[House Report 106-19]
[From the U.S. Government Publishing Office]



106th Congress                                             Rept. 106-19
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================



 
                   AFRICAN GROWTH AND OPPORTUNITY ACT

                                _______
                                

 June 17, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 434]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 434) to authorize a new trade and investment policy 
for sub-Sahara Africa, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
 I. Introduction.....................................................13
        A. Purpose and Summary...................................    13
        B. Background and Need for Legislation...................    14
        C. Legislative History...................................    16
II. Explanation of the bill..........................................16
        A. Short Title...........................................    16
        B. Findings..............................................    17
        C. Statement of Policy...................................    17
        D. Eligibility Requirements..............................    18
        E. United States-Sub-Saharan Africa Trade and Economic 
          Cooperation Forum......................................    20
        F. United States-Sub-Saharan Africa Free Trade Area......    21
        G. Eliminating Trade Barriers and Encouraging Exports....    22
        H. Generalized System of Preferences.....................    25
        I. Executive Branch Initiatives..........................    27
        J. Assistant United States Trade Representative for Sub-
          Saharan Africa.........................................    28
        K. Reporting Requirement.................................    29
        L. Sub-Saharan Africa Defined............................    30
        M. Limit Use of Non-Accrual Experience Method of 
          Accounting to Amounts to be Received for the 
          Performance of Qualified Personal Services.............    30
        N. Denial of Charitable Contribution Deduction for 
          Transfers Associated with Charitable Split-Dollar 
          Insurance Arrangements.................................    32
III.Vote of the Committee............................................37

IV. Budget Effects of the Bill.......................................37
        A. Committee Estimate of Budgetary Effects...............    37
        B. Budget Authority and Tax Expenditures.................    37
        C. Cost Estimate Prepared by the Congressional Budget 
          Office.................................................    37
 V. Other Matters to be Discussed Under the Rules of the House.......42
        A. Committee Oversight Findings and Recommendations......    42
        B. Summary of Findings and Recommendations of the 
          Committee on Government Reform.........................    42
        C. Constitutional Authority Statement....................    42
        D. Information Relating to Unfunded Mandates.............    42
        E. Applicability of House Rule XXI5(B)...................    43
        F. Tax Complexity Analysis...............................    43
VI. Changes in Existing Law Made by the Bill as Reported.............43

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``African Growth and Opportunity Act''.

SEC. 2. FINDINGS.

  The Congress finds that it is in the mutual economic interest of the 
United States and sub-Saharan Africa to promote stable and sustainable 
economic growth and development in sub-Saharan Africa and that 
sustained economic growth in sub-Saharan Africa depends in large 
measure upon the development of a receptive environment for trade and 
investment. To that end, the United States seeks to facilitate market-
led economic growth in, and thereby the social and economic development 
of, the countries of sub-Saharan Africa. In particular, the United 
States seeks to assist sub-Saharan African countries, and the private 
sector in those countries, to achieve economic self-reliance by--
          (1) strengthening and expanding the private sector in sub-
        Saharan Africa, especially women-owned businesses;
          (2) encouraging increased trade and investment between the 
        United States and sub-Saharan Africa;
          (3) reducing tariff and nontariff barriers and other trade 
        obstacles;
          (4) expanding United States assistance to sub-Saharan 
        Africa's regional integration efforts;
          (5) negotiating free trade areas;
          (6) establishing a United States-Sub-Saharan Africa Trade and 
        Investment Partnership;
          (7) focusing on countries committed to accountable 
        government, economic reform, and the eradication of poverty;
          (8) establishing a United States-Sub-Saharan Africa Economic 
        Cooperation Forum; and
          (9) continuing to support development assistance for those 
        countries in sub-Saharan Africa attempting to build civil 
        societies.

SEC. 3. STATEMENT OF POLICY.

  The Congress supports economic self-reliance for sub-Saharan African 
countries, particularly those committed to--
          (1) economic and political reform;
          (2) market incentives and private sector growth;
          (3) the eradication of poverty; and
          (4) the importance of women to economic growth and 
        development.

SEC. 4. ELIGIBILITY REQUIREMENTS.

  (a) In General.--A sub-Saharan African country shall be eligible to 
participate in programs, projects, or activities, or receive assistance 
or other benefits under this Act if the President determines that the 
country does not engage in gross violations of internationally 
recognized human rights and has established, or is making continual 
progress toward establishing, a market-based economy, such as the 
establishment and enforcement of appropriate policies relating to--
          (1) promoting free movement of goods and services between the 
        United States and sub-Saharan Africa and among countries in 
        sub-Saharan Africa;
          (2) promoting the expansion of the production base and the 
        transformation of commodities and nontraditional products for 
        exports through joint venture projects between African and 
        foreign investors;
          (3) trade issues, such as protection of intellectual property 
        rights, improvements in standards, testing, labeling and 
        certification, and government procurement;
          (4) the protection of property rights, such as protection 
        against expropriation and a functioning and fair judicial 
        system;
          (5) appropriate fiscal systems, such as reducing high import 
        and corporate taxes, controlling government consumption, 
        participation in bilateral investment treaties, and the 
        harmonization of such treaties to avoid double taxation;
          (6) foreign investment issues, such as the provision of 
        national treatment for foreign investors, removing restrictions 
        on investment, and other measures to create an environment 
        conducive to domestic and foreign investment;
          (7) supporting the growth of regional markets within a free 
        trade area framework;
          (8) governance issues, such as eliminating government 
        corruption, minimizing government intervention in the market 
        such as price controls and subsidies, and streamlining the 
        business license process;
          (9) supporting the growth of the private sector, in 
        particular by promoting the emergence of a new generation of 
        African entrepreneurs;
          (10) encouraging the private ownership of government-
        controlled economic enterprises through divestiture programs; 
        and
          (11) observing the rule of law, including equal protection 
        under the law and the right to due process and a fair trial.
  (b) Additional Factors.--In determining whether a sub-Saharan African 
country is eligible under subsection (a), the President shall take into 
account the following factors:
          (1) An expression by such country of its desire to be an 
        eligible country under subsection (a).
          (2) The extent to which such country has made substantial 
        progress toward--
                  (A) reducing tariff levels;
                  (B) binding its tariffs in the World Trade 
                Organization and assuming meaningful binding 
                obligations in other sectors of trade; and
                  (C) eliminating nontariff barriers to trade.
          (3) Whether such country, if not already a member of the 
        World Trade Organization, is actively pursuing membership in 
        that Organization.
          (4) Where applicable, the extent to which such country is in 
        material compliance with its obligations to the International 
        Monetary Fund and other international financial institutions.
          (5) The extent to which such country has a recognizable 
        commitment to reducing poverty, increasing the availability of 
        health care and educational opportunities, the expansion of 
        physical infrastructure in a manner designed to maximize 
        accessibility, increased access to market and credit facilities 
        for small farmers and producers, and improved economic 
        opportunities for women as entrepreneurs and employees, and 
        promoting and enabling the formation of capital to support the 
        establishment and operation of micro-enterprises.
          (6) Whether or not such country engages in activities that 
        undermine United States national security or foreign policy 
        interests.
  (c) Continuing Compliance.--
          (1) Monitoring and review of certain countries.--The 
        President shall monitor and review the progress of sub-Saharan 
        African countries in order to determine their current or 
        potential eligibility under subsection (a). Such determinations 
        shall be based on quantitative factors to the fullest extent 
        possible and shall be included in the annual report required by 
        section 15.
          (2) Ineligibility of certain countries.--A sub-Saharan 
        African country described in paragraph (1) that has not made 
        continual progress in meeting the requirements with which it is 
        not in compliance shall be ineligible to participate in 
        programs, projects, or activities, or receive assistance or 
        other benefits, under this Act.

SEC. 5. UNITED STATES-SUB-SAHARAN AFRICA TRADE AND ECONOMIC COOPERATION 
                    FORUM.

  (a) Declaration of Policy.--The President shall convene annual high-
level meetings between appropriate officials of the United States 
Government and officials of the governments of sub-Saharan African 
countries in order to foster close economic ties between the United 
States and sub-Saharan Africa.
  (b) Establishment.--Not later than 12 months after the date of the 
enactment of this Act, the President, after consulting with Congress 
and the governments concerned, shall establish a United States-Sub-
Saharan Africa Trade and Economic Cooperation Forum (hereafter in this 
section referred to as the ``Forum'').
  (c) Requirements.--In creating the Forum, the President shall meet 
the following requirements:
          (1) The President shall direct the Secretary of Commerce, the 
        Secretary of the Treasury, the Secretary of State, and the 
        United States Trade Representative to host the first annual 
        meeting with the counterparts of such Secretaries from the 
        governments of sub-Saharan African countries eligible under 
        section 4, the Secretary General of the Organization of African 
        Unity, and government officials from other appropriate 
        countries in Africa, to discuss expanding trade and investment 
        relations between the United States and sub-Saharan Africa and 
        the implementation of this Act including encouraging joint 
        ventures between small and large businesses.
          (2)(A) The President, in consultation with the Congress, 
        shall encourage United States nongovernmental organizations to 
        host annual meetings with nongovernmental organizations from 
        sub-Saharan Africa in conjunction with the annual meetings of 
        the Forum for the purpose of discussing the issues described in 
        paragraph (1).
          (B) The President, in consultation with the Congress, shall 
        encourage United States representatives of the private sector 
        to host annual meetings with representatives of the private 
        sector from sub-Saharan Africa in conjunction with the annual 
        meetings of the Forum for the purpose of discussing the issues 
        described in paragraph (1).
          (3) The President shall, to the extent practicable, meet with 
        the heads of governments of sub-Saharan African countries 
        eligible under section 4 not less than once every two years for 
        the purpose of discussing the issues described in paragraph 
        (1). The first such meeting should take place not later than 
        twelve months after the date of the enactment of this Act.
  (d) Dissemination of Information by USIA.--In order to assist in 
carrying out the purposes of the Forum, the United States Information 
Agency shall disseminate regularly, through multiple media, economic 
information in support of the free market economic reforms described in 
this Act.
  (e) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.
  (f) Limitation on Use of Funds.--None of the funds authorized under 
this section may be used to create or support any nongovernmental 
organization for the purpose of expanding or facilitating trade between 
the United States and sub-Saharan Africa.

SEC. 6. UNITED STATES-SUB-SAHARAN AFRICA FREE TRADE AREA.

  (a) Declaration of Policy.--The Congress declares that a United 
States-Sub-Saharan Africa Free Trade Area should be established, or 
free trade agreements should be entered into, in order to serve as the 
catalyst for increasing trade between the United States and sub-Saharan 
Africa and increasing private sector development in sub-Saharan Africa.
  (b) Plan Requirement.--
          (1) In general.--The President, taking into account the 
        provisions of the treaty establishing the African Economic 
        Community and the willingness of the governments of sub-Saharan 
        African countries to engage in negotiations to enter into free 
        trade agreements, shall develop a plan for the purpose of 
        entering into one or more trade agreements with sub-Saharan 
        African countries eligible under section 4 in order to 
        establish a United States-Sub-Saharan Africa Free Trade Area 
        (hereafter in this section referred to as the ``Free Trade 
        Area'').
          (2) Elements of plan.--The plan shall include the following:
                  (A) The specific objectives of the United States with 
                respect to the establishment of the Free Trade Area and 
                a suggested timetable for achieving those objectives.
                  (B) The benefits to both the United States and sub-
                Saharan Africa with respect to the Free Trade Area.
                  (C) A mutually agreed-upon timetable for establishing 
                the Free Trade Area.
                  (D) The implications for and the role of regional and 
                sub-regional organizations in sub-Saharan Africa with 
                respect to the Free Trade Area.
                  (E) Subject matter anticipated to be covered by the 
                agreement for establishing the Free Trade Area and 
                United States laws, programs, and policies, as well as 
                the laws of participating eligible African countries 
                and existing bilateral and multilateral and economic 
                cooperation and trade agreements, that may be affected 
                by the agreement or agreements.
                  (F) Procedures to ensure the following:
                          (i) Adequate consultation with the Congress 
                        and the private sector during the negotiation 
                        of the agreement or agreements for establishing 
                        the Free Trade Area.
                          (ii) Consultation with the Congress regarding 
                        all matters relating to implementation of the 
                        agreement or agreements.
                          (iii) Approval by the Congress of the 
                        agreement or agreements.
                          (iv) Adequate consultations with the relevant 
                        African governments and African regional and 
                        subregional intergovernmental organizations 
                        during the negotiations of the agreement or 
                        agreements.
  (c) Reporting Requirement.--Not later than 12 months after the date 
of the enactment of this Act, the President shall prepare and transmit 
to the Congress a report containing the plan developed pursuant to 
subsection (b).

SEC. 7. ELIMINATING TRADE BARRIERS AND ENCOURAGING EXPORTS.

