Fashion is staring down new tariffs on Spanish footwear, Indian jewelry, Turkish bed linens and more.
United States Trade Representative (USTR) Katherine Tai on Wednesday announced the conclusion of the one-year Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey and the U.K.
The final determination in those investigations was to impose additional tariffs on certain goods from these countries, while suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the Organization for Economic Cooperation & Development (OECD) and in the G20 process.
“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes,” Tai said. “The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.”
On June 2, 2020, USTR in the prior administration initiated investigations into DSTs adopted or under consideration in 10 jurisdictions–Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the U.K.
In January, following comprehensive investigations, USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey and the U.K. discriminated against U.S. digital companies, were inconsistent with principles of international taxation and burdened American firms.
In March, USTR proposed trade actions in these six investigations, and undertook a public notice and comment process, during which it collected hundreds of public comments and held seven public hearings. USTR also terminated the remaining four investigations of Brazil, the Czech Republic, the European Union and Indonesia because those jurisdictions had not implemented the DSTs under consideration.
At a USTR hearing last month, apparel and retail trade groups spoke out against the new proposed tariffs.
Blake Harden, vice president of international trade at the Retail Industry Leaders Association (RILA), stressed that the imposition of any additional tariffs on imported goods would hurt American companies, consumers and workers without obtaining the elimination of Austria, India, Italy, Spain, Turkey, or the U.K.s digital services taxes.
“Simply put, adding additional financial strain during an ongoing pandemic and economic recession will slow our recovery, harm American businesses’ ability to compete, limit American consumers’ access to key products and put Americans out of work,” she said.
Beth Hughes, vice president of trade and customs policy at the American Apparel & Footwear Association (AAFA), also said the group “strongly supports the trade principle that U.S. trading partners must abide by global trade rules. Further, we support this administration’s efforts to address unfair trading practices.”
“However, we have serious concerns that the imposition of new punitive duties on U.S. imports from Austria, India, Italy, Spain, Turkey and the U.K. would result in great harm to our industry and exacerbate supply chain disruption issues,” Hughes said.
On Wednesday, AAFA president and CEO Steve Lamar voiced concern that “tariffs in any shape continue to be used as negotiating tools.”
“Making it more expensive for Americans to get dressed every day is not a way to promote positive change abroad,” he said, describing tariffs as a “huge, hidden tax paid by American consumers in the form of higher prices and by American workers in the form of fewer jobs and lower wages.”
“While we are glad to see that the U.S. Trade Representative is suspending tariffs for at least six months as it continues to navigate the Digital Services Taxes dispute, it would have been preferable to see the threat of tariffs removed entirely,” Lamar added.
From USTR’s proposed product lists, members of the Retail Industry Leaders Association, including Walmart and Target, import goods such as cosmetics, perfumes and shampoos from the U.K.; carpets, bed linens, curtains, tiles, kitchen fixtures and bathroom ceramics from Turkey; glassware and footwear from Spain, and jewelry and furniture from India.
“We fail to see how the imposition of an additional import tax on these products, which will be paid by Americans, will convince our trading partners to withdraw or reform their digital services taxes,” Harden said. “At the same time, imposing these tariffs will severely harm the ability of U.S. retailers to compete globally.”
Additional reporting by Jessica Binns.