The United States Trade Representative (“USTR”) announced the continuation of certain Section 301 investigations related to digital services taxes (“DSTs”) and the termination of certain others. USTR originally initiated Section 301 DSTs investigations covering several countries on June 2, 2020 in response to those countries’ implementation or consideration of DSTs, which are taxes on revenues generated by companies from providing digital services. In January 2021, USTR announced its findings in the DSTs investigations related to Austria, India, Italy, Turkey, and the United Kingdom, concluding that those countries’ DSTs discriminate against U.S. companies, overly burden U.S. commerce, and were “inconsistent with principles of international taxation.”
USTR will proceed with respect to Austria, India, Italy, Spain, Turkey, and the United Kingdom on possible trade remedies and will publish a Federal Register notice seeking comments by April 30, 2021. A multi-jurisdictional virtual hearing will be held on May 3, 2021, but one specific to Spain will be held on May 6, 2021. USTR has proposed a list of goods for each of the previously-mentioned countries which could become subject to Section 301 tariffs. These goods appear to be important desirable exports of their respective countries, mainly consisting of foods, cosmetics, textiles, furniture, apparel, precious metals, jewelry, and other mostly luxury items. For example, the list of imports from Italy includes caviar and mens’ suits, while the list of imports from Turkey includes carpets and jewelry.
Section 301 DSTs investigations will be terminated with respect to Brazil, the Czech Republic, the European Union, and Indonesia, since those countries have chosen not to adopt DSTs which were previously under consideration. In the event the previously mentioned countries were to adopt DSTs, USTR has stated that it can reinstate the investigations. However, USTR also states in its prepublication termination notice that under the Section 301 statute, determinations must be made within one year of initiation. If the countries were to adopt DSTs prior to June 2, 2021, “USTR would not have sufficient time to determine whether the DST was actionable under Section 301 and, if so, what action, if any, to take to obtain the elimination of the measure.”
It is believed the Biden Administration aims to ultimately resolve the disputes over DSTs, and other issues of international taxation, through building consensus among the members of the Organization for Economic Co-operation and Development (“OECD”). Secretary of Treasury Janet Yellen also supports engaging in OECD negotiations on the separate issue of minimum corporate taxation. According to USTR Katherine Tai, “the United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.”
Husch Blackwell continues to monitor the Section 301 investigations on DSTs. Should you have any questions or concerns regarding the Section 301 investigations, or are interested in submitting comments, please contact our International Trade and Supply Chain team.