  (a) Findings.--The Congress makes the following findings:
          (1) The lack of competitiveness of sub-Saharan Africa in the 
        global market, especially in the manufacturing sector, make it 
        a limited threat to market disruption and no threat to United 
        States jobs.
          (2) Annual textile and apparel exports to the United States 
        from sub-Saharan Africa represent less than 1 percent of all 
        textile and apparel exports to the United States, which totaled 
        $54,001,863,000 in 1997.
          (3) Sub-Saharan Africa has limited textile manufacturing 
        capacity. During 1999 and the succeeding 4 years, this limited 
        capacity to manufacture textiles and apparel is projected to 
        grow at a modest rate. Given this limited capacity to export 
        textiles and apparel, it will be very difficult for these 
        exports from sub-Saharan Africa, during 1999 and the succeeding 
        9 years, to exceed 3 percent annually of total imports of 
        textile and apparel to the United States. If these exports from 
        sub-Saharan Africa remain around 3 percent of total imports, 
        they will not represent a threat to United States workers, 
        consumers, or manufacturers.
  (b) Sense of the Congress.--It is the sense of the Congress that--
          (1) it would be to the mutual benefit of the countries in 
        sub-Saharan Africa and the United States to ensure that the 
        commitments of the World Trade Organization and associated 
        agreements are faithfully implemented in each of the member 
        countries, so as to lay the groundwork for sustained growth in 
        textile and apparel exports and trade under agreed rules and 
        disciplines;
          (2) reform of trade policies in sub-Saharan Africa with the 
        objective of removing structural impediments to trade, 
        consistent with obligations under the World Trade Organization, 
        can assist the countries of the region in achieving greater and 
        greater diversification of textile and apparel export 
        commodities and products and export markets; and
          (3) the President should support textile and apparel trade 
        reform in sub-Saharan Africa by, among other measures, 
        providing technical assistance, sharing of information to 
        expand basic knowledge of how to trade with the United States, 
        and encouraging business-to-business contacts with the region.
  (c) Treatment of Quotas.--
          (1) Kenya and mauritius.--Pursuant to the Agreement on 
        Textiles and Clothing, the United States shall eliminate the 
        existing quotas on textile and apparel exports to the United 
        States--
                  (A) from Kenya within 30 days after that country 
                adopts an efficient visa system to guard against 
                unlawful transshipment of textile and apparel goods and 
                the use of counterfeit documents; and
                  (B) from Mauritius within 30 days after that country 
                adopts such a visa system.
        The Customs Service shall provide the necessary technical 
        assistance to Kenya and Mauritius in the development and 
        implementation of those visa systems.
          (2) Other sub-saharan countries.--The President shall 
        continue the existing no quota policy for countries in sub-
        Saharan Africa. The President shall submit to the Congress, not 
        later than March 31 of each year, a report on the growth in 
        textiles and apparel exports to the United States from 
        countries in sub-Saharan Africa in order to protect United 
        States consumers, workers, and textile manufacturers from 
        economic injury on account of the no quota policy.
  (d) Customs Procedures and Enforcement.--
          (1) Actions by countries against transshipment and 
        circumvention.--The President should ensure that any country in 
        sub-Saharan Africa that intends to export textile and apparel 
        goods to the United States--
                  (A) has in place a functioning and effective visa 
                system and domestic laws and enforcement procedures to 
                guard against unlawful transshipment of textile and 
                apparel goods and the use of counterfeit documents; and
                  (B) will cooperate fully with the United States to 
                address and take action necessary to prevent 
                circumvention, as provided in Article 5 of the 
                Agreement on Textiles and Clothing.
          (2) Penalties against exporters.--If the President 
        determines, based on sufficient evidence, that an exporter has 
        willfully falsified information regarding the country of 
        origin, manufacture, processing, or assembly of a textile or 
        apparel article for which duty-free treatment under section 
        503(a)(1)(C) of the Trade Act of 1974 is claimed, then the 
        President shall deny to such exporter, and any successors of 
        such exporter, for a period of 2 years, duty-free treatment 
        under such section for textile and apparel articles.
          (3) Applicability of united states laws and procedures.--All 
        provisions of the laws, regulations, and procedures of the 
        United States relating to the denial of entry of articles or 
        penalties against individuals or entities for engaging in 
        illegal transshipment, fraud, or other violations of the 
        customs laws shall apply to imports from Sub-Saharan countries.
          (4) Monitoring and reports to congress.--The Customs Service 
        shall monitor and the Commissioner of Customs shall submit to 
        the Congress, not later than March 31 of each year, a report on 
        the effectiveness of the visa systems described in subsection 
        (c)(1) and paragraph (1) of this subsection and on measures 
        taken by countries in Sub-Saharan Africa which export textiles 
        or apparel to the United States to prevent circumvention as 
        described in Article 5 of the Agreement on Textiles and 
        Clothing.
  (e) Definition.--For purposes of this section, the term ``Agreement 
on Textiles and Clothing'' means the Agreement on Textiles and Clothing 
referred to in section 101(d)(4) of the Uruguay Round Agreements Act 
(19 U.S.C. 3511(d)(4)).

SEC. 8. GENERALIZED SYSTEM OF PREFERENCES.

  (a) Preferential Tariff Treatment for Certain Articles.--Section 
503(a)(1) of the Trade Act of 1974 (19 U.S.C. 2463(a)(1)) is amended--
          (1) by redesignating subparagraph (C) as subparagraph (D); 
        and
          (2) by inserting after subparagraph (B) the following:
                  ``(C) Eligible countries in sub-saharan africa.--The 
                President may provide duty-free treatment for any 
                article set forth in paragraph (1) of subsection (b) 
                that is the growth, product, or manufacture of an 
                eligible country in sub-Saharan Africa that is a 
                beneficiary developing country, if, after receiving the 
                advice of the International Trade Commission in 
                accordance with subsection (e), the President 
                determines that such article is not import-sensitive in 
                the context of imports from eligible countries in sub-
                Saharan Africa. This subparagraph shall not affect the 
                designation of eligible articles under subparagraph 
                (B).''.
  (b) Rules of Origin.--Section 503(a)(2) of the Trade Act of 1974 (19 
U.S.C. 2463(a)(2)) is amended by adding at the end the following:
                  ``(C) Eligible countries in sub-saharan africa.--For 
                purposes of determining the percentage referred to in 
                subparagraph (A) in the case of an article of an 
                eligible country in sub-Saharan Africa that is a 
                beneficiary developing country--
                          ``(i) if the cost or value of materials 
                        produced in the customs territory of the United 
                        States is included with respect to that 
                        article, an amount not to exceed 15 percent of 
                        the appraised value of the article at the time 
                        it is entered that is attributed to such United 
                        States cost or value may be applied toward 
                        determining the percentage referred to in 
                        subparagraph (A); and
                          ``(ii) the cost or value of the materials 
                        included with respect to that article that are 
                        produced in any beneficiary developing country 
                        that is an eligible country in sub-Saharan 
                        Africa shall be applied in determining such 
                        percentage.''.
  (c) Waiver of Competitive Need Limitation.--Section 503(c)(2)(D) of 
the Trade Act of 1974 (19 U.S.C. 2463(c)(2)(D)) is amended to read as 
follows:
                  ``(D) Least-developed beneficiary developing 
                countries and eligible countries in sub-saharan 
                africa.--Subparagraph (A) shall not apply to any least-
                developed beneficiary developing country or any 
                eligible country in sub-Saharan Africa.''.
  (d) Extension of Program.--Section 505 of the Trade Act of 1974 (19 
U.S.C. 2465) is amended to read as follows:

``SEC. 505. DATE OF TERMINATION.

  ``(a) Countries in Sub-Saharan Africa.--No duty-free treatment 
provided under this title shall remain in effect after June 30, 2009, 
with respect to beneficiary developing countries that are eligible 
countries in sub-Saharan Africa.
  ``(b) Other Countries.--No duty-free treatment provided under this 
title shall remain in effect after June 30, 1999, with respect to 
beneficiary developing countries other than those provided for in 
subsection (a).''.
  (e) Definition.--Section 507 of the Trade Act of 1974 (19 U.S.C. 
2467) is amended by adding at the end the following:
          ``(6) Eligible country in sub-saharan africa.--The terms 
        `eligible country in sub-Saharan Africa' and `eligible 
        countries in sub-Saharan Africa' mean a country or countries 
        that the President has determined to be eligible under section 
        4 of the African Growth and Opportunity Act.''.
  (f) Effective Date.--The amendments made by this section take effect 
on July 1, 1999.

SEC. 9. INTERNATIONAL FINANCIAL INSTITUTIONS AND DEBT REDUCTION.

  (a) Better Mechanisms To Further Goals for Sub-Saharan Africa.--It is 
the sense of the Congress that the Secretary of the Treasury should 
instruct the United States Executive Directors of the International 
Bank for Reconstruction and Development, the International Monetary 
Fund, and the African Development Bank to use the voice and votes of 
the Executive Directors to encourage vigorously their respective 
institutions to develop enhanced mechanisms which further the following 
goals in eligible countries in sub-Saharan Africa:
          (1) Strengthening and expanding the private sector, 
        especially among women-owned businesses.
          (2) Reducing tariffs, nontariff barriers, and other trade 
        obstacles, and increasing economic integration.
          (3) Supporting countries committed to accountable government, 
        economic reform, the eradication of poverty, and the building 
        of civil societies.
          (4) Supporting deep debt reduction at the earliest possible 
        date with the greatest amount of relief for eligible poorest 
        countries under the ``Heavily Indebted Poor Countries'' (HIPC) 
        debt initiative.
  (b) Sense of Congress.--It is the sense of the Congress that relief 
provided to countries in sub-Saharan Africa which qualify for the 
Heavily Indebted Poor Countries debt initiative should primarily be 
made through grants rather than through extended-term debt, and that 
interim relief or interim financing should be provided for eligible 
countries that establish a strong record of macroeconomic reform.

SEC. 10. EXECUTIVE BRANCH INITIATIVES.

  (a) Statement of Congress.--The Congress recognizes that the stated 
policy of the executive branch in 1997, the ``Partnership for Growth 
and Opportunity in Africa'' initiative, is a step toward the 
establishment of a comprehensive trade and development policy for sub-
Saharan Africa. It is the sense of the Congress that this Partnership 
is a companion to the policy goals set forth in this Act.
  (b) Technical Assistance To Promote Economic Reforms and 
Development.--In addition to continuing bilateral and multilateral 
economic and development assistance, the President shall target 
technical assistance toward--
          (1) developing relationships between United States firms and 
        firms in sub-Saharan Africa through a variety of business 
        associations and networks;
          (2) providing assistance to the governments of sub-Saharan 
        African countries to--
                  (A) liberalize trade and promote exports;
                  (B) bring their legal regimes into compliance with 
                the standards of the World Trade Organization in 
                conjunction with membership in that Organization;
                  (C) make financial and fiscal reforms; and
                  (D) promote greater agribusiness linkages;
          (3) addressing such critical agricultural policy issues as 
        market liberalization, agricultural export development, and 
        agribusiness investment in processing and transporting 
        agricultural commodities;
          (4) increasing the number of reverse trade missions to 
        growth-oriented countries in sub-Saharan Africa;
          (5) increasing trade in services; and
          (6) encouraging greater sub-Saharan participation in future 
        negotiations in the World Trade Organization on services and 
        making further commitments in their schedules to the General 
        Agreement on Trade in Services in order to encourage the 
        removal of tariff and nontariff barriers.

SEC. 11. SUB-SAHARAN AFRICA INFRASTRUCTURE FUND.

  (a) Initiation of Funds.--It is the sense of the Congress that the 
Overseas Private Investment Corporation should exercise the authorities 
it has to initiate an equity fund or equity funds in support of 
projects in the countries in sub-Saharan Africa, in addition to the 
existing equity fund for sub-Saharan Africa created by the Corporation.
  (b) Structure and Types of Funds.--
          (1) Structure.--Each fund initiated under subsection (a) 
        should be structured as a partnership managed by professional 
        private sector fund managers and monitored on a continuing 
        basis by the Corporation.
          (2) Capitalization.--Each fund should be capitalized with a 
        combination of private equity capital, which is not guaranteed 
        by the Corporation, and debt for which the Corporation provides 
        guaranties.
          (3) Infrastructure fund.--One or more of the funds, with 
        combined assets of up to $500,000,000, should be used in 
        support of infrastructure projects in countries of sub-Saharan 
        Africa.
          (4) Emphasis.--The Corporation shall ensure that the funds 
        are used to provide support in particular to women 
        entrepreneurs and to innovative investments that expand 
        opportunities for women and maximize employment opportunities 
        for poor individuals.

SEC. 12. OVERSEAS PRIVATE INVESTMENT CORPORATION AND EXPORT-IMPORT BANK 
                    INITIATIVES.

  (a) Overseas Private Investment Corporation.--
          (1) Advisory committee.--Section 233 of the Foreign 
        Assistance Act of 1961 is amended by adding at the end the 
        following:
  ``(e) Advisory Committee.--The Board shall take prompt measures to 
increase the loan, guarantee, and insurance programs, and financial 
commitments, of the Corporation in sub-Saharan Africa, including 
through the use of an advisory committee to assist the Board in 
developing and implementing policies, programs, and financial 
instruments with respect to sub-Saharan Africa. In addition, the 
advisory committee shall make recommendations to the Board on how the 
Corporation can facilitate greater support by the United States for 
trade and investment with and in sub-Saharan Africa. The advisory 
committee shall terminate 4 years after the date of the enactment of 
this subsection.''.
          (2) Reports to the congress.--Within 6 months after the date 
        of the enactment of this Act, and annually for each of the 4 
        years thereafter, the Board of Directors of the Overseas 
        Private Investment Corporation shall submit to the Congress a 
        report on the steps that the Board has taken to implement 
        section 233(e) of the Foreign Assistance Act of 1961 (as added 
        by paragraph (1)) and any recommendations of the advisory board 
        established pursuant to such section.
  (b) Export-Import Bank.--
          (1) Advisory committee for sub-saharan africa.--Section 2(b) 
        of the Export-Import Bank Act of 1945 (12 U.S.C. 635(b)) is 
        amended by inserting after paragraph (12) the following:
  ``(13)(A) The Board of Directors of the Bank shall take prompt 
measures, consistent with the credit standards otherwise required by 
law, to promote the expansion of the Bank's financial commitments in 
sub-Saharan Africa under the loan, guarantee, and insurance programs of 
the Bank.
  ``(B)(i) The Board of Directors shall establish and use an advisory 
committee to advise the Board of Directors on the development and 
implementation of policies and programs designed to support the 
expansion described in subparagraph (A).
  ``(ii) The advisory committee shall make recommendations to the Board 
of Directors on how the Bank can facilitate greater support by United 
States commercial banks for trade with sub-Saharan Africa.
  ``(iii) The advisory committee shall terminate 4 years after the date 
of the enactment of this subparagraph.''.
          (2) Reports to the congress.--Within 6 months after the date 
        of the enactment of this Act, and annually for each of the 4 
        years thereafter, the Board of Directors of the Export-Import 
        Bank of the United States shall submit to the Congress a report 
        on the steps that the Board has taken to implement section 
        2(b)(13)(B) of the Export-Import Bank Act of 1945 (as added by 
        paragraph (1)) and any recommendations of the advisory 
        committee established pursuant to such section.

SEC. 13. ASSISTANT UNITED STATES TRADE REPRESENTATIVE FOR SUB-SAHARAN 
                    AFRICA.

