U.S. Proposes Up To 100% Additional Duties Due To French Digital Tax

The Situation: The Office of the United States Trade Representative ("USTR") determined that France's digital services tax ("DST") unreasonably burdens or restricts U.S. commerce, particularly U.S. technology companies.

The Result: As a result of the determination, on December 2, 2019, the USTR proposed additional duties of up to 100% on certain French goods including cheese, sparkling wine, cosmetics, soaps, handbags, and tableware.

Looking Ahead: Companies should consider participating in the public comment period as requests to appear at the public hearing, scheduled for January 7, 2020, are due on December 30, 2019, and written comments are due by January 6, 2020.

On July 24, 2019, French President Emmanuel Macron signed into law a DST, beginning January 1, 2019, which is a 3% tax on revenues generated by certain companies (i.e., companies that generate €750 million globally and €25 million in France) from certain digital services provided to France (i.e., targeted advertising services and digital interface services).

Upon the proposal of the DST on March 6, 2019, the USTR initiated an investigation of the DST pursuant to Section 301 of the Trade Act of 1974 ("Section 301"). Under Section 301, the USTR is authorized to take appropriate action to enforce U.S. rights or eliminate foreign restrictions, including by imposing duties on goods of the foreign country subject to the Section 301 investigation, concerning: (i) trade agreement violations; (ii) acts, policies, or practices that are unjustifiable (defined as those that are inconsistent with U.S. international legal rights) and burden or restrict U.S. commerce; and/or (iii) acts, policies, or practices that are unreasonable or discriminatory and burden or restrict U.S. commerce.

The USTR report on the findings of the Section 301 investigation, released on December 2, 2019, asserted that the French DST is unreasonable or discriminatory and burdens or restricts U.S. commerce, particularly U.S. digital companies. As a result, on December 2, 2019, the USTR proposed action in the form of imposing additional duties of "up to 100 percent" on a variety of French goods. The USTR is also considering whether to impose fees or restrictions on French services. According to public reports, the French government indicated that the European Union would retaliate if the United States pursues any of the threatened additional duties.

Preliminary Section 301 List of French Goods

The preliminary list of...