On March 6, 2019, the French government released a proposal for a 3 percent tax on revenues generated by some companies from certain digital services (the DST). The two houses of the French parliament passed DST bills on April 9 and May 21, 2019, and agreed on a final bill on July 4, 2019. On July 24, 2019, President Emmanuel Macron signed into law a 3 percent levy on gross revenues generated from "digital interface" and "targeted advertising" services provided "in France." The DST applies only to companies that generate €750 million globally and €25 million in France, and requires that covered companies calculate revenues attributable to France using formulas specified under the law. The services covered under the law are ones where U.S. firms are global leaders. The DST applies retroactively beginning January 1, 2019.
On July 10, 2019, the USTR initiated an investigation of the French DST pursuant to section 302(b)(1)(A) of the Trade Act of 1974, as amended (Trade Act). Section 301 of the Trade Act sets out three types of acts, policies or practices of a foreign country that are actionable: (i) trade agreement violations; (ii) acts, policies or practices that are unjustifiable (defined as those that are inconsistent with U.S. international legal rights) and burden or restrict U.S. commerce; and (iii) acts, policies or practices that are unreasonable or discriminatory and burden or restrict U.S. commerce. If the USTR determines that an act, policy or practice of a foreign country falls within any of the categories of actionable conduct, the USTR must determine what action, if any, to take. Authorized actions include "imposing duties, fees, or other import restrictions on the goods or services of the foreign country."