  (a) Sense of Congress.--It is the sense of the Congress that the 
position of Assistant United States Trade Representative for African 
Affairs is integral to the United States commitment to increasing 
United States--sub-Saharan African trade and investment.
  (b) Maintenance of Position.--The President shall maintain a position 
of Assistant United States Trade Representative for African Affairs 
within the Office of the United States Trade Representative to direct 
and coordinate interagency activities on United States-Africa trade 
policy and investment matters and serve as--
          (1) a primary point of contact in the executive branch for 
        those persons engaged in trade between the United States and 
        sub-Saharan Africa; and
          (2) the chief advisor to the United States Trade 
        Representative on issues of trade with Africa.
  (c) Funding and Staff.--The President shall ensure that the Assistant 
United States Trade Representative for African Affairs has adequate 
funding and staff to carry out the duties described in subsection (b), 
subject to the availability of appropriations.

SEC. 14. EXPANSION OF THE UNITED STATES AND FOREIGN COMMERCIAL SERVICE 
                    IN SUB-SAHARAN AFRICA.

  (a) Findings.--The Congress makes the following findings:
          (1) The United States and Foreign Commercial Service 
        (hereafter in this section referred to as the ``Commercial 
        Service'') plays an important role in helping United States 
        businesses identify export opportunities and develop reliable 
        sources of information on commercial prospects in foreign 
        countries.
          (2) During the 1980s, the presence of the Commercial Service 
        in sub-Saharan Africa consisted of 14 professionals providing 
        services in eight countries. By early 1997, that presence had 
        been reduced by half to seven, in only four countries.
          (3) Since 1997, the Department of Commerce has slowly begun 
        to increase the presence of the Commercial Service in sub-
        Saharan Africa, adding five full-time officers to established 
        posts.
          (4) Although the Commercial Service Officers in these 
        countries have regional responsibilities, this kind of coverage 
        does not adequately service the needs of United States 
        businesses attempting to do business in sub-Saharan Africa.
          (5) The Congress has, on several occasions, encouraged the 
        Commercial Service to focus its resources and efforts in 
        countries or regions in Europe or Asia to promote greater 
        United States export activity in those markets.
          (6) Because market information is not widely available in 
        many sub-Saharan African countries, the presence of additional 
        Commercial Service Officers and resources can play a significant 
        role in assisting United States businesses in markets in those 
        countries.
  (b) Appointments.--Subject to the availability of appropriations, by 
not later than December 31, 2000, the Secretary of Commerce, acting 
through the Assistant Secretary of Commerce and Director General of the 
United States and Foreign Commercial Service, shall take steps to 
ensure that--
          (1) at least 20 full-time Commercial Service employees are 
        stationed in sub-Saharan Africa; and
          (2) full-time Commercial Service employees are stationed in 
        not less than ten different sub-Saharan African countries.
  (c) Commercial Service Initiative for Sub-Saharan Africa.--In order 
to encourage the export of United States goods and services to sub-
Saharan African countries, the Commercial Service shall make a special 
effort to--
          (1) identify United States goods and services which are not 
        being exported to sub-Saharan African countries but which are 
        being exported to those countries by competitor nations;
          (2) identify, where appropriate, trade barriers and 
        noncompetitive actions, including violations of intellectual 
        property rights, that are preventing or hindering sales of 
        United States goods and services to, or the operation of United 
        States companies in, sub-Saharan Africa;
          (3) present, periodically, a list of the goods and services 
        identified under paragraph (1), and any trade barriers or 
        noncompetitive actions identified under paragraph (2), to 
        appropriate authorities in sub-Saharan African countries with a 
        view to securing increased market access for United States 
        exporters of goods and services;
          (4) facilitate the entrance by United States businesses into 
        the markets identified under paragraphs (1) and (2); and
          (5) monitor and evaluate the results of efforts to increase 
        the sales of goods and services in such markets.
  (d) Reports to Congress.--Not later than one year after the date of 
the enactment of this Act, and each year thereafter for five years, the 
Secretary of Commerce, in consultation with the Secretary of State, 
shall report to the Congress on actions taken to carry out subsections 
(b) and (c). Each report shall specify--
          (1) in what countries full-time Commercial Service Officers 
        are stationed, and the number of such officers placed in each 
        such country;
          (2) the effectiveness of the presence of the additional 
        Commercial Service Officers in increasing United States exports 
        to sub-Saharan African countries; and
          (3) the specific actions taken by Commercial Service 
        Officers, both in sub-Saharan African countries and in the 
        United States, to carry out subsection (c), including 
        identifying a list of targeted export sectors and countries.

SEC. 15. REPORTING REQUIREMENT.

  The President shall submit to the Congress, not later than 1 year 
after the date of the enactment of this Act, and not later than the end 
of each of the next 6 1-year periods thereafter, a comprehensive report 
on the trade and investment policy of the United States for sub-Saharan 
Africa, and on the implementation of this Act. The last report required 
by section 134(b) of the Uruguay Round Agreements Act (19 U.S.C. 
3554(b)) shall be consolidated and submitted with the first report 
required by this section.

SEC. 16. DONATION OF AIR TRAFFIC CONTROL EQUIPMENT TO ELIGIBLE SUB-
                    SAHARAN AFRICAN COUNTRIES.

  It is the sense of the Congress that, to the extent appropriate, the 
United States Government should make every effort to donate to 
governments of sub-Saharan African countries (determined to be eligible 
under section 4 of this Act) air traffic control equipment that is no 
longer in use, including appropriate related reimbursable technical 
assistance.

SEC. 17. SUB-SAHARAN AFRICA DEFINED.

  For purposes of this Act, the terms ``sub-Saharan Africa'', ``sub-
Saharan African country'', ``country in sub-Saharan Africa'', and 
``countries in sub-Saharan Africa'' refer to the following or any 
successor political entities:
          Republic of Angola (Angola)
          Republic of Botswana (Botswana)
          Republic of Burundi (Burundi)
          Republic of Cape Verde (Cape Verde)
          Republic of Chad (Chad)
          Democratic Republic of Congo
          Republic of the Congo (Congo)
          Republic of Djibouti (Djibouti)
          State of Eritrea (Eritrea)
          Gabonese Republic (Gabon)
          Republic of Ghana (Ghana)
          Republic of Guinea-Bissau (Guinea-Bissau)
          Kingdom of Lesotho (Lesotho)
          Republic of Madagascar (Madagascar)
          Republic of Mali (Mali)
          Republic of Mauritius (Mauritius)
          Republic of Namibia (Namibia)
          Federal Republic of Nigeria (Nigeria)
          Democratic Republic of Sao Tome and Principe (Sao Tome and 
        Principe)
          Republic of Sierra Leone (Sierra Leone)
          Somalia
          Kingdom of Swaziland (Swaziland)
          Republic of Togo (Togo)
          Republic of Zimbabwe (Zimbabwe)
          Republic of Benin (Benin)
          Burkina Faso (Burkina)
          Republic of Cameroon (Cameroon)
          Central African Republic
          Federal Islamic Republic of the Comoros (Comoros)
          Republic of Cote d'Ivoire (Cote d'Ivoire)
          Republic of Equatorial Guinea (Equatorial Guinea)
          Ethiopia
          Republic of the Gambia (Gambia)
          Republic of Guinea (Guinea)
          Republic of Kenya (Kenya)
          Republic of Liberia (Liberia)
          Republic of Malawi (Malawi)
          Islamic Republic of Mauritania (Mauritania)
          Republic of Mozambique (Mozambique)
          Republic of Niger (Niger)
          Republic of Rwanda (Rwanda)
          Republic of Senegal (Senegal)
          Republic of Seychelles (Seychelles)
          Republic of South Africa (South Africa)
          Republic of Sudan (Sudan)
          United Republic of Tanzania (Tanzania)
          Republic of Uganda (Uganda)
          Republic of Zambia (Zambia)

SEC. 18. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD OF 
                    ACCOUNTING.

  (a) In General.--Section 448(d)(5) of the Internal Revenue Code of 
1986 (relating to special rule for services) is amended--
          (1) by inserting ``in fields described in paragraph (2)(A)'' 
        after ``services by such person'', and
          (2) by inserting ``certain personal'' before ``services'' in 
        the heading.
  (b) Effective Date.--
          (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act.
          (2) Change in method of accounting.--In the case of any 
        taxpayer required by the amendments made by this section to 
        change its method of accounting for its first taxable year 
        ending after the date of the enactment of this Act--
                  (A) such change shall be treated as initiated by the 
                taxpayer,
                  (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                  (C) the net amount of the adjustments required to be 
                taken into account by the taxpayer under section 481 of 
                the Internal Revenue Code of 1986 shall be taken into 
                account over a period (not greater than 4 taxable 
                years) beginning with such first taxable year.

SEC. 19. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOWMENT 
                    CONTRACTS.

  (a) In General.--Subsection (f) of section 170 of the Internal 
Revenue Code of 1986 (relating to disallowance of deduction in certain 
cases and special rules) is amended by adding at the end the following 
new paragraph:
          ``(10) Split-dollar life insurance, annuity, and endowment 
        contracts.--
                  ``(A) In general.--Nothing in this section or in 
                section 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), 
                or 2522 shall be construed to allow a deduction, and no 
                deduction shall be allowed, for any transfer to or for 
                the use of an organization described in subsection (c) 
                if in connection with such transfer--
                          ``(i) the organization directly or indirectly 
                        pays, or has previously paid, any premium on 
                        any personal benefit contract with respect to 
                        the transferor, or
                          ``(ii) there is an understanding or 
                        expectation that any person will directly or 
                        indirectly pay any premium on any personal 
                        benefit contract with respect to the 
                        transferor.
                  ``(B) Personal benefit contract.--For purposes of 
                subparagraph (A), the term `personal benefit contract' 
                means, with respect to the transferor, any life 
                insurance, annuity, or endowment contract if any direct 
                or indirect beneficiary under such contract is the 
                transferor, any member of the transferor's family, or 
                any other person (other than an organization described 
                in subsection (c)) designated by the transferor.
                  ``(C) Application to charitable remainder trusts.--In 
                the case of a transfer to a trust referred to in 
                subparagraph (E), references in subparagraphs (A) and 
                (F) to an organization described in subsection (c) 
                shall be treated as a reference to such trust.
                  ``(D) Exception for certain annuity contracts.--If, 
                in connection with a transfer to or for the use of an 
                organization described in subsection (c), such 
                organization incurs an obligation to pay a charitable 
                gift annuity (as defined in section 501(m)) and such 
                organization purchases any annuity contract to fund 
                such obligation, persons receiving payments under the 
                charitable gift annuity shall not be treated for 
                purposes of subparagraph (B) as indirect beneficiaries 
                under such contract if--
                          ``(i) such organization possesses all of the 
                        incidents of ownership under such contract,
                          ``(ii) such organization is entitled to all 
                        the payments under such contract, and
                          ``(iii) the timing and amount of payments 
                        under such contract are substantially the same 
                        as the timing and amount of payments to each 
                        such person under such obligation (as such 
                        obligation is in effect at the time of such 
                        transfer).
                  ``(E) Exception for certain contracts held by 
                charitable remainder trusts.--A person shall not be 
                treated for purposes of subparagraph (B) as an indirect 
                beneficiary under any life insurance, annuity, or 
                endowment contract held by a charitable remainder 
                annuity trust or a charitable remainder unitrust (as 
                defined in section 664(d)) solely by reason of being 
                entitled to any payment referred to in paragraph (1)(A) 
                or (2)(A) of section 664(d) if--
                          ``(i) such trust possesses all of the 
                        incidents of ownership under such contract, and
                          ``(ii) such trust is entitled to all the 
                        payments under such contract.
                  ``(F) Excise tax on premiums paid.--
                          ``(i) In general.--There is hereby imposed on 
                        any organization described in subsection (c) an 
                        excise tax equal to the premiums paid by such 
                        organization on any life insurance, annuity, or 
                        endowment contract if the payment of premiums 
                        on such contract is in connection with a 
                        transfer for which a deduction is not allowable 
                        under subparagraph (A), determined without 
                        regard to when such transfer is made.
                          ``(ii) Payments by other persons.--For 
                        purposes of clause (i), payments made by any 
                        other person pursuant to an understanding or 
                        expectation referred to in subparagraph (A) 
                        shall be treated as made by the organization.
                          ``(iii) Reporting.--Any organization on which 
                        tax is imposed by clause (i) with respect to 
                        any premium shall file an annual return which 
                        includes--
                                  ``(I) the amount of such premiums 
                                paid during the year and the name and 
                                TIN of each beneficiary under the 
                                contract to which the premium relates, 
                                and
                                  ``(II) such other information as the 
                                Secretary may require.
                        The penalties applicable to returns required 
                        under section 6033 shall apply to returns 
                        required under this clause. Returns required 
                        under this clause shall be furnished at such 
                        time and in such manner as the Secretary shall 
                        by forms or regulations require.
                          ``(iv) Certain rules to apply.--The tax 
                        imposed by this subparagraph shall be treated 
                        as imposed by chapter 42 for purposes of this 
                        title other than subchapter B of chapter 42.
                  ``(G) Special rule where state requires specification 
                of charitable gift annuitant in contract.--In the case 
                of an obligation to pay a charitable gift annuity 
                referred to in subparagraph (D) which is entered into 
                under the laws of a State which requires, in order for 
                the charitable gift annuity to be exempt from insurance 
                regulation by such State, that each beneficiary under 
                the charitable gift annuity be named as a beneficiary 
                under an annuity contract issued by an insurance 
                company authorized to transact business in such State, 
                the requirements of clauses (i) and (ii) of 
                subparagraph (D) shall be treated as met if--
                          ``(i) such State law requirement was in 
                        effect on February 8, 1999,
                          ``(ii) each such beneficiary under the 
                        charitable gift annuity is a bona fide resident 
                        of such State at the time the obligation to pay 
                        a charitable gift annuity is entered into, and
                          ``(iii) the only persons entitled to payments 
                        under such contract are persons entitled to 
                        payments as beneficiaries under such obligation 
                        on the date such obligation is entered into.
                  ``(H) Regulations.--The Secretary shall prescribe 
                such regulations as may be necessary or appropriate to 
                carry out the purposes of this paragraph, including 
                regulations to prevent the avoidance of such 
                purposes.''
  (b) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        section, the amendment made by this section shall apply to 
        transfers made after February 8, 1999.
          (2) Excise tax.--Except as provided in paragraph (3) of this 
        subsection, section 170(f)(10)(F) of the Internal Revenue Code 
        of 1986 (as added by this section) shall apply to premiums paid 
        after the date of the enactment of this Act.
          (3) Reporting.--Clause (iii) of such section 170(f)(10)(F) 
        shall apply to premiums paid after February 8, 1999 (determined 
        as if the tax imposed by such section applies to premiums paid 
        after such date).

