Certain products from France, including leather handbags and certain beauty preparations and soaps, will soon become pricier.
Following a disagreement over how to tax US tech companies in France, the US Trade Representative (USTR) has imposed additional duties of 25% on French goods, effective 6 January 2021 – a cost that importers and retailers will have to absorb or pass on to their customers.
As forecast, the United States' withdrawal from talks to agree a multilateral taxation framework for the digitised economy has affected the fragile truce between the United States and France (for further details please see "US withdrawal from international tax talks pulls numerous trading partners closer to new tariffs").
US investigation of French digital services tax resulted in agreement with France
In January 2020 the United States and France announced a détente under which France would delay the collection of taxes under its digital service law until the end of 2020 to allow the broader talks before the Organisation for Economic Cooperation and Development to continue. The United States agreed to withhold the imposition of pre-announced tariffs on $2.4 billion worth of French products. This agreement followed the USTR's determination in December 2019 that France's digital services tax was unreasonable or discriminatory against US companies and burdens or restricts US commerce (for further details please see "USTR opens new front in trade wars with proposed France duties"). Under US law, the president is authorised to take action against such restrictions.
Pressure on France to hold off taxing US companies
On 10 July 2020 the USTR announced that it would impose duties of 25% on French goods with an estimated trade value of 1.3 billion, pressuring France to withhold levying the digital services tax on US companies.
The USTR created a new Harmonised Tariff Schedule of the United States (HTSUS) Heading 9903.90.01, which encompasses the 21 tariff subheadings subject to the additional ad valorem duties of 25%. The HTSUS subheadings and the list of covered goods are published in the USTR's notice and set out below.
|
Subheading |
Product description |
|---|---|
|
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 |
|
3304.99.50 |
Beauty or make-up preparations and preparations for the care of the skin, excluding medicaments but including sunscreen or suntan preparations not elsewhere specified or included (NESOI) |
|
3401.11.10 |
Castile soap in the form of bars, cakes or moulded pieces or shapes |
|
3401.11.50 |
Soap NESOI; organic surface-active products used as soap in the form of bars, cakes or pieces; soap-impregnated paper, wadding or felt which is for toilet use |
|
3401.19.00 |
Soap; organic surface-active products used as soap in the form of bars, cakes or pieces; soap-impregnated paper, wadding or felt which is not for toilet use |
|
3401.20.00 |
Soap which is not in the form of bars, cakes, moulded pieces or shapes |
|
3401.30.10 |
Organic surface-active products for washing the skin, in liquid or cream, containing any aromatic or mod aromatic surface-active agent and put up for retail sale |
|
3401.30.50 |
Organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale and NESOI |
|
4202.21.30 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of reptile leather |
|
4202.21.60 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of leather, composition or patent leather, NESOI, which cost less than $20 each |
|
4202.21.90 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of leather, composition or patent leather, NESOI, which cost more than $20 each |
|
4202.22.15 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of sheeting of plastics |
|
4202.22.40 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of textile materials, wholly or partly braid, NESOI |
|
4202.22.45 |
Handbags with or without a shoulder strap or without a handle, with an outer surface of cotton, not of pile or tufted construction or braid |
|
4202.22.60 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of vegetable fibres, excluding cotton, not of pile or tufted construction or braid |
|
4202.22.70 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface containing 85% or more of silk, not braided |
|
4202.22.81 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of man-made materials |
|
4202.22.89 |
Handbags, with or without a shoulder strap or without a handle, with an outer surface of textile materials NESOI |
The duties remain suspended until 6 January 2020 to allow for additional negotiations that might resolve the matter. If such negotiations are unsuccessful, the effective date of the duties will be 6 January 2020. At this time, the USTR has not indicated whether an exclusion process will be facilitated should the duties take effect as planned.
