[Federal Register Volume 86, Number 107 (Monday, June 7, 2021)]
[Notices]
[Pages 30364-30367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11862]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket Number USTR-2021-0007]


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

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

ACTION: Notice.

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SUMMARY: On January 14, 2021, the U.S. Trade Representative announced a 
determination that the United Kingdom'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 the United Kingdom 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 
the United Kingdom 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

    The United Kingdom has adopted a DST that applies a two percent tax 
on the revenues of certain search engines, social media platforms and 
online marketplaces. The United Kingdom's DST applies only to companies 
with digital services revenues exceeding [pound]500 million and United 
Kingdom digital services revenues exceeding [pound]25 million. On June 
2, 2020, the U.S. Trade Representative initiated an investigation of 
the United Kingdom'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 the United Kingdom'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 the United Kingdom 
regarding the issues involved in the investigation. Consultations were 
held on December 4, 2020. Based on information obtained during the 
investigation, USTR prepared a comprehensive report on the United 
Kingdom's DST, which is posted on the USTR website at https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digitalservices-taxes. The report includes a full description of the 
United Kingdom's DST, and supports findings that the United Kingdom's 
DST is unreasonable and discriminatory and burdens or restricts U.S 
commerce. On January 14, 2021, based on the information obtained during 
the investigation and the advice of the Section 301 Committee, the U.S. 
Trade Representative determined that the United Kingdom'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 6406 (January 21, 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 the United Kingdom to be drawn from a list of 69 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-2021-0007 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

[[Page 30365]]

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 the United Kingdom 
specified in Annex A to this notice. Annex A contains a list of 67 
tariff subheadings, with an estimated trade value for calendar year 
2019 of approximately $887 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 transactions 
covered by the United Kingdom's DST and the amount of taxes assessed by 
the United Kingdom on U.S. companies. Estimates indicate that the value 
of the DST payable by U.S.-based company groups to the United Kingdom 
will be up to approximately $325 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 the United Kingdom and the 
estimates of the amount of taxes to be assessed by the United Kingdom.
    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 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 an 
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 9903.90.07 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 the United Kingdom, 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 28(a) and 28(b) to 
subchapter III of chapter 99 in numerical sequence:
    ``28 (a) For the purposes of heading 9903.90.07, products of the 
United Kingdom, as specified in this note, shall be subject to 
additional duties as provided herein. All products of the United 
Kingdom that are classified in the subheadings enumerated in this note 
are subject to the additional duties imposed by heading 9903.90.07. The 
duties imposed by heading 9903.90.07 shall be in addition to the 
general duty rates provided for in the applicable provisions of the 
tariff schedule.
    Products of the United Kingdom 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 9903.90.07, 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 9903.90.07 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 the United 
Kingdom 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 the United Kingdom that are provided for in heading 
9903.90.07 and classified in one of the subheadings enumerated in note 
28(b) to this subchapter shall continue to be subject to antidumping, 
countervailing or other duties (including duties imposed by

[[Page 30366]]

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 9903.90.07 shall apply to all products of the United 
Kingdom that are classified in the subheadings enumerated below:

3213.90.00
3303.00.10
3303.00.20
3303.00.30
3304.10.00
3304.20.00
3304.30.00
3304.91.00
3304.99.10
3304.99.50
3305.10.00
3305.20.00
3305.30.00
3305.90.00
3306.90.00
3307.10.10
3307.10.20
3307.30.10
3307.30.50
3307.49.00
3307.90.00
4201.00.60
6104.43.20
6201.12.20
6201.92.45
6202.12.20
6202.13.40
6202.92.90
6204.43.40
6204.44.40
6204.49.10
6205.20.20
6215.10.00
6403.59.30
6403.59.90
6403.91.30
6403.99.60
6404.20.40
6903.90.00
6907.23.90
6907.30.90
6910.90.00
7113.11.50
7113.19.29
7113.19.50
7116.20.50
7117.19.90
8415.82.01
8418.40.00
8418.50.00
8418.69.01
8532.24.00
9001.10.00
9401.71.00
9403.10.00
9403.20.00
9403.40.90
9403.60.80
9403.89.60
9503.00.00
9504.50.00
9504.90.40
9504.90.60
9504.90.90
9508.10.00
9508.90.00
9603.29.80''.