              H.R. 434, AFRICAN GROWTH AND OPPORTUNITY ACT


                            I. INTRODUCTION


                         A. Purpose and Summary

    H.R. 434, as reported by Committee on Ways and Means, would 
authorize a new trade and investment policy toward countries in 
sub-Saharan Africa. The bill states that the United States 
seeks to facilitate market-led economic growth in the countries 
in sub-Saharan Africa. To this end, H.R. 434 contains a 
statement of policy that Congress supports economic self-
reliance for sub-Saharan African countries, particularly those 
committed to economic and political reform; market incentives 
and private sector growth; the eradication of poverty; and the 
importance of women to economic growth and development.
    The bill would require the President to identify individual 
countries in sub-Saharan Africa that have established, or are 
making continual progress toward establishing, a market-based 
economy consistent with the criteria outlined. After consulting 
with the governments of eligible countries, H.R. 434 would 
require the President to establish a United States-sub-Saharan 
Africa Trade and Economic Cooperation Forum, not later than 12 
months after the date of enactment, for the purpose of 
convening annual high-level meetings between U.S. government 
officials and officials of participating sub-Saharan African 
countries.
    H.R. 434 also declares that a United States-sub-Saharan 
Africa Free Trade Area should be established, or free trade 
agreements entered into, to serve as the catalyst for 
increasing trade between the United States and sub-Saharan 
Africa and for increasing private sector development in the 
region. On this basis, the bill would require the President to 
develop a plan for entering into one or more trade agreements 
with eligible sub-Saharan African countries, and report to 
Congress within 12 months of enactment.
    The bill would also require the United States to eliminate 
the existing quotas on textile and apparel exports to the 
United States from Kenya and Mauritius within 30 days of those 
countries adopting visa systems to guard against unlawful 
transshipments of textile and apparel goods and the use of 
counterfeit documents. In addition, the provision would require 
the President to continue the existing policy of not imposing 
quotas on textile and apparel exports to the United States from 
other sub-Saharan African countries.
    The bill would direct the President to ensure that any 
country in Africa that intends to export textile and apparel 
goods to the United States: (1) has in place an effective visa 
system and domestic laws and enforcement procedures to guard 
against unlawful transshipment and the use of counterfeit 
documents; and (2) cooperates fully with the U.S. to address 
and take action necessary to prevent transshipment or other 
types of circumvention. In addition, the bill would require the 
President to deny all trade benefits under the bill for two 
years to any exporter, or the successor of any exporter, 
determined to have engaged in illegal transshipment.
    The bill would extend duty-free treatment under the 
Generalized System of Preferences (GSP) for beneficiary 
countries in sub-Saharan Africa that are eligible to 
participate in the Act until June 30, 2009. In addition, 
effective July 1, 1999, the bill would amend the GSP statute to 
extend a series of enhanced benefits to sub-Saharan African 
beneficiary countries participating in the bill, subject to 
whether those countries meet the statutory criteria and rules 
of origin under the GSP program. Specifically, these amendments 
would authorize the President to grant duty-free treatment to 
products from eligible sub-Saharan African countries that are 
currently excluded from the GSP program if he makes a 
determination after receiving advice from the International 
Trade Commission (ITC) that imports of those products are not 
import sensitive in the context of imports from sub-Saharan 
Africa. The bill would also provide that the competitive need 
limits in the GSP program do not apply to imports from sub-
Saharan African countries and would allow up to 15 percent U.S. 
content of an article to count toward the 35 percent local 
content requirement of the GSP program. Moreover, the bill 
would allow the 35 percent minimum value content requirement to 
be cumulated in any eligible sub-Saharan African country.
    H.R. 434 would require the President to maintain a position 
of Assistant United States Trade Representative (AUSTR) for 
African Affairs within the Office of the United States Trade 
Representative (USTR) to direct and coordinate interagency 
activities on United States-Africa trade policy and investment 
matters and serve as a primary point of contact in the 
executive branch for those persons engaged in trade between the 
United States and sub-Saharan Africa. The AUSTR for African 
Affairs also serves as the chief advisor to the USTR on trade 
issues with Africa.
    The bill would require the President to submit to Congress 
a report on the trade and investment policy of the United 
States for sub-Saharan Africa and on the implementation of this 
Act, not later than one year after the date of enactment, and 
not later than the end of each of the next six one-year periods 
thereafter.
    Finally, the bill includes two revenue offsets. The first 
denies a charitablecontributions tax deduction for a transfer 
to a charity which is subject to an understanding that the charity will 
pay premiums on life insurance benefiting the transferor (or some other 
designated person) and imposes an excise tax and reporting requirement 
with respect to any such premium payments. The second limits the use of 
the non-accrual experience tax accounting method to amounts received 
for qualified personal services (services in the fields of health, law, 
engineering, architecture, actuarial science, performing arts or 
consulting).

                 B. Background and Need for Legislation

    Sub-Saharan Africa consists of 48 diverse countries, many 
of which have undergone significant political and economic 
change in recent years. Since 1990, more than 25 African 
nations have held democratic elections. At the same time, more 
than 30 countries have instituted programs to replace their 
centralized economies with free markets under the guidance of 
bilateral and multilateral donors such as the World Bank and 
the International Monetary Fund.
    Despite the fact that 33 countries in sub-Saharan Africa 
are members of the World Trade Organization (WTO), U.S. trade 
with sub-Saharan African countries relative to overall U.S. 
trade levels remains low. In 1998, U.S. merchandise exports to 
the region were valued at $6.7 billion, while U.S. merchandise 
imports in return totaled $13.1 billion. Although virtually all 
countries in sub-Saharan Africa qualify for duty-free entry on 
a wide range of products under the Generalized System of 
Preferences (GSP) program, GSP imports from the region equaled 
$1.9 billion in 1998, a figure representing about 12 percent of 
all U.S. GSP imports for the year. Imports of goods from sub-
Saharan Africa under GSP grew by 78 percent in 1998, however, 
most of this increase was due to the inclusion of petroleum 
imports under the GSP program. Most duty-free petroleum imports 
from the region last year came from Angola.
    In 1994, Congress passed the Uruguay Round Agreements Act 
(P.L. 103-465), which required the President to submit five 
annual reports to Congress on the Administration's 
comprehensive trade and development policy for countries in 
Africa. On January 13, 1999, the President submitted his fourth 
report pursuant to this provision of law. The report describes 
the progress made in the implementation of the five components 
of the Administration's Partnership for Economic Growth and 
Opportunity in Africa: enhanced trade benefits to increase 
U.S.-African trade and investment flows; technical assistance; 
enhanced dialogue with African countries; financing and debt 
relief; and continued U.S. leadership in multilateral fora to 
support private sector development, trade development, and 
institutional capacity building in African countries.
    On January 14, 1997, the Committee on Ways and Means 
requested the International Trade Commission (ITC) to conduct a 
study of the effect on the U.S. economy of providing quota-free 
and duty-free access to textiles and apparel from sub-Saharan 
Africa. In the report sent to Congress on September 2, 1997, 
the ITC found that the effect on the U.S. industry and workers 
would be negligible. The ITC noted that sub-Saharan Africa 
represents a small portion of overall textiles and apparel 
imports, accounting for less than one percent, or $383 million, 
of total U.S. imports in this sector, which were $46 billion in 
1996.
    The ITC report states that removal of all duties and quotas 
on imports from sub-Saharan Africa would result in a 26-46 
percent increase in these imports from the region (between $100 
million and $175 million), and that the increase would 
primarily displace imports from other countries. According to 
these estimates, imports from sub-Saharan Africa are likely to 
remain below 3 percent of total U.S. imports of textile and 
apparel products for at least ten years after the provisions in 
H.R. 434 take effect. In fact, the ITC indicated that this 
estimate most likely overstates the potential increase in sub-
Saharan African imports because of structural problems in many 
of these economies.
    With certain exceptions, the ITC found that the textile and 
apparel industry in sub-Saharan Africa is underdeveloped 
because of lack of capital, management expertise, experience 
exporting to developed countries, and poor infrastructure and 
transportation problems. The exceptions to this finding are 
Mauritius, which has a well developed, exporting industry 
(including investment in nearby Madagascar), South Africa 
(including investments in nearby Lesotho and Swaziland), 
Zimbabwe, and Kenya. However, the report notes that the 
industries in these countries have traditionally focused their 
exports to Europe because of longstanding colonial ties.
    Currently, Mauritius and Kenya are the only two sub-Saharan 
countries under textile and apparel quota arrangements in the 
U.S. market. Kenya has two quotas and did not fill either in 
1998. Mauritius filled two quota categories of cotton knit 
shirts and pants in 1998.

                         C. Legislative History


Committee bill

    On February 2, 1999, Chairman Crane, for himself and for 
Reps. Rangel, Jefferson, Houghton, Levin, Dunn, Johnson, 
McNulty, Neal, Portman, Ramstad, and Thomas, et alia introduced 
H.R. 434, the ``African Growth and Opportunity Act'' to 
authorize a new trade and investment policy toward the 
countries of sub-Saharan Africa.
    On February 3, 1999, the Subcommittee on Trade of the 
Committee on Ways and Means favorably reported H.R. 434 to the 
full Committee by a recorded vote of 14-0.
    On June 10, 1999, the Committee on Ways and Means favorably 
reported H.R. 434 to the House of Representatives, as amended, 
by a voice vote.

Legislative hearing

    On February 3, 1999, the Subcommittee on Trade held a 
hearing on U.S. trade relations with sub-Saharan Africa. The 
Subcommittee received testimony from both invited and public 
witnesses, many of whom stressed the importance of trade and 
investment relations with sub-Saharan Africa to the economic 
development and future self-reliance of countries in the 
region. To this end, witnesses from the U.S. private sector and 
representatives of sub-Saharan African governments expressed 
support for H.R. 434. Secretary of Commerce William Daley 
expressed the Administration's support for the legislation. Two 
witnesses representing the American Textile Manufacturers 
Institute and the Union of Needletrades, Industrial and Textile 
Employees expressed their opposition to the bill.

                      II. EXPLANATION OF THE BILL


                       A. Section 1: Short Title


Present law

    No provision.

Explanation of provision

    Section 1 states that the Act may be cited as the ``African 
Growth and Opportunity Act.''

Reason for change

    The section names the legislation for identification 
purposes.

Effective date

    The provision is effective upon enactment.

                         B. Section 2: Findings


Present law

    No provision.

Explanation of provision

    Section 2 contains the findings of the Congress that it is 
in the mutual economic interest of the United States and sub-
Saharan Africa to promote stable and sustainable economic 
growth and development in sub-Saharan Africa and that sustained 
economic growth in sub-Saharan Africa depends in large measure 
upon the development of a receptive environment for trade and 
investment. To that end, the United States seeks to facilitate 
market-led economic growth in, and thereby the social and 
economic development of, the countries of sub-Saharan Africa. 
In particular, the United States seeks to assist sub-Saharan 
African countries, and the private sector in those countries, 
to achieve economic self-reliance by:
          (1) strengthening and expanding the private sector in 
        sub-Saharan Africa, especially women-owned businesses;
          (2) encouraging increased trade and investment 
        between the U.S. and sub-Saharan Africa;
          (3) reducing tariff and non-tariff barriers and other 
        trade obstacles;
          (4) expanding U.S. assistance to sub-Saharan Africa's 
        regional integration efforts;
          (5) negotiating free trade areas;
          (6) establishing a United States-sub-Saharan Africa 
        Trade and Investment Partnership;
          (7) focusing on countries committed to accountable 
        government, economic reform, and the eradication of 
        poverty;
          (8) establishing a United States-sub-Saharan Africa 
        Economic Cooperation Forum; and
          (9) continuing to support development assistance for 
        those countries in sub-Saharan Africa attempting to 
        build civil societies.

Reason for change

    In the section, Congress finds that the United States and 
countries in sub-Saharan Africa have a shared interest in the 
economic development of sub-Saharan Africa. On this basis, the 
provision notes ways in which the United States seeks to assist 
the region in achieving economic self-reliance.

Effective date

    The provision is effective upon enactment.

                   C. Section 3: Statement of Policy


Present law

    No provision.

Explanation of provision

    In Section 3, the Congress expresses its support for the 
economic self-reliance of sub-Saharan African countries, 
particularly those committed to economic and political reform, 
market incentives and private sector growth; the eradication of 
poverty; and the importance of women to economic growth and 
development.

Reason for change

    Congress expresses its support for the economic self-
reliance of countries in sub-Saharan Africa, particularly those 
committed to implementing free market principles, political 
reform, and economic opportunity for all citizens.

Effective date

    The provision is effective upon enactment.

                 D. Section 4: Eligibility Requirements


Present law

    No provision.

