[Federal Register Volume 86, Number 107 (Monday, June 7, 2021)]
[Notices]
[Pages 30350-30353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11859]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket Number USTR-2021-0004]


Notice of Action in the Section 301 Investigation of Italy's 
Digital Services Tax

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Notice.

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SUMMARY: On January 6, 2021, the U.S. Trade Representative announced a 
determination that Italy's Digital Services Tax (DST) is unreasonable 
or discriminatory and burdens or restricts U.S. commerce. This notice 
announces the U.S. Trade Representative's determination to take action 
in the form of additional duties of 25 percent on the products of Italy 
specified in Annex A to this notice. The U.S. Trade Representative has 
further determined to suspend application of the additional duties for 
a period of up to 180 days.

DATES: 
    June 2, 2021: The U.S. Trade Representative determined to take 
action in the form of additional duties of 25 percent on products of 
Italy specified in Annex A.
    November 29, 2021: The end of the 180-day suspension period for the 
additional duties.

FOR FURTHER INFORMATION CONTACT: For questions concerning the 
investigation, please contact Benjamin Allen, Thomas Au, or Patrick 
Childress, Assistant General Counsels at: (202) 395-9439, (202) 395-
0380, and (202) 385-9531, respectively; Robert Tanner, Director, 
Services and Investment at (202) 395-6125; or Michael Rogers, Director 
for Europe and the Middle East at (202) 395-2684. For specific 
questions on customs classification or implementation of additional 
duties on products, contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Proceedings in the Investigation

    Italy has adopted a DST that applies to companies that during the 
previous calendar year, generated [euro]750 million or more in 
worldwide revenues and [euro]5.5 million or more in revenues deriving 
from the provision of digital services in Italy. On June 2, 2020, the 
U.S. Trade Representative initiated an investigation of Italy's DST 
pursuant to section 302(b)(1)(A) of the Trade Act of 1974, as amended 
(Trade Act). See 85 FR 34709 (June 5, 2020) (notice of initiation). The 
notice of initiation solicited written comments on, inter alia, the 
following aspects of Italy's DST: Discrimination against U.S. 
companies; retroactivity; and possibly unreasonable tax policy. With 
respect to tax policy, USTR solicited comments on, inter alia, whether 
the DST diverged from principles reflected in the U.S. and 
international tax systems including extraterritoriality; taxing revenue 
not income; and a purpose of penalizing particular technology companies 
for their commercial success. Interested persons filed over 380 written 
submissions in response. The public submissions are available on 
www.regulations.gov in docket number USTR-2020-0022.
    Under section 303 of the Trade Act, the U.S. Trade Representative 
requested consultations with the government of Italy regarding the 
issues involved in the investigation. Consultations were held on 
November 10, 2020. Based on information obtained during the 
investigation, USTR prepared a comprehensive report on Italy's DST, 
which is posted on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes. The report includes a full description of Italy's DST, and 
supports findings that Italy's DST is unreasonable and discriminatory 
and burdens or restricts U.S. commerce. On January 6, 2021, based on 
the information obtained during the investigation and the advice of the 
Section 301 Committee, the U.S. Trade Representative determined that 
Italy's DST is unreasonable or discriminatory and burdens or restricts 
U.S. commerce, and therefore is actionable under sections 301(b) and 
304(a) of the Trade Act. See 86 FR 2477 (January 12, 2021).
    On March 31, 2021, USTR issued a notice proposing that appropriate 
action would include additional ad valorem duties of up to 25 percent 
on products of Italy to be drawn from a list of 59 tariff subheadings 
of the Harmonized Tariff Schedule of the United States (HTSUS) included 
in the annex to that notice. The March 31, 2021 notice requested 
comments on the proposed action as well as on other potential actions 
in the investigation. Witnesses provided testimony at public hearings 
on May 3 and May 6, 2021, and interested persons filed written 
comments. Transcripts from the hearings are available on the USTR 
website at: https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes. The written public 
submissions are available at: https://comments.ustr.gov/s/docket?docketNumber=USTR-2021-0004 and https://comments.ustr.gov/s/docket?docketNumber=USTR-2021-0008.

