[Congressional Record (Bound Edition), Volume 146 (2000), Part 12]
[Extensions of Remarks]
[Page 17998]
[From the U.S. Government Publishing Office, www.gpo.gov]



        REPEAL AND EXTRATERRITORIAL INCOME EXCLUSION ACT OF 2000

                                 ______
                                 

                               speech of

                       HON. CAROLYN C. KILPATRICK

                              of michigan

                    in the house of representatives

                      Tuesday, September 12, 2000

  Ms. KILPATRICK. Mr. Speaker, I rise today in support of H.R. 4986, 
the Foreign Sales Corporation Repeal and Extraterritorial Income Act of 
2000 because it will help preserve the strong financial standing of our 
nation's export manufactures and our economy. This debate cannot be 
understood without an understanding of the origin of the Foreign Sales 
Corporation (FSC). The FSC was created by the Department of Commerce to 
provide incentives to increase exports by United States (U.S.) 
manufacturers competing against Asian and European businesses. American 
industry faced stiff competition from state supported foreign 
enterprises. FSC's were given a reduction in income taxes on net 
foreign profit realized from exports. An export businesses' choice to 
form an FSC allows it to minimize its tax bill on foreign profits 
between 15% and 30%.
  In 1998, a trade dispute arose when the European Union (EU) filed a 
claim against the United States arguing that FSC's were in violation of 
World Trade Organization's (WTO's) rules prohibiting government 
subsidization of exports. The EU argued that the FSC amounted to U.S. 
government subsidization of export businesses. The WTO dispute panel 
agreed with their argument and ruled accordingly. The ruling required 
that the U.S. withdraw the FSC provisions by Oct 1, 2000, or face 
sanctions. These events bring us to the floor today.
  The measure before us today exempts from federal taxes most income 
earned abroad and repeals portions of current law (PL 98-369) that 
created foreign sales corporations (FSCs). Under the measure as long as 
50% of a manufactures goods were produced in the United States, the 
manufacturer could receive the same tax benefit on foreign sales.
  This bill satisfies the concerns of the WTO and will prevent the 
implementation of tariffs on potentially billions of dollars of goods 
made in the U.S. and exported abroad.
  I have opposed important trade legislation in Congress because I have 
been particularly concerned about the effects it would have on U.S. 
jobs and our economy. My review of the record concerning the repeal of 
Foreign Sales Corporations and its replacement gives me confidence that 
this measure will be good for American workers, farmers and businesses. 
This bill has been carefully reviewed by both Democrats and Republicans 
and enjoys the approval of the United States Treasury. I particularly 
applaud the bipartisan work of my colleagues on the Ways and Means 
Committee in resolving this matter, and I urge my colleagues to support 
the bill.

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