Explanation of provision

    Section 4(a) states that a sub-Saharan African country 
shall be eligible to participate in this Act only if the 
President determines that the country does not engage in gross 
violations of internationally recognized human rights and has 
established, or is making continual progress toward 
establishing, a market economy, such as the establishment and 
enforcement of appropriate policies relating to:
          (1) promoting free movement of goods and services 
        between the U.S. and sub-Saharan Africa and among 
        countries in the region;
          (2) promoting the expansion of the production base 
        and the transformation of commodities and 
        nontraditional products for export through partnerships 
        between African and foreign investors;
          (3) trade issues, such as the protection of 
        intellectual property rights, improvements in 
        standards, testing, labeling and certification, and 
        government procurement;
          (4) the protection of property rights, such as 
        protection against expropriation and a functioning and 
        fair judicial system;
          (5) appropriate fiscal systems, such as reducing high 
        import and corporate taxes, controlling government 
        consumption, participation in bilateral investment 
        treaties, and the harmonization of such treaties to 
        avoid double taxation;
          (6) foreign investment issues, such as the provision 
        of national treatment for foreign investors; removing 
        restrictions on investment; and other measures to 
        create an environment conducive to domestic and foreign 
        investment;
          (7) supporting the growth of regional markets within 
        a free trade area framework;
          (8) governance issues, such as eliminating government 
        corruption and minimizing government intervention in 
        the market;
          (9) supporting the growth of the private sector, in 
        particular by promoting the emergence of a new 
        generation of African entrepreneurs;
          (10) encouraging the private ownership of government-
        controlled economic enterprises through divestiture 
        programs; and,
          (11) observing the rule of law, including equal 
        protection under the law and the right to due process 
        and a fair trial.
    In determining whether a sub-Saharan African country is 
eligible, section 4(b) requires the President to take into 
account the following factors:
          (1) An expression by such country of its desire to be 
        an eligible country;
          (2) The extent to which such country has made 
        substantial progress toward reducing tariff and non-
        tariff levels, binding its tariffs in the World Trade 
        Organization (WTO) and assuming meaningful binding 
        obligations in other sectors of trade;
          (3) Whether such country, if not already a member of 
        the WTO, is actively pursuing membership;
          (4) Where applicable, the extent to which such 
        country is in material compliance with its obligation 
        to the International Monetary Fund and other 
        international financial institutions;
          (5) The extent to which such country has a 
        recognizable commitment to reducing poverty, increasing 
        the availability of health care and educational opportunities, 
        the expansion of physical infrastructure, increased access to 
        market and credit facilities for small farmers and producers, 
        and improved economic opportunities for women as entrepreneurs 
        and employees and promoting and enabling the formation of 
        capital to support the establishment and operation of micro- 
        enterprises; and
          (6) Whether or not such country engages in activities 
        that undermine U.S. national security or foreign policy 
        interests.
    Section 4(c) requires the President to monitor and review 
the progress of sub-Saharan African countries in order to 
determine their current or potential eligibility under 
subsection (a). Such determinations shall be based on 
quantitative factors to the fullest extent possible and shall 
be included in the annual report required by section 15. The 
provision also states that a sub-Saharan African country that 
has not made continual progress in meeting the requirements 
with which it is not in compliance shall be ineligible to 
participate in this Act.

Reason for change

    Section 4 outlines the eligibility requirements for 
countries in sub-Saharan Africa to participate in the Act. In 
particular, the provision requires the President to determine 
whether individual countries in sub-Saharan Africa have 
established, or are making continual progress toward 
establishing, a market-based economy consistent with the 
criteria outlined. The Committee urges the President to make 
determinations regarding country eligibility as soon as 
practicable.

Effective date

    The provision is effective upon enactment.

   E. Section 5: United States-Sub-Saharan Africa Trade and Economic 
                           Cooperation Forum


Present law

    No provision.

Explanation of provision

    In order to foster close economic ties between the United 
States and sub-Saharan Africa, section 5(a) directs the 
President to convene annual high-level meetings between 
appropriate officials of the U.S. government and government 
officials of the sub-Saharan African countries eligible to 
participate in the Act. After consulting with the governments 
concerned, section 5(b) directs the President to establish a 
United States-sub-Saharan Africa Trade and Economic Cooperation 
Forum not later than 12 months after the date of enactment.
    In creating the Forum, the President shall, under section 
5(c), direct the Secretary of Commerce, the Secretary of the 
Treasury, the Secretary of State, and the United States Trade 
Representative to host the first annual meeting with their 
counterparts from the eligible governments, as well as the 
Secretary General of the Organization of African Unity, and 
government officials from other appropriate countries in 
Africa, to discuss expanding trade and investment relations 
between the United States and sub-Saharan Africa and the 
implementation of this Act. In consultation with Congress, the 
President shall encourage U.S. non-governmental organizations 
(NGOs) to host annual meetings with NGOs from sub-Saharan 
Africa, and representatives of the U.S. private sector to host 
annual meetings with representatives of the private sector in 
sub-Saharan Africa, in conjunction with the annual Forum 
meetings. To the extent practicable, the President shall meet 
with the heads of governments of eligible sub-Saharan African 
countries not less than once every two years for the purposes 
of discussing expanding trade and investment relations between 
the United States and sub-Saharan Africa and the implementation 
of this Act. The President's first meeting with other heads of 
state from sub-Saharan Africa should take place not less than 
12 months after the date of enactment.
    In order to assist in carrying out the purposes of the 
Forum, section 5(d) requires the United States Information 
Agency to disseminate regularly, through multiple media, 
economic information in support of the free market economic 
reforms described in this Act.
    Section 5(e) authorizes such sums as may be necessary to 
carry out this section. Section 5(f) prohibits the use of funds 
authorized under the section to create or support any 
nongovernmental organization for the purpose of expanding or 
facilitating trade between the United States and sub-Saharan 
Africa.

Reason for change

    In order to expand U.S. trade and investment relations with 
sub-Saharan Africa and achieve the goals of the Act, the 
Committee believes that it is important to foster a regular 
dialogue between U.S. government officials and their 
counterparts from eligible sub-Saharan African countries. To 
this end, section 5 requires the President to direct 
theSecretary of Commerce, the Secretary of the Treasury, the Secretary 
of State, and the United States Trade Representative to host the first 
annual meeting of a United States-sub-Saharan Africa Trade and Economic 
Cooperation Forum after consulting with eligible sub-Saharan African 
governments. The Committee also believes that it would help to promote 
the goals of this Act if the President, to the extent practicable, met 
with the heads of state of the governments eligible to participate in 
the Act not less than once every two years.

Effective date

    The provision is effective upon enactment.

     F. Section 6: United States-Sub-Saharan Africa Free Trade Area


Present law

    No provision.

Explanation of provision

    In section 6(a), Congress declares that a United States-
sub-Saharan Africa Free Trade Area should be established, or 
free trade agreements entered into, in order to serve as the 
catalyst for increasing trade between the United States and 
sub-Saharan Africa and increasing private sector development in 
sub-Saharan Africa.
    To this end, section 6(b) requires the President, taking 
into account the provisions of the treaty establishing the 
African Economic Community and the willingness of the 
governments of sub-Saharan African countries to engage in 
negotiations to enter into free trade agreements, to develop a 
plan for the purpose of entering into one or more trade 
agreements with sub-Saharan African countries eligible to 
participate in the Act. The President's plan shall include the 
following:
          (1) the specific objectives of the United States with 
        respect to the establishment of the Free Trade Area and 
        a suggested timetable for achieving those objectives;
          (2) the benefits to both the United States and sub-
        Saharan Africa with respect to the Free Trade Area;
          (3) a mutually agreed-upon timetable for establishing 
        the Free Trade Area;
          (4) the implications for and the role of regional and 
        sub-regional organizations in sub-Saharan Africa with 
        respect to the Free Trade Area;
          (5) subject matter anticipated to be covered by the 
        Free Trade Area and U.S. laws, programs, and policies, 
        as well as the laws of participating eligible African 
        countries and existing bilateral and multilateral and 
        economic cooperation and trade agreements, that may be 
        affected by the agreement or agreements; and
          (6) procedures to ensure adequate consultation with 
        Congress and the private sector, consultation with 
        Congress regarding all matters related to 
        implementation and approval, and adequate consultation 
        with the relevant African governments and African 
        regional and subregional intergovernmental 
        organizations during the negotiations of the agreement 
        or agreements.
    Section 6(c) requires the President, not later than 12 
months after the date of enactment, to prepare and transmit to 
Congress a report on the plan developed.

Reason for change

    By eliminating the barriers that presently exist to 
developing stronger, mutually beneficial trade and investment 
relations between the United States and sub-Saharan Africa, the 
Committee believes that the establishment of a Free Trade Area, 
or the negotiation of one or more free trade agreements, would 
serve as an important catalyst in the economic development of 
sub-Saharan Africa. After taking into account the provisions of 
the treaty establishing the African Economic Community and the 
willingness of the governments of eligible countries in sub-
Saharan Africa, the President is required to develop a plan for 
the purpose of entering into one or more trade agreements with 
sub-Saharan African countries. In the development of the plan, 
the Committee believes that the President should seek to 
complete the negotiations within a similar time frame agreed to 
in other multilateral fora, such as the Asia-Pacific Economic 
Cooperation (APEC) forum, or sooner if practicable.

Effective date

    The provision is effective upon enactment.

    G. Section 7: Eliminating Trade Barriers and Encouraging Exports


Present law

    Certain textile and apparel products from Kenya and 
Mauritius are subject to import quotas under bilateral 
agreements negotiated on a product-category basis under 
authority of section 204 of the Agriculture Act of 1956 and in 
accordance with the WTO Agreement on Textiles and Clothing.

Explanation of provision

    Section 7(a) contains findings of Congress that:
          (1) The lack of competitiveness of sub-Saharan Africa 
        in the global market make it a limited threat to market 
        disruption and no threat to U.S. jobs.
          (2) Annual textile and apparel exports to the United 
        States from sub-Saharan Africa represent less than 1 
        percent of all textile and apparel exports to the 
        United States, which totaled $54,001,863,000 in 1997.
          (3) Sub-Saharan Africa has limited textile 
        manufacturing capacity. During 1999 and the succeeding 
        4 years, this limited capacity to manufacture textiles 
        and apparel is projected to grow at a modest rate. 
        Given this limited capacity to export textiles and 
        apparel, it will be very difficult for these exports 
        from sub-Saharan Africa, during 1999 and the succeeding 
        9 years, to exceed 3 percent annually of total imports 
        of textile and apparel to the United States. If these 
        exports from sub-Saharan Africa remain around 3 percent 
        of total imports, they will not represent a threat to 
        U.S. workers, consumers, or manufacturers.
    Section 7(b) expresses the sense of Congress that:
          (1) It would be to the mutual benefit of the 
        countries in sub-Saharan Africa and the United States 
        to ensure that the commitments of the World Trade 
        Organization are faithfully implemented in each of the 
        member countries;
          (2) Reform of trade policies in sub-Saharan Africa 
        with the objective of removing structural impediments 
        to trade can assist the countries of the region in 
        achieving greater diversification of textile and 
        apparel export commodities and products and export 
        markets; and
          (3) The President should support textile and apparel 
        trade reform in sub-Saharan Africa by providing 
        technical assistance and encouraging business-to-
        business contacts with the region.
    Section 7(c)(1) provides that, pursuant to the WTO 
Agreement on Textiles and Clothing, the United States shall 
eliminate the existing quotas on textile and apparel exports to 
the United States from Kenya and Mauritius within 30 days after 
these countries adopt an efficient visa system to guard against 
unlawful transshipment of textile and apparel goods and the use 
of counterfeit documents. The provision requires the Customs 
Service to provide technical assistance to Kenya and Mauritius 
in the development and implementation of visa systems.
    Section 7(c)(2) requires the President to: (1) continue the 
existing no quota policy for other countries in sub-Saharan 
Africa; and (2) submit a report to the Congress by March 31 of 
each year concerning the growth in textiles and apparel exports 
to the United States from countries in sub-Saharan Africa in 
order to protect United States consumers, workers, and textile 
manufacturers from economic injury due to the no quota policy.
    Section 7(d)(1) states that the President should ensure 
that any sub-Saharan African country that intends to export 
textile and apparel goods to the United States: (1) has in 
place an effective visa system to guard against unlawful 
transshipment of textile and apparel goods and the use of 
counterfeit documents; and (2) will cooperate fully with the 
United States to address and take action necessary to prevent 
circumvention, as provided in Article 5 of the WTO Agreement on 
Textiles and Clothing (see below).
    Section 7(d)(2) increases penalties on exporters who have 
been found to have engaged in illegal transshipment. If the 
President determines, based on sufficient evidence, that an 
exporter has willfully falsified information regarding the 
country of origin, manufacture, processing, or assembly of a 
textile or apparel article for which duty-free treatment under 
the Generalized System of Preferences program is claimed, then 
the President shall deny to such an exporter duty-free 
treatment under this section for textile and apparel articles 
for a period of two years.
    Section 7(d)(3) underscores the fact that all provisions of 
the laws, regulations, and procedures of the United States 
relating to the denial of entry of articles or penalties 
against individuals or entities for engaging in illegal 
transshipment, fraud, or other violations of the customs laws 
shall apply to imports from sub-Saharan countries.
    In order to facilitate close monitoring by the 
Administration and expanded oversight by the Committee, Section 
7(d)(4) requires that the Customs Service submit to the 
Congress, by not later than March 31 of each year, a report on 
the effectiveness of visa systems required of Kenya and 
Mauritius and other countries that intend to export textiles 
and apparel products to the United States, and on measures 
taken by countries in sub-Saharan Africa to prevent 
circumvention as described in Article 5 of the WTO Agreement on 
Textiles and Clothing.
    Pursuant to Article 5 of the WTO Agreement on Textiles and 
Clothing, countries agree that circumvention by transshipment, 
re-routing, false declaration concerning country or place of 
origin, and falsification of official documents undermines the 
effectiveness of trade restraints on textile and apparel 
products. Therefore WTO countries have agreed to establish the 
necessary legal provisions and/or administrative procedures to 
address and take action, consistent with their domestic laws 
andprocedures, against such circumvention.
    Article 5 obligates countries to cooperate fully to 
establish the relevant facts in places of import, export, and 
transshipment. The Agreement establishes that such cooperation 
will include: (1) an investigation of circumvention practices 
which increase exports to the WTO Member maintaining quotas; 
(2) exchange of documents, correspondence and other relevant 
information to the extent available; and, (3) facilitation of 
plant visits and contacts. Under the WTO, the U.S. maintains 
full authority to immediately deny entry of any goods suspected 
of being transshipped, and to appropriately adjust charges to 
quota levels in order to reflect the true country or place of 
origin, provided that the WTO is adequately notified of the 
charges, including a full justification.

Reason for change

    In developing countries around the world, the textile and 
apparel industry has served as a primary sector for economic 
development and job creation. Given the limited manufacturing 
capacity that exists in sub-Saharan Africa now and for the 
foreseeable future, the Committee believes that the existing 
quotas for Kenya and Mauritius should be eliminated. Further, 
the Committee believes that the existing policy of not imposing 
quotas on textile and apparel imports from the region should 
remain in place. In order to ensure that textile and apparel 
products shipped to the United States are manufactured in the 
region, the section envisages that countries which intend to 
export textiles and apparel to the United States will have in 
place an effective visa system to guard against unlawful 
transshipments and the use the counterfeit documents and will 
cooperate fully with the United States in preventing 
transshipments.
    The Committee understands that the Administration is 
committed to closely monitoring the issue. Because of the 
provisions for cooperation with sub-Saharan African countries 
and the expanded penalties against violators contained in the 
bill, the Committee believes that U.S. firms and workers will 
be sufficiently protected against problems caused by illegal 
transshipment and other Customs fraud.
    The Committee also believes that the reports required of 
the President and the Customs Service under this section will 
be useful to the Committee in monitoring the effect of the 
provision on the growth in textile and apparel exports to the 
United States from countries in sub-Saharan Africa in order to 
protect U.S. consumers, workers, and textile manufacturers from 
economic injury due to the no quota policy.
    In sum, it is the Committee's strong view that these 
provisions provide a benefit to the sub-Saharan African 
countries while having a negligible impact on the United 
States.

