French Fashion and Retail Goods Face 25% Duties Starting January 2021

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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 has imposed additional duties of 25 percent on French goods, effective January 6, 2021, a cost that importers and retailers will have to absorb or pass on to their customers.

As forecast in our related alert published June 19, available here, the US’s withdrawal from participation in talks to agree on a multilateral taxation framework for the digitized economy has impacted the fragile truce between the US and France.

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 collection of taxes under its digital service law until the end of 2020 to allow the broader talks before the Organisation for Economic Co-operation and Development (OECD) to continue. The US agreed to withhold imposition on pre-announced tariffs on $2.4 billion of French products. This agreement followed the USTR’s determination in December 2019 that France’s DST was unreasonable or discriminatory against US companies and burdens or restricts US commerce. Under US law, the President is authorized to take action against such restrictions.

Pressure on France to Hold Off Taxing US Companies

On July 10, 2020, the US Trade Representative 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 DST on US companies.

The USTR created a new HTSUS heading 9903.90.01, which encompasses the 21 tariff subheadings subject to the additional ad valorem duties of 25 percent. The HTSUS subheading and list of covered goods are published in the USTR’s notice, available here. The products include:

HTSUS 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 & preparations for the care of the skin, excl. medicaments but incl. sunscreen or sun tan preparations, nesoi

3401.11.10

Castile soap in the form of bars, cakes or molded pieces or shapes

3401.11.50

Soap, nesoi; organic surface-active products used as soap, in bars, cakes, pieces, soap-impregnated paper, wadding, felt, for toilet use

3401.19.00

Soap; organic surface-active products used as soap, in bars, cakes, pieces; soap-impregnated paper, wadding, felt, not for toilet use

3401.20.00

Soap, not in the form of bars, cakes, molded pieces or shapes

3401.30.10

Organic surface-active products for wash skin, in liquid or cream, contain any aromatic/mod aromatic surface-active agent, put up for retail

3401.30.50

Organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, nesoi

4202.21.30

Handbags, with or without shoulder strap or without handle, with outer surface of reptile leather

4202.21.60

Handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, nesoi, n/o $20 ea.

4202.21.90

Handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, nesoi, over $20 ea.

4202.22.15

Handbags, with or without shoulder straps or without handle, with outer surface of sheeting of plastics

4202.22.40

Handbags with or without shoulder strap or without handle, with outer surface of textile materials, wholly or in part of braid, nesoi

4202.22.45

Handbags with or without shoulder strap or without handle, with outer surface of cotton, not of pile or tufted construction or braid

4202.22.60

Handbags with or w/o shoulder strap or w/o handle, outer surface of veg. fibers, exc. cotton, not of pile or tufted construction or braid

4202.22.70

Handbags with or w/o shoulder strap or w/o handle, with outer surface containing 85% or more of silk, not braided

4202.22.81

Handbags with or without shoulder strap or without handle, with outer surface of MMF materials

4202.22.89 Handbags with or without shoulder strap or without handle, with outer surface of textile materials nesoi

The duties remain suspended until January 6, 2020 to allow for additional negotiations that might resolve the matter. However, if such negotiations are not successful, the effective date of the duties will be January 6, 2020. At this time, the USTR has not indicated whether an exclusion process will be facilitated should the duties take effect as planned.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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