The U.S. Trade Representative (USTR) issued its Section 301 investigation report this week on France’s digital services tax (DST), finding that the tax discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. The report notes that the French DST is inconsistent with prevailing tax principles because of its unusual and inconsistent retroactivity, its application to revenue rather than income, its extraterritorial application to revenues unconnected to a presence in France, and its purpose of deliberately targeting and penalizing particular U.S. technology companies (such as Google, Apple, Facebook and Amazon).


In July 2019, the French government passed a tax on revenues generated by certain companies involved in the digital services industry (see Trump and Trade Update of July 11, 2019). The resulting digital services tax imposed a 3 percent levy on gross revenues generated by companies providing two categories of digital services – “digital interface” services and “targeted advertising” services – to, or aimed at, persons in France. The DST, however, applies only to companies that generate total annual revenues from the covered digital services of at least €750 million globally and €25 million in France. The DST applies retroactively, beginning January 1, 2019. At the time of the DST’s enactment, the U.S. government expressed its concern that the tax unfairly targeted U.S. companies and launched in response on July 10, 2019, an investigation of the French DST pursuant to Section 301 of the Trade Act of 1974, which included a public hearing on August 19, 2019 (see Trump and Trade Update of August 19, 2019).

Proposed Retaliatory Action

In a forthcoming Federal Register notice, the USTR is proposing action in the form of additional ad valorem duties of up to 100 percent on products of France to be drawn from a preliminary list covering 63 Harmonized Tariff Schedule (HTS) subheadings, with an estimated import trade value for calendar year 2018 of approximately $2.4 billion. The proposed list includes goods from Chapters 4, 22, 33, 34, 42, 69 and 73 of the HTS, including cheese and dairy products, sparkling wine, cosmetics, soaps, handbags, porcelain or china household table and kitchen products, and certain cast iron kitchen products.

In determining the appropriate retaliatory action, the USTR “may take account of the level of harm to the U.S. economy caused by France’s DST” and is seeking public comment on the level of harm, “including DST payments owed by U.S. companies, the annual growth rate of such payments, and other effects, such as compliance costs.” Comments by interested parties must be submitted by January 6, 2020, prior to a January 7, 2020 public hearing at 9:30 a.m. at the U.S. International Trade Commission, 500 E Street SW, Washington, D.C. 20436. Any final post-hearing rebuttal comments must be filed by January 14, 2020. Written comments should be submitted via the Federal eRulemaking Portal at, on Docket Number USTR-2019-0009. There are specific procedures for filing comments that contain business confidential information.

In a brief statement to the press, USTR Robert Lighthizer noted that the United States “will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” adding that the USTR is considering opening similar Section 301 investigations into the digital services taxes of Austria, Italy and Turkey.