    2. by inserting the following new heading 9903.90.07 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
----------------------------------------------------------------------------------------------------------------
``9903.90.07...................  ``Articles the product   The duty provided
                                  of the United Kingdom,   in the applicable
                                  as provided for in       subheading +
                                  U.S. note 28(a) to       25%''.
                                  this subchapter and as
                                  provided for in the
                                  subheadings enumerated
                                  in U.S. note 28(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
------------------------------------------------------------------------
3213.90.00.......................  Artists', students' or signboard
                                    painters' colors, in tablets, tubes,
                                    jars, bottles, pans or in similar
                                    packings, not in sets.
3303.00.10.......................  Floral or flower waters, not
                                    containing alcohol.
3303.00.20.......................  Perfumes and toilet waters, other
                                    than floral or flower waters, not
                                    containing alcohol.
3303.00.30.......................  Perfumes and toilet waters,
                                    containing alcohol.
3304.10.00.......................  Lip make-up preparations.
3304.20.00.......................  Eye make-up preparations.
3304.30.00.......................  Manicure or pedicure preparations.
3304.91.00.......................  Beauty or make-up powders, whether or
                                    not compressed.
3304.99.10.......................  Petroleum jelly put up for retail
                                    sale.
3304.99.50.......................  Beauty or make-up preparations &
                                    preparations for the care of the
                                    skin, excl. medicaments but incl.
                                    sunscreen or sun tan preparations,
                                    nesoi.
3305.10.00.......................  Shampoos.
3305.20.00.......................  Preparations for permanent waving or
                                    straightening the hair.
3305.30.00.......................  Hair lacquers.
3305.90.00.......................  Preparations for use on the hair,
                                    nesoi.
3306.90.00.......................  Preparations for oral or dental
                                    hygiene, including denture fixative
                                    pastes and powders, excluding
                                    dentifrices and yarn used to clean
                                    between the teeth (dental floss).
3307.10.10.......................  Pre-shave, shaving or after-shave
                                    preparations, not containing
                                    alcohol.
3307.10.20.......................  Pre-shave, shaving or after-shave
                                    preparations, containing alcohol.
3307.30.10.......................  Bath salts, whether or not perfumed.

[[Page 30367]]