II. Determination of Action To Be Taken in the Investigation

    In accordance with section 301(b) of the Trade Act, the U.S. Trade 
Representative has determined that action is appropriate in this 
investigation. Section 301(b) provides that upon determining that the 
acts, policies, and practices under investigation are actionable and 
that action is appropriate, the U.S. Trade Representative shall take 
all appropriate and feasible action authorized under section 301(c) of 
the Trade Act, subject to the specific direction, if any, of the 
President regarding such action, and all other appropriate and feasible 
action within the power of the President that the President may direct 
the U.S. Trade Representative to take under section 301(b), to obtain 
the elimination of that act, policy, or practice. Section 304(a)(2)(B) 
provides that the U.S. Trade Representative shall make the 
determination of what action to take on or before the date that is 12 
months after the date on which the investigation was initiated, or in 
this case, by June 2, 2021.
    Pursuant to sections 301(b) and (c) of the Trade Act, and in 
accordance with the advice of the Section 301 Committee, the U.S. Trade 
Representative has determined that appropriate action is the imposition 
of ad valorem duties of 25 percent on products of Italy specified in 
Annex A to this notice. Annex A contains a list of 44 tariff 
subheadings, with an estimated trade value for calendar year 2019 of 
approximately $386 million. In making this determination, the U.S. 
Trade Representative considered the public comments submitted in the 
investigation, as well as advice of advisory committees. In determining 
the level of trade covered by the additional duties, the U.S. Trade 
Representative considered the value of digital

[[Page 30351]]

transactions covered by Italy's DST and the amount of taxes assessed by 
Italy on U.S. companies. Estimates indicate that the value of the DST 
payable by U.S.-based company groups to Italy will be up to 
approximately $140 million per year. The level of trade covered by the 
action takes into account estimates of the amount of tariffs to be 
collected on goods of Italy and the estimates of the amount of taxes 
assessed by Italy.
    Section 305(a) of the Trade Act provides, in pertinent part, that 
the U.S. Trade Representative may delay implementation of the action to 
be taken for up to 180 days ``if the Trade Representative determines 
that substantial progress is being made, or that a delay is necessary 
or desirable . . . to obtain . . . [a] satisfactory solution with 
respect to the acts, policies, or practices that are the subject of the 
action.'' Pursuant to section 305(a), the U.S. Trade Representative has 
determined to suspend the additional duties for up to 180 days (that 
is, up to November 29, 2021) to allow additional time for multilateral 
and bilateral discussions that could lead to a satisfactory resolution 
of this matter.
    In order to implement this determination, subchapter III of chapter 
99 of the HTSUS is modified by Annex A of this notice. Annex A is 
effective with respect to goods entered for consumption, or withdrawn 
from warehouse for consumption, on or after 12:01 a.m. eastern standard 
time on November 29, 2021, which is 180 days after the determination of 
action. In the event the U.S. Trade Representative determines that the 
suspension of the additional duties should be for less than a period of 
180 days, USTR will issue a subsequent notice amending the effective 
date. For informational purposes, Annex B contains a list of the tariff 
subheadings covered by the tariff action along with short product 
descriptions. In all cases, the formal language in Annex A governs the 
tariff treatment of products covered by the action. As specified in 
Annex A, products provided for in new HTSUS heading 9903.90.04 will be 
subject to an additional ad valorem duty of 25 percent. The additional 
duties provided for in the new HTSUS heading established by Annex A 
apply in addition to all other applicable duties, fees, exactions, and 
charges.
    Any product listed in Annex A, except any product that is eligible 
for admission under `domestic status' as defined in 19 CFR 146.43, 
which is subject to the additional duty imposed by this determination, 
and is admitted into a U.S. foreign trade zone on or after 12:01 a.m. 
eastern standard time on November 29, 2021, only may be admitted as 
`privileged foreign status' as defined in 19 CFR 146.41. Such products 
will be subject upon entry for consumption to any ad valorem rates of 
duty or quantitative limitations related to the classification under 
the applicable HTSUS subheading.
    The U.S. Trade Representative will continue to monitor the effect 
of the trade action, the progress of discussions in the Organisation 
for Economic Co-operation and Development and G20, the progress of 
discussions with Italy, and may adopt appropriate modifications. If a 
modification to the action may be appropriate, the U.S. Trade 
Representative will consider the comments received in response to the 
March 31, 2021 notice.

