French Champagne, Cheese Spared, Handbags, Cosmetics Scheduled for 25% Tariff

The U.S. estimates that France's proposed digital services tax would collect about $450 million from U.S. companies for the 2020 tax year. France has not started collecting the DST, and the U.S. also will not levy higher duties yet. The law requires USTR to announce a decision within a year of the start of the investigation, but also allows USTR to delay an action for 180 days -- so it has set Jan. 6, 2021, as the start date. It could come sooner, but another Federal Register notice would have to be issued.

The Organization for Economic Cooperation and Development has been talking about a more global approach to taxing digital companies' activities, and France has agreed to hold off on collection through the end of the year, while OECD talks continue. However, the U.S. has complained that OECD views are unfair to U.S. giants like Amazon and Facebook.

If the announcement was expected to intimidate France, it didn't seem to. “France’s response will be unchanged,” Bloomberg quoted French Finance Minister Bruno Le Maire's comments in Brussels over the weekend. “If there is no international solution by the end of 2020, we will, as we have always said, apply our national tax.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore, released a joint statement on the USTR news. “Retaliatory tariffs aren’t ideal but the French government’s refusal to back down from its unilateral imposition of unfair and punitive taxes on U.S. companies leaves our government with no choice,” they said. “We hope the French government views the Administration’s deferral of these tariffs as an opportunity to repeal its digital services tax and continue working with OECD member states on a multilateral approach that is fair to all parties. Unilateral action that targets and discriminates against U.S. businesses will not be tolerated.”

The Information Technology Industry Council echoed the senators. Senior Director of Policy Sam Rizzo issued a statement that said: “While we hope to avoid any further escalation of tensions, today’s reporting follows USTR’s findings that the application of targeted, unilateral digital taxation measures -- which continue to proliferate in number and expand in scope -- deviates from established international tax norms, contributes to further fragmentation of our global tax system, and compromises predictability for businesses large and small. We continue to urge all governments participating in multilateral discussions to address the tax policy challenges arising from the digitalization of the global economy through a lasting, consensus-based solution.”

The products left off the list include cheeses, champagne and le Creuset-style cookware. The Cheese Importers Association of America noted that while their products were spared, many of the same cheeses “are also currently being considered for tariffs under the Large Civil Aircraft investigation.” The USTR levied 25% tariffs on French still wines and other products in retaliation for Airbus subsidies, but is considering shuffling the targets, since the European Union has not yet submitted to U.S. demands to remedy the injury to Boeing.

The French products scheduled for January 2021 tariffs over the DST include:

• 3304.10.00: Lip make-up preparations
• 3304.20.00: Eye make-up preparations
• 3304.30.00: Manicure or pedicure preparations
• 3304.91.00 Beauty or make-up powders, whether or not compressed
• 3304.99.50: Beauty or make-up preparations & preparations for the care of the skin, excl. medicaments but incl. sunscreen or sun tan preparations, not elsewhere specified or indicated (nesoi)
• 3401.11.10: Castile soap in the form of bars, cakes or molded pieces or shapes
• 3401.11.50: Soap, nesoi; organic surface-active products used as soap, in bars, cakes, pieces, soap-impregnated paper, wadding, felt, for toilet use
• 3401.19.00: Soap; organic surface-active products used as soap, in bars, cakes, pieces; soap impregnated paper, wadding, felt, not for toilet use
• 3401.20.00: Soap, not in the form of bars, cakes, molded pieces or shapes
• 3401.30.10: Organic surface-active products for wash skin, in liquid or cream, contain any aromatic/mod aromatic surface-active agent, put up for retail
• 3401.30.50: Organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, nesoi
• 4202.21.30: Handbags, with or without shoulder strap or without handle, with outer surface of reptile leather
• 4202.21.60: Handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, nesoi, n/o $20 ea.
• 4202.21.90: Handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, nesoi, over $20 ea.
• 4202.22.15: Handbags, with or without shoulder straps or without handle, with outer surface of sheeting of plastics
• 4202.22.40: Handbags with or without shoulder strap or without handle, with outer surface of textile materials, wholly or in part of braid, nesoi
• 4202.22.45: Handbags with or without shoulder strap or without handle, with outer surface of cotton, not of pile or tufted construction or braid
• 4202.22.60: Handbags with or w/o shoulder strap or w/o handle, outer surface of veg. fibers, exc. cotton, not of pile or tufted construction or braid
• 4202.22.70: Handbags with or w/o shoulder strap or w/o handle, with outer surface containing 85% or more of silk, not braided
• 4202.22.81: Handbags with or without shoulder strap or without handle, with outer surface of MMF materials
• 4202.22.89: Handbags with or without shoulder strap or without handle, with outer surface of textile materials nesoi