 
3307.30.50.......................  Bath preparations, other than bath
                                    salts.
3307.49.00.......................  Preparations for perfuming or
                                    deodorizing rooms, including
                                    odoriferous preparations used during
                                    religious rites, nesoi.
3307.90.00.......................  Depilatories and other perfumery,
                                    cosmetic or toilet preparations.
                                    Nesoi.
4201.00.60.......................  Saddlery and harnesses for animals
                                    nesoi, (incl. traces, leads, knee
                                    pads, muzzles, saddle cloths and
                                    bags and the like), of any material.
6104.43.20.......................  Women's or girls' dresses, knitted or
                                    crocheted, of synthetic fibers,
                                    nesoi.
6201.12.20.......................  Men's or boys' overcoats, carcoats,
                                    capes, & similar coats of cotton,
                                    not knit or crocheted, not
                                    containing 15% or more by wt of
                                    down, etc.
6201.92.45.......................  Men's or boys' anoraks, windbreakers
                                    & sim articles nesoi, not knit/
                                    crochet, cotton, not cont. 15% or
                                    more by wt of down, etc, o/than rec
                                    perf outwear.
6202.12.20.......................  Women's or girls' overcoats,
                                    carcoats, etc, not knitted or
                                    crocheted, of cotton, not containing
                                    15% or more by weight of down, etc.
6202.13.40.......................  Women's or girls' overcoats,
                                    carcoats, capes, cloaks and similar
                                    articles, not knitted or crocheted,
                                    of man-made fibers, nesoi.
6202.92.90.......................  Women's/girls' anoraks, windbreakers
                                    & similar articles, nt knit/crochet,
                                    cotton, nt cont. 15% or more by wt
                                    of down, etc, o/than rec perf
                                    outwear.
6204.43.40.......................  Women's or girls' dresses, not
                                    knitted or crocheted, of synthetic
                                    fibers, nesoi.
6204.44.40.......................  Women's or girls' dresses, not
                                    knitted or crocheted, of artificial
                                    fibers, nesoi.
6204.49.10.......................  Women's or girls' dresses, not
                                    knitted or crocheted, containing 70%
                                    or more by weight of silk or silk
                                    waste.
6205.20.20.......................  Men's or boys' shirts, not knitted or
                                    crocheted, of cotton, nesoi.
6215.10.00.......................  Ties, bow ties and cravats, not
                                    knitted or crocheted, of silk or
                                    silk waste.
6403.59.30.......................  Footwear w/outer soles and uppers of
                                    leather, not covering the ankle,
                                    welt, nesoi.
6403.59.90.......................  Footwear w/outer soles and uppers of
                                    leather, not cov. ankle, n/welt, for
                                    persons other than men, youths and
                                    boys.
6403.91.30.......................  Footwear w/outer soles of rubber/
                                    plastics/composition leather &
                                    uppers of leather, covering the
                                    ankle, welt.
6403.99.60.......................  Footwear w/outer soles of rubber/
                                    plastics/comp. leather & uppers of
                                    leather, n/cov. ankle, n/welt, for
                                    men, youths and boys, nesoi.
6404.20.40.......................  Footwear w/outer soles of leather/
                                    comp. leath., n/o 50% by wt. rub./
                                    plast. or rub./plast./text. & 10%+
                                    by wt. rub./plast., val. o/$2.50/pr.
6903.90.00.......................  Refractory ceramic goods (o/than of
                                    siliceous fossil meals or earths),
                                    nesoi.
6907.23.90.......................  Glazed ceramic flags and paving,
                                    hearth, or wall tiles, o/t
                                    subheading 6907.30 and 6907.40, of a
                                    H2O absorp coeff by wt >10%, nesoi.
6907.30.90.......................  Glazed ceramic mosaic cubes nesoi, o/
                                    t subheading 6907.40.
6910.90.00.......................  Ceramic (o/than porcelain or china)
                                    sinks, washbasins, baths, bidets,
                                    water closet bowls, urinals & siml.
                                    sanitary fixtures.
7113.11.50.......................  Silver articles of jewelry and parts
                                    thereof, nesoi, valued over $18 per
                                    dozen pieces or parts.
7113.19.29.......................  Gold necklaces and neck chains (o/
                                    than of rope or mixed links).
7113.19.50.......................  Precious metal (o/than silver)
                                    articles of jewelry and parts
                                    thereo, whether or not plated or
                                    clad with precious metal,nesoi.
7116.20.50.......................  Precious stone articles,nesoi.
7117.19.90.......................  Imitation jewelry (o/than toy jewelry
                                    valued not over 8 cents per piece &
                                    rope, curb, cable, chain, and
                                    similar articles produced in
                                    continuous lengths), of base metal
                                    (wheth. or n/plated w/prec.metal),
                                    nesoi.
8415.82.01.......................  Air conditioning machines
                                    incorporating a refrigerating unit,
                                    nesoi.
8418.40.00.......................  Freezers of the upright type, not
                                    exceeding 900 liters capacity,
                                    electric or other.
8418.50.00.......................  Refrigerating or freezing display
                                    counters, cabinets, showcases and
                                    similar refrigerating or freezing
                                    furniture.
8418.69.01.......................  Refrigerating or freezing equipment
                                    nesoi.
8532.24.00.......................  Ceramic dielectric fixed capacitors,
                                    multilayer.
9001.10.00.......................  Optical fibers, optical fiber bundles
                                    and cables, other than those of
                                    heading 8544.
9401.71.00.......................  Seats nesoi, w/metal frame (o/than of
                                    heading 9402), upholstered.
9403.10.00.......................  Furniture (o/than 9401 or 9402) of
                                    metal nesoi, of a kind used in
                                    offices.
9403.20.00.......................  Furniture (o/than 9401 or 9402) of
                                    metal nesoi, o/than of a kind used
                                    in offices.
9403.40.90.......................  Furniture (o/than 9401 or 9402) of
                                    wood (o/than bentwood) nesoi, of a
                                    kind used in the kitchen & not
                                    designed for motor vehicl. Use.
9403.60.80.......................  Furniture (o/than 9401 or 9402) of
                                    wood (o/than bentwood) nesoi.
9403.89.60.......................  Furniture (o/than 9401 or 9402) of
                                    materials nesoi.
9503.00.00.......................  Toys, including riding toys o/than
                                    bicycles, puzzles, reduced scale
                                    models.
9504.50.00.......................  Video game consoles and machines,
                                    other than those of heading 9504.30.
9504.90.40.......................  Game machines (o/than coin- or token-
                                    operated) and parts and accessories
                                    thereof.
9504.90.60.......................  Chess, checkers, backgammon, darts
                                    and o/table and parlor games played
                                    on boards of a special design and
                                    parts thereof; poker chips and dice.
9504.90.90.......................  Articles nesoi for arcade, table or
                                    parlor games & parts & access.;
                                    automatic bowling alley equipment &
                                    parts and accessories thereof.
9508.10.00.......................  Traveling circuses and traveling
                                    menageries; parts and accessories
                                    thereof.
9508.90.00.......................  Merry-go-rounds, boat-swings,
                                    shooting galleries and other
                                    fairground amusements; traveling
                                    theaters; parts and accessories
                                    thereof.
9603.29.80.......................  Shaving brushes, hair brushes, nail
                                    brushes, eyelash and other toilet
                                    brushes for use on the person (o/
                                    than tooth brushes), valued o/40
                                    cents each.
------------------------------------------------------------------------

[FR Doc. 2021-11862 Filed 6-4-21; 8:45 am]
BILLING CODE 3290-F1-P