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June 3, 2021updated 25 Oct 2021 12:15pm

US tech tax tariffs suspended for six months

The US has postponed until November plans to impose punitive tariffs on imports from six countries as part of a digital services taxes dispute. 

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.

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This concluded that additional tariffs of up to 25% would be imposed on items – including some textiles and clothing –  imported from Austria, 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.

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Free Report
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How is technology having an impact on Consumer buying behavior?

As the world rapidly becomes more connected, it is important for brands to understand the impact that improved technology is having on consumer purchasing behaviors. To react effectively, brands must know how to engage with increasingly digitally savvy consumers. GlobalData’s latest Trend Tracker report provides an analysis of Digital Lifestyles – one of GlobalData's top consumer trends for 2022. The report includes an overview of how digital lifestyles are evolving, including the significant impact that the COVID-19 pandemic had on accelerating digitalization, and how this trend is emerging across different Consumer sectors. Key features included in the report:
  • A breakdown of the trend’s prominence across sectors
  • Insights into consumer online penetration, preferred electronic devices and engagement
  • The key drivers and challenges impacting the digital lifestyles trend
  • A spotlight on key innovations set to reshape the consumer landscape
  • Analysis of what’s next for digital innovations and how brands can leverage the trend
Download this report to keep in touch with the more digital consumer.
by GlobalData
Enter your details here to receive your free Report.

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