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USTR Announces Additional Duties on Cosmetics and Handbags from France, Delays Effective Date Until January 2021

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USTR Announces Additional Duties on Cosmetics and Handbags from France, Delays Effective Date Until January 2021

On July 10, 2020, the U.S. Trade Representative (USTR) announced that it would impose a 25 percent additional duty on certain cosmetics, soaps and cleansing products, and handbags that are products of France, valued at $1.3 billion, due to the French Digital Services Tax (DST). Nevertheless, USTR delayed the application of the duties for as long as 180 days, which means that at the earliest, the additional duties would go into effect January 6, 2020.  USTR stated that the tariffs could go into effect sooner than the 180-day suspension period, but if this change were to occur, USTR would issue a subsequent Federal Register Notice amending the effective date of implementation for the tariffs.

In July 2019, USTR opened an investigation directed at the Government of France under Section 301 of the Trade Act of 1974, because of France’s new DST, which imposed a 3 percent revenue tax on companies providing certain online services directed at French customers. In December 2019, USTR found that the French DST was “unreasonable, discriminatory, and burdens U.S. commerce” and was expected to collect over $500 million in taxes for activities in 2021. USTR accepted comments from interested parties in early 2020 on a proposed list of goods targeted for additional tariffs, which included French cheeses, wines, cosmetics, and handbags. However, prior to the imposition of additional duties, the U.S. and French governments were able to negotiate a truce that temporarily delayed the implementation of the DST until December 2020 and obviated the need for USTR to take immediate action.

USTR has stated that this action concerning tariffs on certain French goods is not intended to escalate trade tensions with France but instead was necessitated by Section 304(a)(2)(B) of the Trade Act of 1974 requiring that USTR announce the action to be taken within 12 months of the initiation of the Section 301 investigation. The 180-day delay of the imposition of the tariffs is intended to provide USTR and France additional time to continue discussions, which could lead to a satisfactory resolution of the DST matter.

USTR has stated that it will continue to monitor the effect of the trade action and may modify the list of affected goods necessary to ensure resolution of the matter with the Government of France.

This action comes on the heels of USTR announcing a similar action into digital service taxes involving India, the European Union and several other countries. Over the last few years, various governments have enacted or considered taxes on revenues generated by digital services companies within the different jurisdictions. Proponents of DSTs argue that the tax corrects corporate taxation to cover previously untaxed or undertaxed revenues. Alternatively, the position of the Trump administration is that DSTs unfairly discriminate against “large, U.S.-based tech companies” such as Amazon and Google.

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Robert Stang is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He leads the firm’s Customs group.

Emily Lyons is an attorney in Husch Blackwell LLP’s Washington, D.C. office.

olives

Spanish Olives in the Pits Over U.S.-EU Trade Tensions

You’d be hard pressed to find a recipe that doesn’t start with a couple tablespoons of olive oil. Whether you’re roasting pumpkin seeds or dressing a salad, a bottle of EVOO is a must in most kitchen pantries.

Olive oil is a critical ingredient in the Mediterranean diet, known as one of the healthiest diets in history (it’s even been dubbed an “intangible cultural heritage” by UNESCO). Its popularity has been building in the United States since the 1990s and has skyrocketed in recent years. Americans now consume 90 million gallons of “liquid gold” each year. But since we produce just five percent of the amount we consume each year, Americans are dependent on imports from other countries, mainly Spain and Italy, to keep us well stocked.

Ripe olives are a critical ingredient for olive oil. They’ve also been ripe with trade tension over the past two years. Spanish black olives, green olives and olive oil have all been embroiled in two recent trade disputes between the United States and the European Union (EU), resulting in higher tariffs and increased prices of Spanish olives and olive oils for U.S. consumers.

Americans consume 90 million gallons of olive oil annually

The art of olive oil

Autumn marks the start of olive harvesting season across the globe. Olives grow on trees in subtropical climates, turning from green to purple and ultimately black by the end of fall.

To make olive oil, fresh olives are picked or shaken from trees in fields and then rushed to the mill, where they are cleaned and ground into a paste. The paste is stirred with water to release oil droplets, and then spun in a centrifuge which separates the oil from the water, leaving fresh olive oil behind. It takes up to 11 pounds of olives to produce just one liter of olive oil.

