Termination of Action in the Section 301 Digital Services Tax Investigation of Turkey and Further Monitoring

CourtTrade Representative Office Of The United States
Citation86 FR 68295
Publication Date01 December 2021
Record Number2021-26116
Federal Register, Volume 86 Issue 228 (Wednesday, December 1, 2021)
[Federal Register Volume 86, Number 228 (Wednesday, December 1, 2021)]
                [Notices]
                [Pages 68295-68297]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-26116]
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                OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
                Termination of Action in the Section 301 Digital Services Tax
                Investigation of Turkey and Further Monitoring
                AGENCY: Office of the United States Trade Representative (USTR).
                ACTION: Notice.
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                SUMMARY: On October 8, 2021, Turkey joined the United States and 134
                other jurisdictions participating in the OECD/G20 Inclusive Framework
                on Base Erosion and Profit Shifting in reaching a political agreement
                on a two-pillar solution to address tax challenges arising from the
                digitalization of the world economy. As part of Pillar 1, all parties
                agreed to remove existing digital services taxes and other relevant
                similar measures, and to coordinate the
                [[Page 68296]]
                withdrawal of these taxes. On November 22, 2021, the U.S. Department of
                the Treasury (Treasury) issued a joint statement with Turkey regarding
                a transitional approach to Turkey's Digital Service Tax (DST) prior to
                entry into force of Pillar 1. The joint statement reflects a political
                agreement that DST liabilities accrued during the transitional period
                will be creditable in defined circumstances against future taxes due
                under Pillar 1. Based on the commitment of Turkey to remove its DST
                pursuant to Pillar 1 and on Turkey's political agreement to the
                transitional approach prior to Pillar 1's entry into force, the U.S.
                Trade Representative has determined to terminate the section 301 action
                taken in the investigation of Turkey's DST. In coordination with
                Treasury, USTR will monitor implementation of the removal of Turkey's
                DST as provided for under Pillar 1 and the transitional approach as
                provided in the joint statement.
                DATES: The additional duties on products of Turkey are terminated as of
                November 28, 2021.
                FOR FURTHER INFORMATION CONTACT: For questions concerning this notice,
                please contact Benjamin Allen, Thomas Au, Patrick Childress, or Kate
                Hadley, Assistant General Counsels at (202) 395-9439, (202) 395-0380,
                (202) 395-9531, and (202) 395-3911, respectively, Robert Tanner,
                Director, Services and Investment at (202) 395-6125, or Michael Rogers,
                Director for Europe at (202) 395-2684.
                SUPPLEMENTARY INFORMATION:
                I. Proceedings in the Investigation
                 For background on the proceedings in the section 301 investigation
                of Turkey's DST, please see prior notices including: 85 FR 34709 (June
                5, 2020); 86 FR 2480 (January 12, 2021); 86 FR 16822 (March 31, 2021);
                and 86 FR 30353 (June 7, 2021).
                 On June 2, 2021, the U.S. Trade Representative determined to take
                action in the form of additional duties on certain products of Turkey
                and to immediately suspend those additional duties for up to 180 days.
                86 FR 30353 (June 7, 2021).
                II. OECD/G20 Negotiations
                 One-hundred forty-one jurisdictions are engaged in international
                tax negotiations under the OECD/G20 Inclusive Framework on Base Erosion
                and Profit Shifting. On October 8, 2021, Turkey joined the United
                States and 134 other participants in reaching political agreement on a
                Statement on a Two-Pillar Solution to Address the Tax Challenges
                Arising from the Digitalisation of the Economy. OECD/G20 Base Erosion
                and Profit Shifting Project, Statement on a Two-Pillar Solution to
                Address the Tax Challenges Arising from the Digitalisation of the
                Economy (Oct. 8, 2021) at https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.pdf (the OECD/G20 Two-Pillar
                Solution). The statement provides that Pillar 1 will be implemented
                through a multilateral convention. With respect to DSTs, the statement
                provides:
                 The Multilateral Convention (MLC) will require all parties to
                remove all Digital Services Taxes and other relevant similar
                measures with respect to all companies, and to commit not to
                introduce such measures in the future. No newly enacted Digital
                Services Taxes or other relevant similar measures will be imposed on
                any company from 8 October 2021 and until the earlier of 31 December
                2023 or the coming into force of the MLC. The modality for the
                removal of existing Digital Services Taxes and other relevant
                similar measures will be appropriately coordinated.