Effective date

    The provision is effective upon enactment.

            H. Section 8: Generalized System of Preferences


Present law

    Title V of the Trade Act of 1974, as amended, grants 
authority to the President to provide duty-free treatment on 
imports of eligible articles from beneficiary developing 
countries (BDC). Under section 503(a)(1) the President may not 
designate any article as GSP eligible within the following 
categories:
          (1) textiles and apparel articles which were not 
        eligible articles for purposes of this title on January 
        1, 1994;
          (2) watches, except watches entered after June 30, 
        1989 that the President determines will not cause 
        material injury to watch or watch band, strap, or 
        bracelet manufacturing and assembly operations in the 
        United States or U.S. insular possessions;
          (3) import-sensitive electronic articles;
          (4) import-sensitive steel articles;
          (5) footwear, handbags, luggage, flat goods, work 
        gloves, and leather wearing apparel which were not GSP 
        eligible articles on January 1, 1995;
          (6) import-sensitive semimanufactured and 
        manufactured glass products; and,
          (7) any other articles the President determines to be 
        import-sensitive in the context of GSP.
    Under section 502(a)(2) the President is authorized to 
designate any article that is the growth, product, or 
manufacture of a least developed developing country (LDDC) as 
an eligible article with respect to imports from LDDCs, if the 
President determines such article is not import-sensitive in 
the context of imports from LDDCs. This authority does not 
apply to statutorily exempt articles listed under paragraphs 
(1), (2) , and (5) above.
    Under section 503(b)(3), no quantity of an agricultural 
product subject to a tariff-rate quota that exceeds the in-
quota quantity is eligible for duty-free treatment.
    Under section 503(c)(2)(D), whenever the President 
determines that exports by any BDC to the United States of a 
GSP eligible article--
          (1) exceed a dollar limit of $80 million a year (a 
        number which increases by $5 million annually), or
          (2) equal or exceed a 50 percent share of the total 
        value of U.S. imports of the article, then, not later 
        than July 1 of the next year, such country is not 
        treated as a BDC with respect to such article.
    Under section 503(c)(2)(A), GSP duty-free treatment applies 
to any eligible article which is the growth, product or 
manufacture of a BDC if: (1) that article is imported directly 
from a BDC into the U.S. customs territory; and, (2) the sum of 
(a) the cost or value of the materials produced in the BDC or 
member countries in an association which is treated as one BDC, 
plus (b) the direct costs of processing operations performed in 
such BDC or member countries is not less than 35 percent of the 
value of the article.
    Under section 505, no duty-free treatment shall remain in 
effect after June 30, 1999.

Explanation of provision

    In order to receive extended and enhanced GSP benefits 
under the bill, sub-Saharan African countries must meet all of 
the criteria in current law regarding designation of 
beneficiary developing countries and also the eligibility 
requirements set forth in section 4 of H.R. 434. The existing 
statutory GSP designation criteria include internationally-
recognized worker rights, intellectual property rights, 
compensation for property expropriation, and market access.
    Section 8(a) of the bill amends section 503(a)(1) of the 
Trade Act of 1974 to authorize the President to grant duty-free 
GSP treatment for products from eligible African GSP 
beneficiary countries that are currently excluded from the GSP 
program, if, after receiving advice from the International 
Trade Commission, he determines that imports of these products 
are not import sensitive in the context of imports from sub-
Saharan African countries. Opportunities for public comment 
would be provided in making this determination.
    The bill does not change the rule of origin requirements 
under current law for GSP duty-free treatment on any currently 
eligible or any additional products, including textiles and 
apparel. The rule of origin remains that articles must be the 
growth, product, or manufacture of an eligible country and also 
contain a minimum 35 percent local value. As under present law, 
processes such as simple combining, packaging, or dilution 
would not constitute substantial transformation to qualify an 
article for trade benefits under this program. The article must 
also be directly imported from a beneficiary country.
    Textile and apparel products eligible for duty-free and 
quota-free treatment must be substantially transformed in sub-
Saharan Africa as determined by the ``Breaux-Cardin'' rules of 
origin enacted into law in 1994 (section 334 of P.L. 103-465).
    With respect to the second required test of value content, 
section 8(b) of the bill amends section 503(a)(2) of the Trade 
Act of 1974 to allow up to 15 percent of the total value of the 
article from U.S.-made materials to count toward the 35 percent 
local value requirement for duty-free entry under the GSP 
program. In order to encourage regional economic integration in 
Africa, the bill provides that the minimum 35 percent local 
value content may be cumulated in any eligible sub-Saharan 
African country.
    Section 8(c) amends section 503(c)(2)(D) of the Trade Act 
of 1974 to stipulate that the competitive need limits do not 
apply to imports from eligible countries in sub-Saharan Africa.
    Section 8(d) amends section 505 of the Trade Act of 1974 to 
extend the GSP program for ten years, until June 30, 2009, for 
eligible countries in sub-Saharan Africa.
    Section 8(f) establishes July 1, 1999 as the effective date 
for the amendments made to the GSP program for sub-Saharan 
Africa.

Reason for change

    The GSP program, which provides duty-free access to the 
U.S. market for eligible articles from BDCs, has proven to be 
an effective program in the development of many countries 
around the world. In recent years, however, the program has 
undergone a series of short term extensions due to budgetary 
constraints. For this reason, the Committee believes that it is 
important to give the business community greater certainty 
about the program's existence for sub-Saharan African countries 
eligible to participate in the African Growth and Opportunity 
Act, thereby encouraging long-term investment and development 
in the region. At the same time, the Committee continues to 
seek the renewal of the existing GSP program for BDCs worldwide 
beyond the current expiration date of June 30, 1999.
    Given the low utilization of the GSP program by exporters 
in sub-Saharan Africa at present, the Committee believes that 
these reforms are appropriate for beneficiaries in sub-Saharan 
Africa that are eligible to participate in the benefits of this 
Act.

Effective date

    The bill establishes July 1, 1999 as the effective date for 
the new sub-Saharan elements of the GSP program established by 
this bill.

              I. Section 10: Executive Branch Initiatives


Present law

    No provision.

Explanation of provision

    Section 10(a) expresses the sense of Congress that the 
stated policy of the Executive Branch in 1997, the 
``Partnership for Growth and Opportunity in Africa'' 
initiative, is a step toward the establishment of a 
comprehensive trade and development policy for sub-Saharan 
Africa. It is the sense of Congress that this Partnership is a 
companion to the policy goals set forth in this Act.
    Section 10(b) directs the President, in addition to 
continuing bilateral and multilateral economic and development 
assistance, to target technical assistance toward:
          (1) developing relationships between United States 
        firms and firms in sub-Saharan Africa through a variety 
        of business associations and networks;
          (2) providing assistance to the governments of sub-
        Saharan African countries to liberalize trade and 
        promote exports, bring their legal regimes into 
        compliance with the standards of the WTO in conjunction 
        with membership in that Organization, make financial 
        and fiscal reforms, and promote greater agribusiness 
        linkages;
          (3) addressing such critical agricultural policy 
        issues as market liberalization, agricultural export 
        development, and agribusiness investment in processing 
        and transporting agricultural commodities;
          (4) increasing the number of reverse trade missions 
        to growth-oriented countries in sub-Saharan Africa;
          (5) increasing trade in services; and
          (6) encouraging greater sub-Saharan participation in 
        future negotiations in the World Trade Organization on 
        services and making further commitments in their 
        schedules to the General Agreement on Trade in Services 
        in order to encourage the removal of tariff and 
        nontariff barriers.

Reason for change

    The Committee believes that the President's ``Partnership 
for Growth and Opportunity in Africa,'' which was announced in 
1997, is a step toward the establishment of a comprehensive 
U.S. trade and development policy toward countries in sub-
Saharan Africa and that the President's ``Partnership'' is a 
companion to the policy goals of this legislation.
    The Committee believes that the active participation of 
sub-Saharan African countries in negotiations under the 
auspices of the World Trade Organization is vital to achieving 
the goals of this legislation. To this end, the Committee 
supports the Administration's efforts to encourage sub-Saharan 
African involvement in the WTO.

Effective date

    The provision is effective upon enactment.

  J. Section 13: Assistant United States Trade Representative for Sub-
                             Saharan Africa


Present law

    Section 141 of the Trade Act of 1974 established the Office 
of the United States Trade Representative within the Executive 
Office of the President and directed the President to appoint a 
person to head the office and to serve as United States Trade 
Representative (USTR).

Explanation of provision

    Section 13(a) expresses the sense of Congress that the 
position of Assistant United States Trade Representative 
(AUSTR) for African Affairs within USTR is integral to the U.S. 
commitment to increasing United States-sub-Saharan African 
trade and investment.
    Section 13(b) requires the President to maintain a position 
of AUSTR for African Affairs to direct and coordinate 
interagency activities on United States-African trade policy 
and investment matters and serve as a primary point of contact 
in the executive branch for those persons engaged in trade 
between the United States and sub-Saharan Africa and the chief 
advisor to the USTR on issues of trade with Africa.
    Section 13(c) requires the President to ensure that the 
AUSTR for Africa has adequate funding and staff.

Reason for change

    The combined population of sub-Saharan Africa represents a 
potential market of nearly 700 million consumers for exports of 
U.S. goods and services. Given the importance of exports to 
future U.S. economic growth and job creation, the Committee 
believes that a position of AUSTR for African Affairs should be 
maintained within the Office of USTR to focus on trade issues 
relating to sub-Saharan Africa. The Committee also believes 
that the President should ensure that the AUSTR for Africa has 
adequate funding and staff to carry out his or her 
responsibilities consistent with the goals of this Act.

Effective date

    The provision is effective upon enactment.

                  K. Section 15: Reporting Requirement


Present law

    Section 134 of the Uruguay Round Agreements Act requires 
the President to develop a comprehensive trade and development 
policy for countries in Africa and submit five annual reports 
to Congress on it.

Explanation of provision

    The President shall submit to Congress not later than one 
year after the date of enactment, and not later than the end of 
each of the next six one-year periods thereafter, a 
comprehensive report on the trade and investment policy of the 
United States toward sub-Saharan Africa, and on the 
implementation of this Act. The last report required by section 
134 of the Uruguay Round Agreements Act shall be consolidated 
and submitted with the first report required by this section.

Reason for change

    The Committee requests that the President submit seven 
annual reports to Congress on the trade and investment policy 
of the United States toward sub-Saharan Africa, and on the 
implementation of this Act, in order to assist the Committee in 
its oversight responsibilities on trade between the United 
States and the countries in sub- Saharan Africa.

Effective date

    The provision is effective upon enactment.

               L. Section 16: Sub-Saharan Africa Defined


Present law

    No provision.

Explanation of provision

    For purposes of this Act, the terms ``sub-Saharan Africa'', 
``sub-Saharan African country'', ``country in sub-Saharan 
Africa'', and ``countries in sub-Saharan Africa'' refer to the 
following: Republic of Angola (Angola), Republic of Botswana 
(Botswana), Republic of Burundi (Burundi), Republic of Cape 
Verde (Cape Verde), Republic of Chad (Chad), Democratic 
Republic of Congo, Republic of the Congo (Congo), Republic of 
Djibouti (Djibouti), State of Eritrea (Eritrea), Gabonese 
Republic (Gabon), Republic of Ghana (Ghana), Republic of 
Guinea-Bissau (Guinea-Bissau), Kingdom of Lesotho (Lesotho), 
Republic of Madagascar (Madagascar), Republic of Mali (Mali), 
Republic of Mauritius (Mauritius), Republic of Namibia 
(Namibia), Federal Republic of Nigeria (Nigeria), Democratic 
Republic of Sao Tome and Principe (Sao Tome and Principe), 
Republic of Sierra Leone (Sierra Leone), Somalia, Kingdom of 
Swaziland (Swaziland), Republic of Togo (Togo), Republic of 
Zimbabwe (Zimbabwe), Republic of Benin (Benin), Burkina Faso 
(Burkina), Republic of Cameroon (Cameroon), Central African 
Republic, Federal Islamic Republic of the Comoros (Comoros), 
Republic of Cote d'Ivoire (Cote d'Ivoire), Republic of 
Equatorial Guinea (Equatorial Guinea), Ethiopia, Republic of 
the Gambia (Gambia), Republic of Guinea (Guinea), Republic of 
Kenya (Kenya), Republic of Liberia (Liberia), Republic of 
Malawi (Malawi), Islamic Republic of Mauritania (Mauritania), 
Republic of Mozambique (Mozambique), Republic of Niger (Niger), 
Republic of Rwanda (Rwanda), Republic of Senegal (Senegal), 
Republic of Seychelles (Seychelles), Republic of South Africa 
(South Africa), Republic of Sudan (Sudan), United Republic of 
Tanzania (Tanzania), Republic of Uganda (Uganda), Republic of 
Zambia (Zambia).

Reason for change

    The section identifies the countries in sub-Saharan Africa 
for the purposes of this Act.

Effective date

    The provision is effective upon enactment.