Greta Peisch,
General Counsel, Office of the United States Trade Representative.

Annex A

    Effective with respect to goods entered for consumption, or 
withdrawn from warehouse for consumption, on or after 12:01 a.m. 
eastern standard time on November 29, 2021, subchapter III of chapter 
99 of the Harmonized Tariff Schedule of the United States (HTSUS) is 
modified:
    1. By inserting the following new U.S. notes 25(a) and 25(b) to 
subchapter III of chapter 99 in numerical sequence:
    ``25 (a) For the purposes of heading 9903.90.04, products of Italy, 
as specified in this note, shall be subject to additional duties as 
provided herein. All products of Italy that are classified in the 
subheadings enumerated in this note are subject to the additional 
duties imposed by heading 9903.90.04. The duties imposed by heading 
9903.90.04 shall be in addition to the general duty rates provided for 
in the applicable provisions of the tariff schedule.
    Products of Italy that are classified in the subheadings enumerated 
in this note and that are eligible for temporary duty exemptions or 
reductions under subchapter II to chapter 99 shall be subject to the 
additional duties imposed by heading 9903.90.04, and any such duty 
exemption or reduction shall apply only to the permanent general rate 
prescribed in provisions of chapters 1 through 97 of the tariff 
schedule.
    The additional duties imposed by heading 9903.90.04 do not apply to 
goods for which entry is properly claimed under a provision of chapter 
98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 
9802.00.50 and 9802.00.60 and heading 9802.00.80. For subheadings 
9802.00.40, 9802.00.50 and 9802.00.60, the additional duties apply to 
the value of repairs, alterations or processing performed in Italy and 
as described in the applicable subheading. For heading 9802.00.80, the 
additional duties apply to the value of the article less the cost or 
value of such products of the United States, as described in heading 
9802.00.80.
    Products of Italy that are provided for in heading 9903.90.04 and 
classified in one of the subheadings enumerated in note 25(b) to this 
subchapter shall continue to be subject to antidumping, countervailing 
or other duties (including duties imposed by other provisions of 
subchapter III of this chapter and safeguard duties set forth in 
provisions of subchapter IV of this chapter), fees, exactions and 
charges that apply to such products, as well as to the additional 
duties imposed herein.
    (b) Heading 9903.90.04 shall apply to all products of Italy that 
are classified in the subheadings enumerated below:

1604.31.00
1604.32.40
3303.00.20
3307.90.00
4202.29.10
4202.29.50
4202.29.90
6103.10.10
6103.31.00
6103.32.00
6103.33.20
6103.39.80
6104.32.00
6104.33.20
6110.30.10
6117.80.20
6117.80.87
6203.19.10
6203.31.90
6203.32.10
6203.32.20
6203.33.10
6203.33.20
6203.39.10
6203.39.20
6203.39.50
6203.39.90
6204.31.10
6204.31.20
6204.32.20
6204.33.10
6204.33.40
6204.33.50
6204.39.20
6204.39.30
6204.39.60
6204.39.80
6403.59.60
6403.91.60
6403.91.90
9001.40.00
9001.50.00

[[Page 30352]]

9001.90.40
9001.90.90''.

