Spain Welcomes Suspension Of US Tariffs On Spanish Products Due To Digital Tax

The Spanish Government’s negotiations with the Biden administration succeeded in getting nine products off the list penalized by the US.

Following the official announcement of the decision of the United States Trade Representative (USTR), Katherine Tai, to impose additional tariffs of 25% on a range of Spanish products, as well as the immediate suspension of their application for a period of 180 days, the Government of Spain reports that this announcement marks the end of the year-long Section 301 investigations into the digital services taxes adopted by Austria, India, Italy, Spain, Turkey and the United Kingdom. The report was published in January and concluded that the taxes are unfairly targeted at US digital companies and are causing damage to the US economy, and recommended imposing additional tariffs on certain goods from these countries.

In March 2021, the USTR announced the proposed trade actions in these six investigations, and undertook a public hearing and comment process, during which it collected hundreds of comments and held seven public hearings.

During the course of the investigation, the Spanish government has repeatedly pointed out that the Tax on Certain Digital Services in Spain has been designed to be proportionate, neutral and non-discriminatory. Moreover, its temporary nature is explicitly stated in the text of the law itself and it has been repeatedly pointed out that as soon as there is a multilateral agreement within the framework of the OECD, the process of replacing this tax with the global solution will begin.

Since publication, the Second Vice-President and the Ministers of Industry, Trade and Tourism and Foreign Affairs, European Union and Cooperation have been in contact with their counterparts to convey their displeasure to the US government at the possible imposition of measures and to express their willingness to cooperate and work together to reach an agreement in the international tax negotiations taking place at the OECD.

Representatives of the Secretary of State for Trade have held several meetings and contacts with sectors that could be affected if the measures were applied and the Minister of Industry, Trade and Tourism met with representatives of the footwear sector in Alicante – one of the most affected sectors – to gather first-hand information on the problems, which she subsequently passed on to the US Trade Representative by letter.

The Minister of Industry, Trade and Tourism welcomes the fact that the US has suspended the application of the tariffs and is confident that the suspension will be definitive, as she was able to see first hand the good progress of the negotiations during her visit to the OECD last week to inquire about the status of the negotiations.

She also welcomes the fact that, compared to the list that was submitted for public hearing and published on 26 March, 9 of the 36 initially proposed items have been removed, including some items of footwear, octopus, hats and caps, and a tariff line of glassware.

The announcement of the immediate suspension confirms that “the United States maintains its commitment to reaching a consensus on international tax issues through the OECD processes, a commitment that the Spanish government also shares”, the Minister indicated.

Spain and the United States are working intensively within the OECD to reach an agreement on a global tax architecture that fairly taxes intellectual property (IP) and digital profits. The full resolution is only possible in the context of a broader global agreement on international taxation.

The value of trade in the tariff lines concerned is:

The following items have been excluded from the list:

0307.51.00 …………. Octopus, live, fresh or chilled.

0307.59.01 …………. Octopus, dried, salted or in brine.

1605.55.60 …………. Octopus, prepared or preserved.

6403.59.15 …………. Turn or turned footwear w/outer soles and uppers of leather, not covering the ankle.

6403.91.90 …………. Footwear w/outer soles of rubber/plastics/comp. leather & uppers of leather, cov. ankle, n/welt, for persons other than men/youths/boys.

6403.99.60 …………. Footwear w/outer soles of rubber/plastics/comp. leather & uppers of leather, n/cov. ankle, n/welt, for men, youths and boys, nesoi.

6505.00.04 …………. Hats and headgear of fur felt made from hat forms and hat bodies of 6501.

6505.00.60 …………. Hats and headgear, of man-made fibers, knitted or crocheted or made up from knitted or crocheted fabrics, not in part of braid.

7013.99.50 …………. Glassware for toilet/office/indoor decor. or similar purposes, nesoi, valued over $0.30 but n/over $3 each.