The Section 301, under an outdated US trade law adopted in 1974, allows the American President to unilaterally impose tariffs or other trade restrictions on foreign countries. The latest Section 301 investigation could lead the US to impose new tariffs on French imports, if Washington and Paris cannot reach a negotiated settlement, reports Xinhua news agency.
"The US is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies," USTR Robert Lighthizer said in a statement on Wednesday.
"The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts US commerce."
On July 4, France's lower house of parliament approved a tax bill targeting multinational digital giants. The bill foresees a 3 per cent tax on the French revenues of digital companies with global revenue of more than 750 million euros, and French revenue over 25 million euros.
"The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies," Lighthizer claimed.
The US will continue its efforts with other countries at the Organisation for Economic Co-operation and Development (OECD) to reach a multilateral agreement to address the challenges to the international tax system posed by an increasingly digitized global economy, the USTR office said.
The Information Technology Industry Council (ITI), a Washington-based trade association representing the information and communications technology industry, on Wednesday urged the US government not to use tariffs as a solution.
"We support the US government's efforts to investigate these complex trade issues but urge it to pursue the investigation in a spirit of international cooperation and without using tariffs as a remedy," said Jennifer McCloskey, ITI's vice president of policy, in a statement.
"It is critical that countries around the world cooperate to address these questions, and the ongoing OECD discussions are a promising example of the international collaboration that is necessary to resolve these issues fairly and thoughtfully," McCloskey said.
The global trading community has become increasingly concerned that the US government's frequent use of Section 301 would go against the World Trade Organization rules, undermine the multilateral trading system and disrupt the global supply chain.
( With inputs from IANS )