    2. by inserting the following new heading 9903.90.04 in numerical 
sequence, with the material in the new heading inserted in the columns 
of the HTSUS labeled ``Heading/Subheading'', ``Article Description'', 
and ``Rates of Duty 1-General'', respectively:

----------------------------------------------------------------------------------------------------------------
                                                                               Rates of duty
                                                         -------------------------------------------------------
       Heading/subheading          Article description                      1
                                                         ---------------------------------------        2
                                                                General            Special
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``9903.90.04...................  ``Articles the product   The duty provided
                                  of Italy, as provided    in the applicable
                                  for in U.S. note 25(a)   subheading +
                                  to this subchapter and   25%''.
                                  as provided for in the
                                  subheadings enumerated
                                  in U.S. note 25(b) to
                                  this subchapter.
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Annex B

    Note: The product descriptions that are contained in this Annex are 
provided for informational purposes only, and are not intended to 
delimit in any way the scope of the action. In all cases, the formal 
language in Annex A governs the tariff treatment of products covered by 
the action. Any questions regarding the scope of particular HTSUS 
subheadings should be referred to U.S. Customs and Border Protection. 
In the product descriptions, the abbreviation ``nesoi'' means ``not 
elsewhere specified or included''.

------------------------------------------------------------------------
        HTSUS  subheading                   Product description
------------------------------------------------------------------------
1604.31.00.......................  Caviar.
1604.32.40.......................  Caviar substitutes prepared from fish
                                    eggs, nesoi.
3303.00.20.......................  Perfumes and toilet waters, other
                                    than floral or flower waters, not
                                    containing alcohol.
3307.90.00.......................  Depilatories and other perfumery,
                                    cosmetic or toilet preparations.
                                    nesoi.
4202.29.10.......................  Handbags w. or w/o shld. strap or w/o
                                    handle of mat. (o/t leather, shtng.
                                    of plas., tex. mat., vul. fib. or
                                    paperbd.), paper cov., of plas.
4202.29.50.......................  Handbags w. or w/o shld. strap or w/o
                                    handle of mat. (o/t leather, shtng.
                                    of plas., tex. mat., vul. fib. or
                                    paperbd.), pap.cov.,of mat. nesoi.
4202.29.90.......................  Handbags with or without shoulder
                                    straps or without handle, with outer
                                    surface of vulcanized fiber or of
                                    paperboard, not covered with paper.
6103.10.10.......................  Men's or boys' suits, knitted or
                                    crocheted, of wool or fine animal
                                    hair.
6103.31.00.......................  Men's or boys' suit-type jackets and
                                    blazers, knitted or crocheted, of
                                    wool or fine animal hair.
6103.32.00.......................  Men's or boys' suit-type jackets and
                                    blazers, knitted or crocheted, of
                                    cotton.
6103.33.20.......................  Men's or boys' suit-type jackets and
                                    blazers, knitted or crocheted, of
                                    synthetic fibers, nesoi.
6103.39.80.......................  Men's or boys' suit-type jackets and
                                    blazers, of textile mats, (except
                                    wool, cotton, or mmf), cont less
                                    than 70% by wt of silk, knitted/
                                    croc.
6104.32.00.......................  Women's or girls' suit-type jackets
                                    and blazers, knitted or crocheted,
                                    of cotton.
6104.33.20.......................  Women's or girls' suit-type jackets
                                    and blazers, knitted or crocheted,
                                    of synthetic fibers, nesoi.
6110.30.10.......................  Sweaters, pullovers, sweatshirts and
                                    similar articles, knitted or
                                    crocheted, of man-made fibers, cont.
                                    25% or more by weight of leather.
6117.80.20.......................  Ties, bow ties and cravats,
                                    containing 70% or more by weight of
                                    silk or silk waste, knitted or
                                    crocheted.
6117.80.87.......................  Ties, bow ties and cravats,
                                    containing under 70% by weight of
                                    silk or silk waste, knitted or
                                    crocheted.
6203.19.10.......................  Men's or boys' suits, not knitted or
                                    crocheted, of cotton.
6203.31.90.......................  Men's or boys' suit-type jackets and
                                    blazers, of wool or fine animal
                                    hair, not knitted or crocheted.
6203.32.10.......................  Men's or boys' suit-type jackets and
                                    blazers, not knitted or crocheted,
                                    of cotton, containing 36 percent or
                                    more of flax fibers.
6203.32.20.......................  Men's or boys' suit-type jackets and
                                    blazers, not knitted or crocheted,
                                    of cotton, under 36% by weight of
                                    flax.
6203.33.10.......................  Men's or boys' suit-type jackets and
                                    blazers, not knitted or crocheted,
                                    of synthetic fibers, cont. 36% or
                                    more of wool or fine animal hair.
6203.33.20.......................  Men's or boys' suit-type jackets and
                                    blazers, not knitted or crocheted,
                                    of synthetic fibers, under 36% by
                                    weight of wool.
6203.39.10.......................  Men's or boys' suit-type jackets and
                                    blazers, of artificial fibers,
                                    containing 36% or more by weight of
                                    wool or fine animal hair, not k/c.
6203.39.20.......................  Men's or boys' suit-type jackets and
                                    blazers, not knitted or crocheted,
                                    of artificial fibers, under 36% by
                                    weight of wool.
6203.39.50.......................  Men's or boys' suit-type jackets and
                                    blazers, of textile materials
                                    (except wool, cotton or mmf), cont
                                    70% or more by weight of silk, not k/
                                    c.
6203.39.90.......................  Men's or boys' suit-type jackets and
                                    blazers, of text materials (except
                                    wool, cotton or mmf), containing
                                    under 70% by weight of silk, not k/
                                    c.
6204.31.10.......................  Women's or girls' suit-type jackets &
                                    blazers, of wool or fine animal
                                    hair, not knitted or crocheted,
                                    cont. 30% or more by weight of silk/
                                    silk waste.
6204.31.20.......................  Women's or girls' suit-type jackets
                                    and blazers, of wool or fine animal
                                    hair, not knitted or crocheted,
                                    under 30% by weight of silk/silk
                                    waste.
6204.32.20.......................  Women's or girls' suit-type jackets
                                    and blazers, of cotton, not knitted
                                    or crocheted, under 36% flax.
6204.33.10.......................  Women's or girls' suit-type jackets
                                    and blazers, not knitted or
                                    crocheted, of synthetic fibers,
                                    cont. 30% or more of silk/silk
                                    waste.
6204.33.40.......................  Women's or girls' suit-type jackets &
                                    blazers, not knitted or crocheted,
                                    of synthetic fibers, cont. 36% or
                                    more of wool or fine animal hair.
6204.33.50.......................  Women's or girls' suit-type jackets
                                    and blazers, not knitted or
                                    crocheted, of synthetic fibers,
                                    nesoi.
6204.39.20.......................  Women's or girls' suit-type jackets &
                                    blazers, not knitted or crocheted,
                                    of artificial fibers, cont. 36% or
                                    more by weight of wool or fine
                                    animal hair.

