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On December 2, 2019, the US Trade Representative (USTR) published a report concluding France’s Digital Services Tax (DST) “discriminates” against and is “unusually burdensome” for US companies, and published a Federal Register note setting out proposed tariffs as high as 100 percent on US$2.4 billion in French imports into the United States. USTR will conduct hearings in January on its proposed actions. In making his announcement, Ambassador Lighthizer also noted that “USTR is exploring whether to initiate similar investigations into the digital services taxes of Austria, Italy, and Turkey.

USTR initiated in July 2019 its investigation of France’s Digital Services Tax DST under section 301(b)(1)(A) of the Trade Act of 1974 (the Trade Act) and concluded that discriminates against US companies. The DST was signed into law by President Macron on July 24, 2019 and imposes a 3 percent levy on revenues that certain companies generate from providing certain digital services to, or aimed at, persons in France. In its report published December 2, USTR found:

“France’s [DST] discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies. Specifically, USTR’s investigation found that the French DST discriminates against US digital companies, such as Google, Apple, Facebook, and Amazon.”

USTR stated that the French DST is inconsistent with prevailing tax principles on account of its retroactivity to January 1, 2019, its application to revenue rather than income, its extraterritorial application (the DST applies to revenues unconnected to a physical presence in France) and its purpose of penalizing particular US technology companies (since smaller companies, that are more likely to be locally based, are exempt).

The United States has also criticized the impact of the French DST on international negotiations occurring at the Organisation for Economic Co-operation and Development (OECD). Those negotiations are aimed at developing a consensus approach to corporate income taxation affecting the digital economy. The United States has argued that France’s law undermines the OECD negotiations.

In the wake of these findings, USTR is authorized by Section 301 to take all appropriate and feasible action, including the imposition of duties on the goods and imposition of fees or restrictions on the services of France. As noted, USTR is issuing a Federal Register notice soliciting comments from the public on USTR’s proposed action, which includes additional duties of up to 100 percent on certain French products. The notice also seeks comment on the option of imposing fees or restrictions on French services. The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of US$2.4 billion. The value of any US action through either duties or fees may take into account the level of harm to the US economy resulting from the DST. A list of the products proposed by USTR for the additional duties may be found in the Federal Register Notice. Click here to access.

USTR requests comments with respect to any issue related to the action to be taken in this investigation. With respect to action in the form of additional duties, USTR invites comments regarding:

  • The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added.
  • The level of the increase, if any, in the rate of duty.
  • The level of the burden or restriction on the US economy resulting from the DST.
  • The appropriate aggregate level of trade to be covered by additional duties.

In commenting on the inclusion or removal of particular products on the list of products subject to the proposed additional duties, USTR requests that commenters address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of France’s DST, and whether imposing additional duties on a particular product would cause disproportionate economic harm to US interests, including small- or medium-size businesses and consumers.

With respect to action in the form of fees or restrictions on services of France, USTR seeks comments on issues such as:

  • Which services would be covered by a fee or restriction.
  • If a fee is imposed, the rate (flat or percentage) of the fee, and the basis upon which any fee would be applied.
  • If a restriction is imposed, the form of such restriction.
  • Whether imposing fees or restrictions on services of France would be practicable or effective to obtain the elimination of France’s acts, policies, and practices.

USTR is inviting public comment on these issues and will be holding a hearing. We are assisting many clients in responding to these proposed tariffs.

If you would like to submit public comments and/or participate in a public hearing to be held on January 7, 2020, we would be pleased to assist.



Rod Hunter, a partner based in the Washington, DC office of Baker McKenzie, practices trade and investment law. He previously served as Special Assistant to the President for National Security Affairs and senior director for international economics at the National Security Council (NSC), the White House office that coordinates trade policy and supervises CFIUS. In that role, he managed CFIUS cases, including negotiating resolution of the most sensitive cases. A recognized expert in the field, he has testified before Congress during the legislative process leading to recent amendments to CFIUS’ authorizing legislation. Previously, in addition to coordinating U.S. trade policy at the White House’s NSC, he served as senior counsel at the US Trade Representative’s office, where he litigated cases before the World Trade Organization. He has also taught trade law and policy at the University of Virginia’s Batten School of Leadership and Public Policy and has testified before the United States-China Economic and Security Review Commission. Earlier in his career, Rod practiced regulatory law in Brussels, Belgium for a decade, served as a judicial clerk to Judge Boyce F. Martin, US Sixth Circuit Court of Appeals, served as an associate to Chief Justice Sir Anthony Mason, High Court of Australia and served as an assistant to Senator John W. Warner, US Senate.


John Foote advises companies on policy, compliance and enforcement issues, with a particular emphasis on international trade. He regularly speaks and writes on issues relating to public policy and international trade.