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USTR announces and suspends tariffs in Section 301 DST investigations

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June 2021

In brief

The United States Trade Representative (USTR) on June 2 announced the conclusion of its Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom. The USTR’s final determination in these investigations is to impose additional tariffs up to 25% on certain goods from these countries, but immediately suspend the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G-20 process. 

The USTR will continue to monitor the effect of the trade actions, the progress of the Organisation for Economic Co-operation and Development (OECD) and G-20 discussions, and the progress of discussions with the six affected countries. The USTR may adopt appropriate modifications to the actions taken on June 2, taking into account comments received in response to its March 31 notices.

For prior coverage, see PwC Tax Insight, USTR proposes potential tariffs pending six digital tax investigations; closes four others, April 1, 2021.

An earlier Section 301 investigation into the DST adopted by France resulted in a similar 25% tariff on goods imported from France that also was suspended to allow time for further negotiations. For discussion, see PwC Tax Insight, US announces tariffs on French imports in response to French DST, July 15, 2020.

Action item: Companies importing from any of the six referenced countries should review the product listings and, if potentially affected by any of the suspended tariffs, should continue to monitor USTR actions regarding these tariffs.

In detail

Austria

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would attract duties on goods of Austria in the range of the amount of the DST that Austria is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to Austria will be up to approximately $45 million per year.

The Austrian goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes glassware and optical products.

India

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on goods of India in the range of the amount of DST that India is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year.

The Indian goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes seafood, basmati rice, bamboo products, jewelry, and furniture.

Italy

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on goods of Italy in the range of the amount of DST that Italy is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to Italy will be up to approximately $140 million per year.

The Italian goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes caviar, hats, gloves, shoes, suits, and outerwear.

Spain

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on goods of Spain in the range of the amount of the DST that Spain is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to Spain will be up to approximately $155 million per year.

The Spanish goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes seafood, belts, hats, shoes, and glassware.

Turkey

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would attract duties on goods of Turkey in the range of the amount of the DST that Turkey is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to Turkey will be up to approximately $160 million per year.

The Turkish goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes carpets, building materials, and jewelry.

United Kingdom

The USTR has imposed but suspended additional tariffs of up to 25% ad valorem on an aggregate level of trade that would collect duties on UK goods in the range of the amount of the DST that the United Kingdom is expected to collect from US companies. Initial estimates indicate that the value of the DST payable by US-based company groups to the United Kingdom will be up to approximately $325 million per year.

The UK goods subject to additional tariffs are listed in Annex A to the June 2 notice regarding that country. The list includes cosmetics, bath products, saddles and harnesses, clothing, shoes, jewelry, refrigerators, furniture, and toys and games.

The takeaway

The June 2 notices indicate that the Biden Administration still may impose enforcement tariffs. Companies should remain aware that actions taken by other countries that affect companies doing business in the United States could lead to the imposition of US tariffs on goods from such other countries.

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Anthony Tennariello

Customs and International Trade Co-leader, PwC US

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