France: Additional Import Tariffs Averted

Posted on Jan 22


Tariffs Averted for French Champagne, Cheese, Handbags

As reported yesterday by the NY Times, France and the United States appeared to strike a temporary truce in a trans-Atlantic spat, French officials said Tuesday, after President Emmanuel Macron agreed to suspend a tax on American technology giants in exchange for a postponement of threatened retaliatory tariffs on French goods by the Trump administration.

On Tuesday, January 21st, France announced they would no longer be imposing a digital service tax in 2020 and the U.S. responded swiftly by eliminating the planned Section 301 tariffs on imports of French champagne, cheese and handbags. The apparent détente emerged after Mr. Macron and President Trump agreed in a phone call late Sunday to grant more time for negotiations over a global solution to taxing Amazon, Facebook and other digital companies. “We will work together on a good agreement to avoid tariff escalation,” Mr. Macron said on Twitter on Monday. “Excellent!” Mr. Trump replied on the social media platform.

It is important to note that French wines and other European Union (EU) alcoholic beverages, food products and airplane parts are still subject to additional Section 301 tariffs. These tariffs are more likely to stay in place for now as they are tied to the EU subsidization of Airbus, and not associated with the planned digital services tax.

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President Trump has announced plans to impose additional tariffs for certain imports from France.

This action is in response to a 3% percent tax applied to the total annual revenues generated by companies that provide digital services to French users.

According to the USTR, this digital services tax discriminates against U.S. companies and is inconsistent with prevailing tax principles on account of its retroactivity (to Jan. 1, 2019), its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing particular U.S. technology companies.

In response, the USTR is proposing to impose additional tariffs of up to 100 percent on products from France that are drawn from a preliminary list that contains 63 tariff subheadings with an estimated import trade value for 2018 of $2.4 billion.

Affected products include yogurt, butter, cheese, cosmetics, soap, handbags, and porcelain and china dinnerware. Additionally, the USTR is also considering whether to impose fees or restrictions on services of France.

The USTR will hold a hearing on these issues on January 7 and is accepting written comments on them through January 6. It has not been determined when the proposed tariffs or other measures would take effect.

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