[[Page 30353]]

 
6204.39.30.......................  Women's or girls' suit-type jackets
                                    and blazers, not knitted or
                                    crocheted, of artificial fibers,
                                    under 36% by weight of wool or fine
                                    animal hair.
6204.39.60.......................  Women's or girls' suit-type jackets
                                    and blazers, not knitted/crocheted,
                                    of othertextile materials nesoi,
                                    cont. 70% + by weight of silk or
                                    silk waste.
6204.39.80.......................  Women's or girls' suit-type jackets
                                    and blazers, not knitted or
                                    crocheted, of textile materials
                                    nesoi.
6403.59.60.......................  Footwear w/outer soles and uppers of
                                    leather, not cov. ankle, n/welt, for
                                    men, youths and boys.
6403.91.60.......................  Footwear w/outer soles of rubber/
                                    plastics/composition leather &
                                    uppers of leather, covering the
                                    ankle, n/welt, for men, youths and
                                    boys.
6403.91.90.......................  Footwear w/outer soles of rubber/
                                    plastics/comp. leather & uppers of
                                    leather, cov. ankle, n/welt, for
                                    persons other than men/youths/boys.
9001.40.00.......................  Spectacle lenses of glass, unmounted.
9001.50.00.......................  Spectacle lenses of materials other
                                    than glass, unmounted.
9001.90.40.......................  Lenses nesoi, unmounted.
9001.90.90.......................  Optical elements nesoi, unmounted.
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[FR Doc. 2021-11859 Filed 6-4-21; 8:45 am]
BILLING CODE 3290-F1-P