The US goes again to the 25 % tariff, which is predicted to be $ 1.three billion for French purses and cosmetics

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The US is going back to the 25 percent tariff, which is expected to be $ 1.3 billion for French handbags and cosmetics

The US has withdrawn plans to impose a last-minute import tax on French luxury goods. In a statement on Thursday, the US sales representative’s office announced that it “has decided to suspend tariff action”. The 25 percent tax on French handbags and cosmetics valued at $ 1.3 billion was announced in July 2020 in response to the introduction of the French digital services tax, which imposes a tax on the digital revenues of businesses that sell a achieve certain global and French sales. This includes technology giants like Facebook Inc., Google, Amazon and Apple.

The Office of the US Commercial Representative (“USTR”), due to go into effect Jan. 6, said Thursday that it had decided to end proposed tariffs in light of the “ongoing investigation into similar digital service taxes (DST”) in ten other jurisdictions accepted or examined. “While these investigations are” significantly advanced “according to the USTR, they” have not yet made a decision on possible trade measures. ”

In the meantime, “a suspension of the tariff measure in the DST investigation in France will encourage a coordinated response to any ongoing DST investigation.

As reported by the Wall Street Journal, the government agency said it was “not taking any specific action at the moment but would continue to” evaluate “all available options, noting that investigations into similar digital tax practices were being carried out in the European Union, Austria, Brazil and the Czech Republic , Indonesia, Spain and the UK are ongoing.

USTR Robert Lighthizer initially threatened to impose tariffs on French goods worth up to $ 2.4 billion imported into the US in December 2019 in response to the introduction of the French digital tax law in July. With its 3 percent tax on digital services companies that have worldwide sales of at least 750 million euros ($ 845 million) and digital sales of 25 million euros ($ 28 million) in France, argued Lighthizer that this is “unreasonable” [and] discriminatory “French law” deliberately targets US companies … and burdens US trade. “As a result, he stated that the government” needs to send a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise excessively burden US companies. “

As we discovered late last year, the potential tariffs should hit some brands harder than others. For example, Louis Vuitton, headquartered in Paris, was relatively well protected in the event that import taxes came into play, as the company has a growing network of American operations alongside its French and other European factories, including a factory in Johnson County, Texas, the Opened in 2019, and has factories in San Dimas and Irwin, California. These manufacturing outposts have enabled LVMH Moët Hennessy Louis Vuitton brand to make “roughly half the bags” it has sold on US soil in the United States over the past 30 years, reported Vanessa Friedman of New York Times in 2019. They’d also allow Louis Vuitton to bypass the majority of the expected tariffs.

Competitors such as the Kering conglomerate (which includes Gucci, Balenciaga, Yves Saint Laurent and Bottega Veneta, among others) and the Birkin manufacturer Hermès, on the other hand, do not maintain any expansive manufacturing operations in the USA, which would probably be in connection with the import of luxury goods into the USA would have been more precarious if tariffs had come into play. According to Sheppard Mullin’s attorneys Reid Whitten and Sarah Ben-Moussa, the impact should be “significant.” “While some consumers of these products may be able to support the higher prices that may result from additional tariffs, that may not be enough to protect certain industry players from long-term loss of revenue.”