France's Digital Tax and Section 301 tariffs: new duties imposed on French exports

French soap

On July 10, 2019, the USTR initiated their investigation of France’s Digital tax, and on December 6, 2019, the USTR announced that France’s Digital Service Tax is unreasonable or discriminatory and burdens and or restricts US commerce. Most recently, on July 10, 2020, the USTR has taken action to impose a 25% tax of additional duties on specific products from France. As such a 180-day suspension was initiated and will be in effect until January 6, 2021.

This additional time will allow for discussions to happen that could lead to a satisfactory resolution, in this case, I say let the talks begin.

The list of 21 specific product subheading that will be impacted include make-up, soaps and handbags; these of course are some of the most popular items that France exports to the US. The current duties rates range from 0 all the way up to 17.6%, so the extra 25% will limit the flow of these products to the US.

In the US, many importers have become somewhat familiar with the management of the section 301 tariffs that have been imposed on their goods from China and other European goods - this new action will add more reviews of imported goods as well as increased costs. One item that has been different on these tariffs from China and Europe is that exclusions have been granted for goods from China and not available for the list of European goods.

What can be expected in the coming months? Well, we know that discussions between the US and France are needed and hopefully, in the next 180 days (or less!) a working resolution can take place.

It is important to keep in mind, however, that France has not been the only country to initiate a digital service tax. Several other countries in Europe have issued their proposals; this can cause more disruptions in the supply chain so we need to keep close to these actions, while the new tariffs are threatening some of France’s valuable products to the US, as other countries put forth their actions you should expect to see similar actions by the US.

We all need to stay alert to all section 301 tariffs and the products that are being listed, making changes take a lot of time as well as trying to source from new points. This additional extra duty and work continue to show the value of having a compliance team that stays informed.