                III. Joint Statement
                 On November 22, 2021, the United States and Turkey issued a joint
                statement that describes a political compromise reached on a
                transitional approach to existing Unilateral Measures while
                implementing Pillar 1. Joint Statement from the United States and
                Turkey Regarding a Compromise on a Transitional Approach to Existing
                Unilateral Measures During the Interim Period Before Pillar 1 Is in
                Effect, U.S. Dep't of the Treas. (Nov. 22, 2021) at https://home.treasury.gov/news/press-releases/jy0500. Under the transitional
                approach in the joint statement, DST liability that accrues during the
                transitional period prior to implementation of Pillar 1 will be
                creditable in defined circumstances against future taxes due under
                Pillar 1. See id. (citing Joint Statement from the United States,
                Austria, France, Italy, Spain, and the United Kingdom Regarding a
                Compromise on a Transitional Approach to Existing Unilateral Measures
                During the Interim Period Before Pillar 1 is in Effect, U.S. Dep't of
                the Treas. (Oct. 21, 2021) at https://home.treasury.gov/news/press-releases/jy0419). In return, the United States commits to terminating
                the existing section 301 trade action on goods of Turkey, and not to
                impose further trade actions against Turkey with respect to its
                existing DST until the earlier of the date the Pillar 1 multilateral
                convention comes into force or December 31, 2023. Id.
                IV. Termination of Action
                 Section 307 of the Trade Act of 1974, as amended (Trade Act) (19
                U.S.C. 2417), provides that ``[t]he Trade Representative may modify or
                terminate any action, subject to the specific direction, if any, of the
                President with respect to such action, that is being taken under
                section [301] of this title if . . . such action is being taken under
                section [301(b)] of this title and is no longer appropriate.'' The U.S.
                Trade Representative has found that that the political agreement of
                Turkey to the OECD/G20 Two-Pillar Solution, which provides for the
                removal of DSTs upon entry into force of Pillar 1, and the transitional
                approach in the joint statement provide a satisfactory resolution of
                the matters covered by the section 301 investigation of Turkey's DST.
                Accordingly, pursuant to section 307 of the Trade Act, the U.S. Trade
                Representative has determined that the suspended trade action in this
                investigation is no longer appropriate and that the action should be
                terminated.
                 The U.S. Trade Representative's determination was made in
                consultation with Treasury and considers the advice of the interagency
                Section 301 Committee, consultations with representatives of the
                domestic industry concerned, and public comments and advisory committee
                advice received during the investigation.
                 In order to implement the termination of the section 301 action in
                the investigation of Turkey's DST, subchapter III of chapter 99 of the
                Harmonized Tariff Schedule of the United States (HTSUS) is modified by
                the Annex to this notice.
                V. Ongoing Monitoring
                 Section 306(a) of the Trade Act (19 U.S.C. 2416(a)) provides that
                ``[t]he Trade Representative shall monitor the implementation of each
                measure undertaken, or agreement that is entered into, by a foreign
                country to provide a satisfactory resolution of a matter subject to
                investigation. . . .'' Section 306(b) (19 U.S.C. 2416(b)) provides that
                ``[i]f, on the basis of the monitoring carried out under subsection
                (a), the Trade Representative considers that a foreign country is not
                satisfactorily implementing a measure or agreement referred to in
                subsection (a), the Trade Representative shall determine what further
                action the Trade Representative shall take under section [301(a)].''
                Pursuant to section 306(a) of the Trade Act, the U.S. Trade
                Representative, in coordination with Treasury, will monitor the
                implementation of the
                [[Page 68297]]
                political agreement on an OECD/G20 Two-Pillar Solution as pertaining to
                DSTs, the commitments under the joint statement, and associated
                measures. Pursuant to section 306(b) of the Trade Act, if the U.S.
                Trade Representative, in consultation with Treasury, subsequently
                considers that Turkey is not satisfactorily implementing these
                political agreements or associated measures, then the U.S. Trade
                Representative will consider further action under section 301.
                Annex
                 The U.S. Trade Representative has decided to terminate the
                additional duties under heading 9903.90.06 of the HTSUS on articles the
                product of Turkey, as provided for in U.S. notes 27(a) and 27(b) to
                subchapter III of chapter 99 of the HTSUS. The termination of these
                additional duties is effective on November 28, 2021.
                 In accordance with this determination, the U.S. Trade
                Representative has determined to modify the HTSUS by: (1) Deleting U.S.
                notes 27(a) and 27(b) to subchapter III of chapter 99 of the HTSUS; and
                (2) by deleting HTSUS heading 9903.90.06. The modifications of the
                HTSUS are effective on November 28, 2021. Any provisions of previous
                notices issued in this investigation that are inconsistent with this
                notice are superseded to the extent of such inconsistency.
                Greta Peisch,
                General Counsel, Office of the United States Trade Representative.
                [FR Doc. 2021-26116 Filed 11-30-21; 8:45 am]
                BILLING CODE 3290-F2-P
                

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