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Digital Services Tax

The United States Trade Representative late last month announced that after a Section 301 investigation into ten entities for unfair treatment of American tech companies based on the proposed imposition of a digital services tax, the government is moving forward with notice of comment and virtual hearings on six countries. If they proceed as announced, products from these countries could be subject to an additional 25% Section 301 duties which would have a materially adverse impact on importers of these commodities.


The trade tiff dates back to last year when France’s finance minister announced his government’s intention to move forward on a tax on tech companies who seek to book their profits in low corporate-tax countries. The move was seen as an interim step while the Organization for Cooperation and Economic Development (OECD)’s 140 member countries worked to agree on a minimum corporate taxation scheme to avoid this country-shopping.


In June of last year, USTR Robert Lighthizer opened the investigation. Comments were sought on actions taken or under consideration by the following countries and entities: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.


Prior to the change of administrations, the USTR found that Austria, India, Italy, Spain, Turkey and the UK had regimes which were discriminatory to US companies. However, there was uncertainty with the change of administrations whether or not action would be taken.


At the end of March, the trade got their answer: the agency was moving forward with ad valorem Section 301 duties on the estimated aggregate level of trade that would collect duties equal to what US companies would be expected to pay under these DST tax regimes.


The USTR has proposed a 25% ad valorem duty on products ranging from Austrian stemware and grand pianos to more impactful tariffs on clothes, footwear and eyeglasses from Italy, glazed ceramic tiles from Turkey, and lip and eye makeup from the United Kingdom.


For importers, this potentially means one more trade remedy duty to manage in their supply chains at a time when every imaginable cost is already through the roof.


Importers are advised to visit this page on the USTR’s website which breaks down the proposed actions against each of the six countries. We encourage our clients to both work with industry trade associations on group letters and submit their own comments to the USTR. We also suggest contacting your Senators and Representative(s) to let them know how this will both adversely impact your business and the people your company employs.


Written comments are due to USTR by April 30th, so time is of the essence. There are also proposed virtual hearings through May where companies can request to testify.


Comments can be submitted via and enter the docket number USTR-2020-0022 to proceed.


For more information, including a complete list of proposed products and potential exposure, contact your RIM representative today