US tech tax tariffs suspended for six months - Just Style
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US tech tax tariffs suspended for six months

By Leonie Barrie 03 Jun 2021 (Last Updated June 3rd, 2021 14:28)

The move, announced yesterday (2 June) by United States Trade Representative Katherine Tai, came at the end of a one-year Section 301 investigation into the issue.

This concluded that additional tariffs of up to 25% would be imposed on items – including some textiles and clothing –  imported from Australia, India, Italy, Spain, Turkey and the United Kingdom.

However, the tariffs will be suspended “for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process.”  

“The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes,” said Ambassador Tai. “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.”

The proposals are in response to Digital Services Taxes (DST) by the six countries targeting US technology firms, including search engines, social media services and online marketplaces.

Supply chain disruption

The move has been strongly opposed by US brands, retailers and importers, who say it would exacerbate supply chain disruption issues during the Covid-19 pandemic.

The proposal covers several textile and apparel products (HS Chapters 50-63). However, an analysis of the USTR’s final decision by Dr Sheng Lu, associate professor in Fashion and Apparel Studies at the University of Delaware, shows some textile and apparel products have now been removed from the list previously proposed in March. Most significantly, items from India are no longer impacted.

  • Austria: No textiles and apparel products affected
  • India: No textiles and apparel products affected
  • Italy: (25% punitive tariffs): all 8-digit codes under 6103, 6104, 6110, 6117, 6203, 6204
  • Spain: No textiles and apparel products affected
  • Turkey: (25% punitive tariffs): all 8-digit codes under 5701, 5702, 5703, 6302
  • UK: (25% punitive tariffs): 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

In a submission earlier this year to the USTR hearing on the matter, Beth Hughes, vice president for trade and customs policy at the American Apparel & Footwear Association (AAFA), noted that many AAFA members have sought out new suppliers due to the Section 301 action against China several years ago.

“Italy is our 6th largest supplier of footwear and 9th for accessories. US apparel imports from Turkey have doubled in the past decade. US apparel imports from the UK have experienced steady growth.

“The growth in each of these categories in the countries in question furthers the national interest of diversifying supply chains away from China. However, the proposed set of actions would seek to punish the US companies who have made much needed progress in this area to find supply chain partners.”

She also stressed that “apparel, footwear, and accessories have nothing to do with digital services. Because of this lack of connection, imposing punitive tariffs on US imports for apparel, footwear, and accessories from these countries will do nothing to change their behaviour in this dispute.”

In March, the UK’s fashion and textile sector also expressed its disappointment over the potential implementation of punitive tariffs by the US.