M. Section 18: Limit Use of Non-Accrual Experience Method of Accounting 
  to Amounts To Be Received for the Performance of Qualified Personal 
                                Services


Present law

    An accrual method taxpayer generally must recognize income 
when all the events have occurred that fix the right to receive 
the income and the amount of the income can be determined with 
reasonable accuracy. An accrual method taxpayer may deduct the 
amount of any receivable that was previously included in income 
that becomes worthless during the year.
    Accrual method taxpayers are not required to include in 
income amounts to be received for the performance of services 
which, on the basis of experience, will not be collected (the 
``non-accrual experience method''). The availability of this 
method is conditioned on the taxpayer not charging interest or 
a penalty for failure to timely pay the amount charged.
    A cash method taxpayer is not required to include an amount 
in income until it is received. A taxpayer may not use the cash 
method if the purchase, production, or sale of merchandise is a 
material income producing factor. Such taxpayers are generally 
required to keep inventories and use the accrual method of 
accounting. In addition, corporations (and partnerships with 
corporate partners) generally may not use the cash method of 
accounting if their average annual gross receipts exceed $5 
million. An exception to this $5 million rule is provided for 
qualified personal service corporations, which are corporations 
(1) substantially all of whose activities involve the 
performance of services in the fields of health, law, 
engineering, architecture, accounting, actuarial science, 
performing arts, or consulting and (2) substantially all of the 
stock of which is owned by current or former employees 
performing such services, their estates, or their heirs. 
Qualified personal service corporations may use the cash method 
without regard to whether their average annual gross receipts 
exceed $5 million.

Explanation of provision

    The bill provides that the non-accrual experience method 
will be available only for amounts to be received for the 
performance of qualified personal services. Amounts to be 
received for the performance of all other services will be 
subject to the general rule regarding inclusion in income. 
Qualified personal services are personal services in the fields 
of health, law, engineering, architecture, accounting, 
actuarial science, performing arts, or consulting. As under 
present law, the availability of the method is conditioned on 
the taxpayer not charging interest or a penalty for failure to 
timely pay the amount.

Reasons for change

    The Committee understands that the use of the non-accrual 
experience method provides the equivalent of a bad debt 
reserve, which generally is not available to taxpayers using 
the accrual method of accounting. The Committee believes that 
accrual method taxpayers should be treated similarly, unless 
there is a strong indication that different treatment is 
necessary to clearly reflect income or to address a particular 
competitive situation.
    The Committee understands that accrual basis providers of 
qualified personal services (services in the fields of health, 
law, engineering, architecture, accounting, actuarial science, 
performing arts, or consulting) compete on a regular basis and 
on an even footing with competitors using the cash method of 
accounting. The Committee believes that this competitive 
situation justifies the continued availability of the non-
accrual experience method with respect to amounts to be 
received for the performance of qualified personal services. 
The Committee believes that it is important to avoid the 
disparity of treatment between competing cash and accrual 
method providers of qualified personal services that could 
result if the non-accrual experience method were eliminated 
with regard to amounts to be received for such services.

Effective date

    The provision is effective for taxable years ending after 
the date of enactment. Any change in the taxpayer's method of 
accounting necessitated as a result of the proposal will be 
treated as a voluntary change initiated by the taxpayer with 
the consent of the Secretary of the Treasury. Any required 
section 481(a) adjustment is to be taken into account over a 
period not to exceed four years under principles consistent 
with those in Rev. Proc. 98-60.1
---------------------------------------------------------------------------
    \1\ 1998-51 I.R.B. 16.
---------------------------------------------------------------------------

    N. Section 19: Denial of Charitable Contribution Deduction for 
      Transfers Associated with Charitable Split-Dollar Insurance 
                              Arrangements


Present law

    Under present law, in computing taxable income, a taxpayer 
who itemizes deductions generally is allowed to deduct 
charitable contributions paid during the taxable year. The 
amount of the deduction allowable for a taxable year with 
respect to any charitable contribution depends on the type of 
property contributed, the type of organization to which the 
property is contributed, and the income of the taxpayer (secs. 
170(b) and 170(e)). A charitable contribution is defined to 
mean a contribution or gift to or for the use of a charitable 
organization or certain other entities (sec. 170(c)). The term 
``contribution or gift'' is not defined by statute, but 
generally is interpreted to mean a voluntary transfer of money 
or other property without receipt of adequate consideration and 
with donative intent. If a taxpayer receives or expects to 
receive a quid pro quo in exchange for a transfer to charity, 
the taxpayer may be able to deduct the excess of the amount 
transferred over the fair market value of any benefit received 
in return, provided the excess payment is made with the 
intention of making a gift.2
---------------------------------------------------------------------------
    \2\ United States v. American Bar Endowment, 477 U.S. 105 (1986). 
Treas. Reg. sec. 1.170A-1(h).
---------------------------------------------------------------------------
    In general, no charitable contribution deduction is allowed 
for a transfer to charity of less than the taxpayer's entire 
interest (i.e., a partial interest) in any property (sec. 
170(f)(3)). In addition, no deduction is allowed for any 
contribution of $250 or more unless the taxpayer obtains a 
contemporaneous written acknowledgment from the donee 
organization that includes a description and good faith 
estimate of the value of any goods or services provided by the 
donee organization to the taxpayer in consideration, whole or 
part, for the taxpayer's contribution (sec. 170(f)(8)).

Explanation of provision

            Deduction denial
    The provision 3 restates present law to provide 
that no charitable contribution deduction is allowed for 
purposes of Federal tax, for a transfer to or for the use of an 
organization described in section 170(c) of the Internal 
Revenue Code, if in connection with the transfer (1) the 
organization directly or indirectly pays, or has previously 
paid, any premium on any ``personal benefit contract'' with 
respect to the transferor, or (2) there is an understanding or 
expectation that any person will directly or indirectly pay any 
premium on any ``personal benefit contract'' with respect to 
the transferor. It is intended that an organization be 
considered as indirectly paying premiums if, for example, 
another person pays premiums on its behalf.
---------------------------------------------------------------------------
    \3\ The provision is similar to H.R. 630, introduced by Mr. Archer 
for himself and for Mr. Rangel (106th Cong., 1st Sess.).
---------------------------------------------------------------------------
    A personal benefit contract with respect to the transferor 
is any life insurance, annuity, or endowment contract, if any 
direct or indirect beneficiary under the contract is the 
transferor, any member of the transferor's family, or any other 
person (other than a section 170(c) organization) designated by 
the transferor. For example, such a beneficiary would include a 
trust having a direct or indirect beneficiary who is the 
transferor or any member of the transferor's family, and would 
include an entity that is controlled by the transferor or any 
member of the transferor's family. It is intended that a 
beneficiary under the contract include any beneficiary under 
any side agreement relating to the contract. If a transferor 
contributes a life insurance contract to a section 170(c) 
organization and designates one or more section 170(c) 
organizations as the sole beneficiaries under the contract, 
generally, it is not intended that the deduction denial rule 
under the provision apply. If, however, there is an outstanding 
loan under the contract upon the transfer of the contract, then 
the transferor is considered as a beneficiary. The fact that a 
contract also has other direct or indirect beneficiaries 
(persons who are not the transferor or a family member, or 
designated by the transferor) does not prevent it from being a 
personal benefit contract. The provision is not intended to 
affect situations in which an organization pays premiums under 
a legitimate fringe benefit plan for employees.
    It is intended that a person be considered as an indirect 
beneficiary under a contract if, for example, the person 
receives or will receive any economic benefit as a result of 
amounts paid under or with respect to the contract. For this 
purpose, as described below, an indirect beneficiary is not 
intended to include a person that benefits exclusively under a 
bona fide charitable gift annuity (within the meaning of sec. 
501(m)).
    In the case of a charitable gift annuity, if the charitable 
organization purchases an annuity contract issued by an 
insurance company to fund its obligation to pay the charitable 
gift annuity, a person receiving payments under the charitable 
gift annuity is not treated as an indirect beneficiary, 
provided certain requirements are met. The requirements are 
that (1) the charitable organization possess all of the 
incidents of ownership (within the meaning of Treas. Reg. sec. 
20.2042-1(c)) under the annuity contract purchased by the 
charitable organization; (2) the charitable organization be 
entitled to all the payments under the contract; and (3) the 
timing and amount ofpayments under the contract be 
substantially the same as the timing and amount of payments to each 
person under the organization's obligation under the charitable gift 
annuity (as in effect at the time of the transfer to the charitable 
organization).
    In the case of a charitable gift annuity obligation that is 
issued under the laws of a State that requires, in order for 
the charitable gift annuity to be exempt from insurance 
regulation by that State, that each beneficiary under the 
charitable gift annuity be named as a beneficiary under an 
annuity contract issued by an insurance company authorized to 
transact business in that State, then the foregoing 
requirements (1) and (2) are treated as if they are met, 
provided that certain additional requirements are met. The 
additional requirements are that the State law requirement was 
in effect on February 8, 1999, each beneficiary under the 
charitable gift annuity is a bona fide resident of the State at 
the time the charitable gift annuity was issued, the only 
persons entitled to payments under the annuity contract issued 
by the insurance company are persons entitled to payments under 
the charitable gift annuity when it was issued, and (as 
required by clause (iii) of subparagraph (D) of the provision) 
the timing and amount of payments under the annuity contract to 
each person are substantially the same as the timing and amount 
of payments to the person under the charitable organization's 
obligation under the charitable gift annuity (as in effect at 
the time of the transfer to the charitable organization).
    In the case of a charitable remainder annuity trust or 
charitable remainder unitrust (as defined in section 664(d)) 
that holds a life insurance, endowment or annuity contract 
issued by an insurance company, a person is not treated as an 
indirect beneficiary under the contract held by the trust, 
solely by reason of being a recipient of an annuity or unitrust 
amount paid by the trust, provided that the trust possesses all 
of the incidents of ownership under the contract and is 
entitled to all the payments under such contract. No inference 
is intended as to the applicability of other provisions of the 
Code with respect to the acquisition by the trust of a life 
insurance, endowment or annuity contract, or the 
appropriateness of such an investment by a charitable remainder 
trust.
    Nothing in the provision is intended to suggest that a life 
insurance, endowment, or annuity contract would be a personal 
benefit contract, solely because an individual who is a 
recipient of an annuity or unitrust amount paid by a charitable 
remainder annuity trust or charitable remainder unitrust uses 
such a payment to purchase a life insurance, endowment or 
annuity contract, and a beneficiary under the contract is the 
recipient, a member of his or her family, or another person he 
or she designates.
            Excise tax
    The provision imposes on any organization described in 
section 170(c) of the Code an excise tax, equal to the amount 
of the premiums paid by the organization on any life insurance, 
annuity, or endowment contract, if the premiums are paid in 
connection with a transfer for which a deduction is not 
allowable under the deduction denial rule of the provision 
(without regard to when the transfer to the charitable 
organization was made). The excise tax does not apply if all of 
the direct and indirect beneficiaries under the contract 
(including any related side agreement) are organizations 
described in section 170(c). Under the provision, payments are 
treated as made by the organization, if they are made by any 
other person pursuant to an understanding or expectation of 
payment. The excise tax is to be applied taking into account 
rules ordinarily applicable to excise taxes in chapter 41 or 42 
of the Code (e.g., statute of limitation rules).
            Reporting
    The provision requires that the charitable organization 
annually report the amount of premiums that is paid during the 
year and that is subject to the excise tax imposed under the 
provision, and the name and taxpayer identification number of 
each beneficiary under the life insurance, annuity or endowment 
contract to which the premiums relate, as well as other 
information required by the Secretary of the Treasury. For this 
purpose, it is intended that a beneficiary include any 
beneficiary under any side agreement to which the section 
170(c) organization is a party (or of which it is otherwise 
aware). Penalties applicable to returns required under Code 
section 6033 apply to returns under this reporting requirement. 
Returns required under this provision are to be furnished at 
such time and in such manner as the Secretary shall by forms or 
regulations require.
            Regulations
    The provision provides for the promulgation of regulations 
necessary or appropriate to carry out the purposes of the 
provisions, including regulations to prevent the avoidance of 
the purposes of the provision. For example, it is intended that 
regulations prevent avoidance of the purposes of the provision 
by inappropriate or improper reliance on the limited exceptions 
provided for certain beneficiaries under bona fide charitable 
gift annuities and for certain noncharitable recipients of an 
annuity or unitrust amount paid by a charitable remainder 
trust.

Reasons for change

    The Committee is concerned about an abusive scheme 
4 referred to as charitable split-dollar life 
insurance, and the provision is designed to stop the spread of 
this scheme. Under this scheme, taxpayers typically transfer 
money to a charity, which the charity then uses to pay premiums 
for cash value life insurance on the transferor or another 
person. The beneficiaries under the life insurance contract 
typically include members of the transferor's family (either 
directly or through a family trust or family partnership). 
Having passed the money through a charity, the transferor 
claims a charitable contribution deduction for money that is 
actually being used to benefit the transferor and his or her 
family. If the transferor or the transferor's family paid the 
premium directly, the payment would not be deductible. Although 
the charity eventually may get some of the benefit under the 
life insurance contract, it does not have unfettered use of the 
transferred funds.
---------------------------------------------------------------------------
    \4\  ``A Popular Tax Shelter for `Angry Affluent' Prompts Ire of 
Others,'' Wall Street Journal, Jan. 22, 1999, p. A1; ``U.S. Treasury 
Officials Investigating Charitable Split-Dollar Insurance Plan,'' Wall 
Street Journal, Jan. 29, 1999, p. B5; ``Brilliant Deduction?,'' The 
Chronicle of Philanthropy, Aug. 13, 1998, p. 24; ``Charitable Reverse 
Split-Dollar: Bonanza or Booby Trap,'' Journal of Gift Planning, 2nd 
quarter 1998.
---------------------------------------------------------------------------
    The Committee is concerned that this type of transaction 
represents an abuse of the charitable contribution deduction. 
The Committee is also concerned that the charity often gets 
relatively little benefit from this type of scheme, and serves 
merely as a conduit or accommodation party, which the Committee 
does not view as appropriate for an organization with tax-
exempt status. In substance, the charity receives a transfer of 
a partial interest in an insurance policy, for which no 
charitable contribution deduction is allowed. While there is no 
basis under present law for allowing a charitable contribution 
deduction in these circumstances, the Committee intends that 
the provision stop the marketing of these transactions 
immediately.
    Therefore, the provision clarifies present law by 
specifically denying a charitable contribution deduction for a 
transfer to a charity if the charity directly or indirectly 
pays or paid any premium on a life insurance, annuity or 
endowment contract in connection with the transfer, and any 
direct or indirect beneficiary under the contract is the 
transferor, any member of the transferor's family, or any other 
noncharitable person chosen by the transferor. In addition, the 
provision clarifies present law by specifically denying the 
deduction for a charitable contribution if, in connection with 
a transfer to the charity, there is an understanding or 
expectation that any person will directly or indirectly pay any 
premium on any such contract.
    The provision provides that certain persons are not treated 
as indirect beneficiaries, in certain cases in which a 
charitable organization purchases an annuity contract to fund 
an obligation to pay a charitable gift annuity. The provision 
also provides that a person is not treated as an indirect 
beneficiary solely by reason of being a noncharitable recipient 
of an annuity or unitrust amount paid by a charitable remainder 
trust that holds a life insurance, annuity or endowment 
contract. The rationale for these rules is that the amount of 
the charitable contribution deduction is limited under present 
law to the value of the charitable organization's interest. 
Congress has previously enacted rules designed to prevent a 
charitable contribution deduction for the value of any personal 
benefit to the donor in these circumstances, and the Committee 
expects that the personal benefit to the donor is appropriately 
valued.
    Further, the provision imposes an excise tax on the 
charity, equal to the amount of the premiums paid by the 
charity. Finally, the provision requires a charity to report 
annually to the Internal Revenue Service the amount of premiums 
subject to this excise tax and information about the 
beneficiaries under the contract.

