The U.S. will terminate the threat of additional tariffs on imports from Austria, France, Italy, Spain, and the United Kingdom after reaching an agreement on their treatment of digital services taxes.

DSTs are taxes on revenues generated from providing digital services to, or aimed at, users in the subject jurisdiction. In June 2020 the Office of the U.S. Trade Representative launched a Section 301 investigation into whether DSTs adopted or under consideration by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom would discriminate against U.S. companies, be inconsistent with prevailing principles of international taxation, and burden or restrict U.S. commerce.

USTR concluded that DSTs in Austria, India, Italy, Spain, Turkey, and the United Kingdom would meet these criteria and proposed additional tariffs of up to 25 percent on a total of $880 million worth of goods imported from these countries. The actual imposition of those tariffs was postponed for six months while the Organization for Economic Cooperation and Development held talks on a multilateral agreement on DSTs. (The investigations of Brazil, the Czech Republic, the EU, and Indonesia were terminated after USTR concluded that they had not adopted or implemented DSTs at that time.)

USTR has now announced that it will terminate these currently-suspended duties following an agreement under which Austria, France, Italy, Spain, and the UK can continue to collect DSTs from U.S. companies pending full implementation of the recently-concluded OECD agreement (expected in 2023) but will credit them against future taxes accrued under that deal.

However, India and Turkey are not among the 136 nations that have joined the OECD agreement. As a result, Section 301 tariffs on imports from those countries could be imposed once the current suspension ends Nov. 28. These tariffs could impact products such as (1) seafood, rice, bamboo articles, corks, cigarette paper, wool yarn, bras, pearls, precious stones, precious metal articles, and furniture from India and (2) textile floor coverings, bed linen, curtains, stone and ceramic articles, precious metal articles, and imitation jewelry from Turkey.

For more information on these developments, please contact Nicole Bivens Collinson (at (202) 730-4956 or via email) or Kristen Smith (at (202) 730-4965 or via email).

Click here to register for ST&R’s Oct. 28 webinar on mitigating Section 301 and other tariffs by using foreign-trade zones and bonded warehouses.

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