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March 29, 2021

USTR proposes 25% punitive tariff on Austrian, Indian, Italian, Spanish, Turkish and UK origin goods in response to each country’s DST; Terminates investigations for Brazil, Czech Republic, EU and Indonesia

Executive summary

On 26 March 2021, the United States (US) Trade Representative (USTR) announced proposed punitive tariffs of 25% on goods from Austria, India, Italy, Spain, Turkey, and the United Kingdom (UK) with regard to each country’s Digital Services Tax (DST). The proposed tariff amounts are directly tied to the amount of the DST that each country is estimated to collect from US companies. The USTR also provided a proposed list of impacted products per country and is asking for public comments due by 30 April 2021.1

Additionally, the USTR announced the termination of investigations under Section 301 of the Trade Act of 1974 (Section 301) regarding the proposed DST of Brazil, the Czech Republic, the European Union (EU),2 and Indonesia, as the countries have not adopted or have not implemented their respective DST since the initiation of the investigations.

Detailed discussion

In June 2020, the USTR initiated Section 301 investigations into Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey and the UK relating to the adoption or contemplated adoption of a DST.3

In early January 2021, the USTR announced its findings in the investigations of the DST regimes of Austria, India, Italy, Spain, Turkey and the UK. In each instance, the USTR concluded that the adopted DST regime was discriminatory to US companies, inconsistent with prevailing principals of international taxation, and burdens or restricts US commerce. At the time of the announcements, the USTR noted there was no intention take immediate action but all options were under review.

On 26 March 2021, the USTR announced proposed punitive tariffs of 25% on goods originating in each of the countries with a DST regime. The announcements for each individual country noted that the tariff would be applied on the estimated aggregate level of trade that would collect duties on goods of the country estimated to be collected on US companies under the DST, along with a list of proposed goods to be subject to the tariffs. Information regarding the aggregate level of trade for each country, as well as some examples of the proposed goods are noted in the table below.

The USTR has requested public comment with regard to each of the proposed tariff actions. Specifically, comments should address:

  • The level of the burden or restriction on US commerce resulting from the applicable country’s DST, including the amount of DST payments owed by US companies, the annual growth rate of such payments, and other effects, such as compliance costs10 May 2021

  • The appropriate aggregate level of trade to be covered by additional duties

  • The level of the increase, if any, in the rate of duty

  • The specific products to be subject to increased duties, including whether the proposed tariff subheadings should be retained or removed, or whether tariff subheadings not currently considered should be added

Written comments are due by 30 April 2021.


Aggregate trade amount

Ad valorem tariff

Proposed goods

Virtual hearing date




  • Stemware
  • Grand pianos

11 May 2021




  • Cultured pearls, strung for transport
  • Jewelry articles of precious or semiprecious stones
  • Bedroom furniture of wood




  • Men and women’s suiting
  • Footwear
  • Eyeglasses

5 May 2021




  • Handbags
  • Footwear
  • Hats
  • Glassware




  • Carpets
  • Glazed ceramic tiles
  • Silver articles of jewelry
  • Gold mixed link necklaces




  • Lip and eye make-up preparation
  • Men and women’s overcoats
  • Footwear

Further, the USTR announced the termination of Section 301 investigations into the DST regimes of Brazil, the Czech Republic, the EU and Indonesia, as the countries have not adopted or imposed the tax since the initiation of the investigations. The USTR noted, however, that if any of these jurisdictions proceed to adopt or implement a DST, the USTR may initiate new investigations.

The USTR’s announcement comes on the heels of signals by US Treasury Secretary Janet Yellen on the US willingness to engage through the Organisation for Economic Co-operation and Development (OECD) process. For the US, this commitment to multilateralism is not inconsistent with the USTR’s taking steps to address DSTs imposed by countries outside of the OECD process. It is likely that resolution of this dispute will require a willingness of these countries to bring their DSTs in line with the OECD approach.

Actions for business

Companies that import goods originating in Austria, India, Italy, Spain, Turkey, and/or the UK, which may be impacted under these actions should begin planning. Immediate actions companies should consider are:

  • Fully understand the extent of products impacted on the proposed list of 8-digit Harmonized Tariff codes

  • Submit public comment as appropriate

  • Review options to mitigate the impact of any potential duties, such as:

    • Utilizing US Foreign-Trade Zones or bonded warehouse storage mechanisms to provide tariff deferral, and eliminate tariffs on products re-exported

    • Structuring transactions to obtain refunds of the 301 tariffs paid through the US drawback program

    • Adjusting approaches to reduce the customs value of US imports such as first sale for export or adjustments to transfer prices

    • Determine whether US customs bonds are adequate to support the increase in tariffs

  • Determine whether US customs bonds are adequate to support the increase in tariffs

Additionally, US distributors who purchase from related parties should consider transfer price impacts by the imposition of any new Section 301 duties. Along with the strategic importance of mitigating duty impact while aligning the income tax and customs approaches, mechanics for reporting any transfer pricing adjustments to US Customs should also be reviewed.

This process may be particularly complex when duties are present for only a portion of the year. US Customs has very specific rules for reporting adjustments to prices made after importation, such as transfer pricing adjustments. These rules require that the importer take specific actions before importation of goods for which prices may be adjusted, including adding customs specific language to transfer pricing policies. With proper planning, refunds may be obtained on duties paid should transfer prices be reduced.


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), Global Trade



  1. See USTR press release, “USTR Announces Next Steps of Section 301 Digital Services Taxes Investigations.

  2. EU member countries are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

  3. 85 FR 34709.


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