Cheese, Handbags and Kitchenware Among Proposed Section 301 Tariffs on Goods From France

The Office of the U.S. Trade Representative concluded in its Trade Act Section 301 investigative report released the evening of Dec. 2 (see 1912020066) that France’s digital services tax (DST), enacted into law in July, discriminates against U.S. companies, tech and business trade associations said. USTR seeks comment by Jan. 6, 2020, in docket USTR-2019-0009 at regulations.gov on its proposal to slap up to 100 percent retaliatory tariffs on 63 subheadings of French imports worth about $2.4 billion in 2018 customs value, mainly cheese, beauty products, handbags and kitchenware. The French government didn’t comment.

The 8-digit subheadings fall in the following chapters and headings (note that not all subheadings would necessarily be covered in the headings listed below):

• Chapter 4: 0403, 0404, 0405, 0406
• Chapter 22: 2204
• Chapter 33: 3304
• Chapter 34: 3401
• Chapter 42: 4202
• Chapter 69: 6911
• Chapter 73:7323

Twelve of the 21 companies facing exposure to the DST’s “digital interface segment” are U.S.-based, USTR’s report said. “No other country has more than three companies” with DST exposure, including no French companies, it said. “The DST targets U.S. companies by applying only to a business model where U.S. companies are unusually successful.”

The DST covers sales of goods or services “where the company operating the digital interface does not itself own or provide the good or service,” the report said. “This distinction has the effect of excluding French companies from the scope of the DST while covering their U.S.-based competitors.”

USTR found eight of the nine companies with exposure to the DST’s digital advertising component are American-based. “French policymakers expected and desired this outcome,” it said. U.S. companies are “highly successful” in the internet ad sector in France, it said. The DST does not apply to “related sectors such as traditional advertising, where French companies are more successful,” it said. “The DST targets U.S. companies by applying only to a type of advertising where U.S. companies are particularly successful.” Requests to testify at a Jan. 7 public hearing on the proposed tariffs on French imports are due Dec. 30. Post-hearing rebuttal comments are due Jan. 14.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and the top Democrat on the committee, Sen. Ron Wyden, D-Ore., said they welcome the announcement of potential tariff targets. “The French digital services tax is unreasonable, protectionist and discriminatory,” they said. “We encourage other member states considering similar actions to work within the OECD framework toward a comprehensive solution.”

The USTR said it might start similar investigations for Austria, Italy and Turkey.

In a call with reporters on Dec. 3, Grassley said he supports up to 100 percent tariffs on the $2.4 billion in French goods, but also noted that it's just a proposal until after the public weighs in on the list. “So maybe it will wake the French up,” he said, and the tax won't go into effect in France.

President Donald Trump, speaking to reporters around a Dec. 3 meeting with French President Emmanuel Macron, said that the two had been talking about the digital services tax and the potential list of products to face additional tariffs in the U.S. if the tax goes into effect. “But we’d rather not do that,” he said, and said he thinks France and the U.S. will “be able to work something out.”