certain ‘‘digital interface’’ services and certain internet advertising services aimed at French users. France signed the bill into law on July 24, 2019, and the Digital Service Tax was implemented retroactive to January 1, 2019.
The investigation, which included a public comment period and hearing, focused on whether the DST discriminated against U.S. companies or is an unreasonable tax policy. On December 2, 2019, the USTR published the investigation Report on France’s DST; concluding that the DST was intended to discriminate against U.S. digital companies and the retroactive application was unusual and inconstant with prevailing tax principles.
On December 6, 2019, the USTR released a determination and opened a comment period for interested parties to submit comments related to the proposed additional tariffs of up to 100% on a list of 63 specific products from France with an import value of approximately $2.4 billion.
Following a comment period and public hearings, the USTR published a Notice of Action in the July 16, 2020, Federal Register. The notice announced the USTR’s determination to impose a 25% tariff on 21 specific products imported from France with an import value of $1.3 billion. The subject products are listed in Annex A to the notice and include makeup, soaps and handbags. The USTR determined to suspend the application of the additional duties for a period of 180 days, allowing time for further discussion related to the DST. The additional duties will go into effect on January 6, 2021.
Digital Services Taxes (DST)
On June 5, 2020, the United States Trade Representative (USTR) announced the initiation of investigations into Digital Services Taxes (DST) that either have been adopted or are being considered by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain and Turkey.
Like France’s DST, these actions impose taxes on the revenue generated from providing certain digital services, which the USTR believes target large U.S.-based tech companies. The investigation will be conducted under Section 301 of the 1974 Trade Act and could result in additional tariffs on goods imported from the subject countries. The investigation will focus on discrimination against U.S. companies, retroactivity, and unreasonable tax policy.
The Federal Register notice provides details of the actions taken or proposed by each of the countries. The notice also opened a comment period for interested parties to comment on the specific DST actions of each country. Due to the COVID-19 restrictions, the USTR did not schedule public hearings on the investigation. To review comments submitted, go to Regulations.gov and enter docket number USTR-2020-0022.
The USTR website provides full details and information on each of the Section 301 investigations, including notices, reports, determinations, modifications, transcripts of public hearings, submitted comments and exclusion requests, tariff lists, and granted exclusions.