Because this legislation repeals the existing foreign sale corporation provisions and puts in their place radically different rules, Export Assist, Inc. is providing information to its clients and their advisors about H. R. 4986 in the form of a handbook.

For a quick overview of the handbook click on the summary report here.
Summary of H.R. 4986. For the full text, right click on the Exporters' Handbook and use 'Save Link As' or 'Save Target As' to download the complete handbook in Adobe PDF file format. Exporters' Handbook covering H.R. 4986 (PDF file size is 84K bytes)You can open the PDF file using the Adobe Acrobat Reader software available free from Adobe Inc.--- to obtain the latest Adobe Acrobat Reader click here.

President Clinton signed the bill into law on Wednesday, November 15, 2000. As was expected, the EU has already made it clear that the new U. S. export tax system is “just as unpalatable” as the one invalidated earlier this year by the WTO. The 15-nation EU has asked the WTO to begin a review of the new law, which is expected to take several months.

The US's position is that of “feeling good” about the legislation and believing that the recommendations of the dispute settlement system/WTO were in fact implemented. Clinton said the new legislation should avert an immediate confrontation with the EU because the WTO must review the U. S. law before authorizing any retaliation. The EU, on the other hand, has said it would impose $4.043 billion in sanctions on anything from crispy corn flakes to cold steel if the WTO rules that the law Clinton signed is deemed illegal. The European Commission, the EU's executive arm, expects the United States to challenge any sanctions. If enforced, the sanctions would set off the two economic giants on their biggest trade dispute yet. Earlier conflicts, including those over beef and banana imports, “pale into insignificance,” according to an EU spokesperson.

What does all this mean? Under a previous agreement, the US will, by November 30, ask for WTO arbitration on the EU's sanction request. Both sides will then request that the arbitrators suspend work until the WTO panel decides whether or not the new US law complies with global trade rules. Only if the WTO panel finds in the EU's favor would the arbitrators resume their work and determine a value on US exports on which the EU could legally impose sanctions. All of this is estimated to take until the middle of 2001, giving both sides more time to seek a resolution. While continuing in this “wait and see” mode, Export Assist will keep you updated as to any new developments in this area

While it initially passed in September with a "voice" vote, many legislators attempted to include additional amendments, some with special interests in mind, and others which had absolutely no bearing on the FSC legislation at all. While the U. S. is maintaining that the FSC repeal/replacement bill will indeed pass while Congress is in session this year, substantive changes to the bill as currently written could result in it being returned to the House for a new vote. A last minute deal with the European Union (EU) extended the deadline for the FSC legislation to November 1, 2000.

However, with the extension came a reiteration of the EU’s belief that the proposed legislation still violates international trade laws. What does all this mean? Without an act of Congress, U. S. tax law cannot be changed. At this time, the Foreign Sales Corporation entity is alive and well in its present form and is anticipated to continue at least until December 31, 2001, providing time for a successful transition to a new tax-advantaged vehicle.

At present, we must continue to comply with current law, including the maintenance of required books and records and, if a regular FSC, performance of economic processing tests. Export Assist will continue to provide you with updates as more information becomes available. .

The Senate Leadership has indicated that the bill may be added to a larger tax package that is expected to be passed before adjournment this year. The Amendments to H.R. 4986 are not expected to hold up action on the legislation. Details of any new minor revisions to the ACT, as written in July, will be posted shortly.

The Bill, which must now pass the U.S. Senate in order to become law, is expected to have the support required to do so. Details of any minor revisions to the ACT, as written in July, will be posted as they become known.