Tariffs, soon in the best movie theaters | Business

In a movement that has shaken the global film industry, Donald Trump has announced his intention to impose a 100% tariff on all films produced outside the United States. The measure, which seeks to replace national production, has generated criticism for its possible illegality and the economic consequences that it could lead to. This announcement would be related to Jon Voight’s plan, Trump’s film advisor, to revitalize Hollywood that, according to the documents filtered by the Deadline website, includes a 120% tariff to the productions that may be made in the United States, rolled abroad (100% of the fiscal incentive obtained outside the US plus a penalty of 20%). Although the White House has not confirmed it, the audiovisual sector and the legal experts have already lit the alarms. And it is that a tariff like this would have a huge impact for international co -productions, distribution contracts or digital platforms.

Jurists specialized in international law and in the audiovisual sector agree that the measure faces important legal obstacles and warn about possible disputes within the World Trade Organization (WTO). “The imposition of tariffs on foreign audiovisual productions could not only conflict with the WTO standards, but also with the commitments assumed by the US in several free trade agreements, by unjustified discriminating to the productions of other countries,” explains Pilar Sánchez Bleda, a media & tech partner in legal auren.

A key issue to determine the possible application of this tariff is the legal nature of the films. Within the framework of the WTO, goods can be considered when physically marketed (DVD or hard drives), or services when they are transmitted or exploited by digital. “Until today there is nothing more than a tweet from the president of the United States, so analyze the legality of the measure is complicated and it will have to be attentive to the definitions made on audiovisual productions,” says Inés de Casas, Senior Socia of Elzaburu. However, the lawyer clarifies that, in principle, at the tariff level, cinema is a service, not a merchandise. Therefore, the films would be regulated by the General Agreement on the Commerce of Services (GATS), according to which it is not legal to impose tariffs on electronic transmissions.

Even, although the Trump administration could tax foreign films with a tariff, underline Díez, a legal mint member, the rate could violate the principle of national treatment, provided for in the General Agreement on Customs and Commerce tariffs (GATT), which requires that imported products receive the same treatment as nationals, once they are in the market. It could also violate the most favored nation clause collected in the same agreement, which prevents WTO states from discriminating between countries by applying commercial advantages to some and not to others.

What if Trump uses the argument that cinema is a “cultural exception”? Although this figure appears in agreements such as the UNESCO Convention on Cultural Diversity, it is not officially recognized by the WTO. “The promotion of culture cannot be used as a pretext to apply protectionist measures contrary to the rules of international trade,” says Álvaro de Luis Andrés, partner of Net Craman Lawyers.

Impact and conflicts

One of the greatest legal uncertainties lies in how the origin of a film will be determined to know whether or not it will be subject to the tariff. The US does not have a unified legal definition, which leaves the door open to ambiguous interpretations. Luis Andrés warns that “blockbusters such as Marvel Studios recorded in Pinewood (United Kingdom) or series such as Thrones Game, HBO co -production partially shot in Spain, could be erroneously classified as foreigners, generating litigation and insecurity for US studies themselves.”

The digital and distributors platforms would be the first to suffer the impact of this tariff, since acquisition costs would increase and could be forced to renegotiate contracts. In this scenario, says Pilar Sánchez Bleda, “the parties could invoke clauses of force majeure, given the unforeseen and survey situation, as well as the review clauses that could exist.”

Likewise, producers and distributors could challenge the measure before US courts or go to international arbitrations. “Other options would be to seek protection under bilateral investment treaties that prohibit discrimination or collaborate with their governments to negotiate exceptions or compensation,” adds ten. For its part, any WTO -me -affected country affected by the tariff could file a formal claim before the difference solution body. “If it is shown that the measure exceeds consolidated tariffs, violates the national treatment or the most favored nation clause, the chances of success would be very high,” says Álvaro by Luis Andrés.

There are precedents of similar restrictions in the audiovisual sphere that have ended up in claims. For example, in the Chinese Audiovisuals case of 2009: the OMC difference solution body ruled that the limitations imposed by Beijing to the import and distribution of films and other cultural goods violated the GATSS. The resolution stressed that the defense of culture cannot justify commercial discrimination. On the contrary, the imposition of the European Union to digital platforms, such as Netflix, of a 30% quota of European content has not been challenged, being protected by cultural promotion policies without resorting to tariffs.