The art of olive oil production was perfected by the Romans. Oil from Hispania (modern-day Spain) was the most prized in the Roman Empire. Spain has continued the tradition and is the world’s largest producer of olives and olive oil today. It produces nearly 1.3 million tons of olive oil a year, with 80 percent produced in its southern Andalusia region.

Ground and spun

United States consumption of olive oil has increased 257 percent since the 1990s. In addition to reading about olive oil in your cookbook, you may have also read about it in news headlines recently, due to an ongoing dispute at the World Trade Organization (WTO) involving airplanes.

US consumption of olive oil since 1990

This September the United States won the largest WTO arbitration award ever over illegal EU subsidies to its aircraft industry. The WTO approved the United States to levy up to $7.5 billion a year in retaliatory tariffs on EU products until they remove the subsidies.

Following the WTO ruling, the U.S. Trade Representative (USTR) announced that the U.S. will implement tariffs of 10 percent on civilian aircraft and 25 percent tariffs on a long list of EU products like butter, cheeses and whiskies starting October 18. The list also included green olives and olive oil from France, Germany, Spain and the United Kingdom. Other major European olive oil producers, Italy and Greece, were not included.

This 25 percent tariff is a double whammy for Spanish olive producers, who were hit with U.S. duties on ripe black olive exports last year.

In the pit of the olive dispute

In August 2018, the U.S. Department of Commerce imposed duties of up to 27 percent on Spanish black olive exports as part of an antidumping and countervailing duty case initiated by Californian olive growers.

California growers argued that Spanish black olives were being dumped in the United States market at lower prices than the domestic market in Spain, and that subsidies under the European Common Agriculture Policy (CAP) were allowing Spanish producers to benefit from an unfair advantage. After an investigation, the Department of Commerce and U.S. International Trade Commission agreed with the California growers’ assertions and placed duties on Spanish imports.

In January 2019, the EU took the case to the WTO arguing that the EU’s CAP program is in line with WTO rules and thus the United State may not apply countervailing duties on Spanish olive imports. The EU sees the case as having “far-reaching consequences” since the case effectively challenges the EU’s agricultural model. WTO members have agreed to the EU’s request for a dispute panel to review the U.S. tariffs.

In the meantime, Spanish producers are already feeling the pain. In 2017, before the tariffs were imposed, the United States imported an estimated $67.6 million worth of ripe olives from Spain. In the first two months after the U.S. imposed tariffs, exports fell by 72 percent, according to the Spanish Association of Olive Exporters.

The overall impact of the tariffs is estimated at 350 and 700 million euros over the next five to 10 years, according to a March 2018 European Parliament report. The tariffs could even “potentially lead to the end of Spanish ripe olive exports,” the report says.

To make matters worse for Spanish olive producers, olive oil prices have dropped significantly over the last two years. Reuters reported that tens of thousands of olive producers from southern Spain marched to Madrid in October in protest of low prices and U.S. tariffs.

Where is the olive branch?

Throughout history olive branches have been used to symbolize peace. However, in recent years olives have become a source of argument between the United States and the European Union, and have also been caught in the crosshairs of other trade disputes.

Olives are just one item on a long list of trade issues between the United States and the European Union. The two shelved Transatlantic Trade and Investment Partnership (TTIP) talks in 2016. They restarted bilateral talks in July 2018, where they agreed to work toward zero tariffs, but have since stalled over U.S. demands to include agriculture in the discussions, which the EU has not agreed.

Unfortunately for Spanish olive producers looking for relief from U.S. tariffs, a deal soon does not look likely. And olive oil, unlike wine, does not get better with age.

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Lauren Kyger

 

Lauren Kyger is Associate Editor for TradeVistas. Prior to joining TradeVistas, she was a Research Associate at the Hinrich Foundation focused on international trade issues. She is a Hinrich Foundation Global Trade Leader Scholar alumna, earning her Master’s degree in Global Business Journalism from Tsinghua University in Beijing. She received her Bachelor’s degree from the Walter Cronkite School of Journalism and Mass Communication at Arizona State University.

This article originally appeared on TradeVistas.org. Republished with permission.