Effective date

    The deduction denial provision applies to transfers after 
February 8, 1999 (as provided in H.R. 630). The excise tax 
provision applies to premiums paid after the date of enactment. 
The reporting provision applies to premiums paid after February 
8, 1999 (determined as if the excise tax imposed under the 
provision applied to premiums paid after that date).
    No inference is intended that a charitable contribution 
deduction is allowed under present law with respect to a 
charitable split-dollar insurance arrangement. The provision 
does not change the rules with respect to fraud or criminal or 
civil penalties under present law; thus, actions constituting 
fraud or that are subject to penalties under present law would 
still constitute fraud or be subject to the penalties after 
enactment of the provision.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of the bill, H.R. 434, as amended.

                       Motion to Report the Bill

    The bill, H.R. 434, was ordered favorably reported, by 
voice vote on June 10, 1999, with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee agrees with cost 
estimates furnished by the Congressional Budget Office (CBO) on 
H.R. 434, as amended, set forth below.

                B. Budget Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that H.R. 
434 does not include any new budget authority and reduces tax 
expenditures by an amount equal to the revenue raised by the 
provisions limiting the use of non-accrual experience method of 
accounting and denying the charitable contribution deduction 
for transfers associated with charitable split-dollar insurance 
arrangements.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estiamte 
prepared by the Congressional Budget Ofice (CBO), the following 
statement by CBO is provided:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 15, 1999.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 434, the African 
Growth and Opportunity Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Hester 
Grippando.
            Sincerely,
                                          Dan L. Crippen, Director.
    Enclosure.

H.R. 434--African Growth and Opportunity Act

            Summary
    H.R. 434, the African Growth and Opportunity Act, would 
authorize a new trade and investment policy for Sub-Saharan 
Africa. The bill would extend and expand the Generalized System 
of Preferences (GSP) with respect to sub-Saharan Africa beyond 
its current expiration of June 30, 1999, through June 30, 2009. 
The bill would also amend the Internal Revenue Code in order to 
limit the use of the nonaccrual experience method of accounting 
and deny charitable contributions deductions from transfers 
associated with charitable split dollar insurance arrangements. 
CBO and the Joint Committee on Taxation (JCT) estimate that the 
bill would increase governmental receipts by $31 million over 
the 1999-2004 period. Because the bill would affect receipts, 
pay-as-you-go procedures would apply.
    In addition, the bill could increase discretionary spending 
by $3 million a year, assuming appropriation of the necessary 
amounts. The bill would authorize annual high-level meetings 
between officials of the United States government and their 
counterparts in sub-Saharan countries eligible for benefits 
under the bill. The bill would increase the number of foreign 
commercial service employees stationed in Africa. The bill 
would require the creation of advisory committees and expanded 
reporting on trade and investment policy with sub-Saharan 
Africa.
    H.R. 434 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (URMA) and would not affect 
the budgets of state, local, or tribal governments. The bill 
would impose two new private-sector mandates by limiting the 
use of the nonaccrual experience method of accounting and by 
denying charitable contributions deductions fro transfers 
associated with charitable split dollar insurance arrangements. 
JCT estimates that the direct costs of the new mandates would 
not exceed the statutory threshold ($100 million in 1996, 
adjusted annually for inflation) established in UMRA in each of 
fiscal years 1999 through 2004.
            Estimated cost to the Federal Government
    The annual estimated budgetary impact of H.R. 434 is shown 
in the following table.

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUESTrade Provisions
    Extension of GSP................................        -8       -32       -33       -34       -36       -38
    Expansion of GSP................................         0        -8       -17       -17       -18       -18
                                                     -----------------------------------------------------------
      Subtotal of Trade Provisions..................        -8       -40       -50       -51       -54       -56
    Revenue Offset Provisions.......................        14        88        73        47        43        25
                                                     -----------------------------------------------------------
    Net Effect on Revenues..........................         6        48        23        -4       -11       -31                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATIONEstiamted authorization.............................         0         3         3         3         3         3
    Estimated Outlays...............................         0         2         3         3         3         3
----------------------------------------------------------------------------------------------------------------

            Basis of estimate

Revenues

    The estimate of extending the existing GSP program with 
respect to sub-Saharan Africa was based on recent trade data on 
imports for U.S. consumption of goods from eligible countries. 
CBO assumed that GSP imports would remain a constant portion of 
total imports. CBO estimates a trade diversion of half of a 
percentage point from non-sub-Saharan African GSP beneficiaries 
who will no longer receive duty-free GSP treatment after June 
30, 1999. Losses of revenues from customs duties were projected 
using a trade-weighted duty rate with respect to sub-Saharan 
Africa adjusted for tariff reductions scheduled by the World 
Trade Organization (WTO). Assuming a July 1, 1999, enactment 
date, CBO estimates that extending the existing GSP program 
with respect to sub-Saharan Africa would reduce governmental 
receipts by $182 million over the 1999-2004 period.
    The current GSP excludes articles determined by the U.S. 
Trade Representative (USTR) to be import sensitive from 
receiving duty-free GSP treatment. H.R. 434 would allow 
countries of sub-Saharan Africa to ask the President to 
redetermine import sensitivity of GSP-excluded imports in the 
context of imports from sub-Saharan Africa. Based on 
discussions with the International Trade Commission (ITC), CBO 
identified products that are now importsensitive but are likely 
not to be considered import sensitive with respect to sub-Saharan 
Africa. USTR expects that the program to grant additional sub-Saharan 
African imports duty-free GSP treatment will not be implemented until 
eight months after the enactment of the law. Assuming a July 1, 1999, 
enactment date, CBO does not expect that sub-Saharan Africa will 
receive duty-free treatment for these articles prior to March 1, 2000. 
Using trade-weighted duty rates adjusted for reductions scheduled by 
the WTO, CBO estimates that this provision would reduce receipts by $41 
million over the 1999-2004 period.
    Current law also excludes from duty-free treatment a list 
of specific products, including apparel, textiles, footwear, 
leather goods, glass, certain electronic products, and watches. 
H.R. 434 would extend duty-free treatment to these products if 
the USTR determines that they are not import sensitive with 
respect to Sub-Saharan Africa. CBO based its estimate of the 
loss of duties that would result from granting these goods 
duty-free GSP treatment on recent collections data. CBO assumed 
that under existing law, imports of these products would grow 
at the same rate as total non-petroleum imports. United States 
imports of footwear, leather goods, glass, certain electronic 
products, and watches from sub-Saharan Africa are insignificant 
compared with United States imports of similar goods from other 
countries. CBO assumes that the USTR will not rule these 
products import sensitive. The bill would also authorize the 
administration to grant textile and apparel products duty free 
and quota free treatment. U.S. imports of textile and apparel 
products from sub-Saharan Africa are also relatively 
insignificant, accounting for less than 1 percent of total U.S. 
imports of such products. Nonetheless, trade experts expect the 
USTR to rule in favor of the textile industry in determining 
the import sensitivity of many textile and apparel products. 
CBO assumes that the USTR will determine 90 percent of eligible 
imports to be import sensitive. Losses of duties for the 
remaining 10 percent were projected using trade-weighted duty 
rates adjusted for scheduled reductions under the WTO. Assuming 
an implementation date of March 1, 2000, CBO projects that 
granting these additional products duty-free GSP treatment 
would reduce receipts by $37 million over the 1999-2004 period.
    All other revenue provisions in H.R. 434 were estimated by 
JCT.

Discretionary Spending

    The bill could increase discretionary spending by $3 
million a year, assuming appropriation of the necessary 
amounts.
    Section 5 would authorize the Secretaries of Commerce, 
Treasury, and State and the U.S. Trade Representative to meet 
with their counterparts from sub-Saharan African countries in 
an annual trade and economic forum. It would require the United 
States to host the first forum within 12 months of enactment. 
Based on the cost of similar meetings, CBO estimates the 
meetings would cost $2 million a year.
    Section 12 would require the Overseas Private Investment 
Corporation and the Export-Import Bank to create advisory 
committees to assist in developing policies toward Africa. CBO 
estimates the advisory committees would cost less than $25,000 
each year based on the cost of similar committees. The bill 
would require reports on trade and investment policy with sub-
Saharan Africa and on negotiating free trade agreements. The 
U.S. Trade Representative currently reports on these issues, 
and CBO estimates the expanded reporting requirement would 
result in no significant increase in costs.
    Section 14 would direct the International Trade 
Administration (ITA) to increase from four to 10 the number of 
countries in sub-Saharan Africa in which foreign commercial 
service employees are stationed. Currently, the ITA has 24 
employees stationed in four countries of sub-Saharan Africa. To 
establish the six new posts, CBO expects that ITA will hire 
three new employees and move three current employees to 
additional countries in sub-Saharan Africa. Based on 
information from the Department of Commerce, CBO estimates that 
the cost for each new employee will be about $200,000 in 1999 
dollars, which includes the high cost of locating employees in 
foreign countries. CBO also estimates that there will be moving 
costs for current employees, but such costs would be less than 
$500,000 a year. CBO estimates that implementing this section 
would cost less than $500,000 in 2000 and increase to about $1 
million in 2001 and each subsequent year.
    Sections 10 and 14 would authorize the executive branch to 
use development assistance funds to provide technical 
assistance to sub-Saharan governments to liberalize trade, to 
bring their legal regimes into compliance with the World Trade 
Organization, to promote democracy and good governance, and to 
strengthen conflict resolution. CBO estimates that the cost of 
those provisions would be minimal because other provisions of 
law already provide similar authority.
            Pay-as-you-go considerations
    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. The net changes in outlays and 
governmental receipts that are subject to pay-as-you-go 
procedures are shown in the following table. For the purpose of 
enforcing pay-as-you-procedures, only the effects in the 
current year, the budget year, and the succeeding four years 
are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By fiscal year in millions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                 1999   2000   2001  2002    2003     2004     2005     2006     2007     2008     2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts...........................................      6     48     23    -4      -11      -31      -32      -34      -34      -36      -30
Changes in outlays............................................      0      0      0     0        0        0        0        0        0        0        0
--------------------------------------------------------------------------------------------------------------------------------------------------------

            Estimated impact on State, local, and tribal governments
    H.R. 434 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act and would not affect the 
budgets of state, local, or tribal governments.
            Estimated impact on the private sector
    JCT has determined that H.R. 434 would impose two new 
private-sector mandates by limiting the use of the nonaccrual 
experience methods of accounting and by denying charitable 
contributions deductions for transfers associated with 
charitable split dollar insurance arrangements. JCT estimates 
that the direct costs of the new mandates would not exceed the 
statutory threshold ($100 million in 1996, adjusted annually 
for inflation) established in UMRA in each of fiscal years 1999 
through 2004.
            Previous CBO estimate
    On March 18, 1999, CBO prepared a cost estimate for H.R. 
434, as reported by the House Committee on International 
Relations. The current estimate of the bill differs from the 
March 18 estimate because of two revenue provisions in the bill 
added by the House Committee on Ways and Means. The new revenue 
provisions would limit the use of the nonaccural experience 
method of accounting and would deny charitable contributions 
deductions for transfer associated with charitable split dollar 
insurance arrangements.
            Estimate prepared by
    Federal Revenues: Hester Grippando.
    Federal Spending: Joseph Whitehill and Mark Hadley.
    Sunita D'Monte and John Righter.
    Impact on State, local, and tribal governments: Leo Lex.
    Impact on the private sector: Keith Mattrick.
            Estimate approved by
    G. Thomas Woodward, Assistant Director for Tax Analysis, 
and Paul N. Van de Water, Assistant Director for Budget 
Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee concludes that the 
actions taken in this legislation are appropriate given its 
oversight of international trade and tax matters.

    B. Summary of Findings and Recommendations of the Committee on 
                           Government Reform

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House ofRepresentatives (relating to oversight findings), 
the Committee states that no oversight findings or recommendations have 
been submitted to the Committee by the Committee on Government Reform 
with respect to the provisions in H.R. 434.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article 1 of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States.'') and from the 16th Amendment to the 
Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4). The 
Committee has reviewed the provisions of the bill as approved 
by the Committee on June 10, 1999. In accordance with the 
requirements of Public Law 104-4, the Committee has determined 
that the following provisions of the bill contain Federal 
private sector mandates:
          The use of the non-accrual experience method of 
        accounting is limited to amounts to be received for the 
        performance of qualified professional services.
          A charitable contribution deduction is denied for 
        charitable split-dollar insurance.
    The Committee has determined that it is necessary to 
include these provisions in the bill to provide revenue offsets 
for the trade initiatives approved by the Committee.

                E. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``No bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase shall be considered as passed or agreed to unless 
determined by a vote of not less than three-fifths of the 
Members.'' The Committee has carefully reviewed the provisions 
of the bill, and states that the provisions of the bill do not 
involve any Federal income tax rate increase within the meaning 
of the rule.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the Senate Committee on 
Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
(the ``Code'') and has widespread applicability to individuals 
or small businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Internal Revenue Code and that have 
widespread applicability to individuals or small businesses.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                    TITLE V OF THE TRADE ACT OF 1974


TITLE V--GENERALIZED SYSTEM OF PREFERENCES

           *       *       *       *       *       *       *


SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

  (a) Eligible Articles.--
          (1) Designation.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Eligible countries in sub-saharan 
                africa.--The President may provide duty-free 
                treatment for any article set forth in 
                paragraph (1) of subsection (b) that is the 
                growth, product, or manufacture of an eligible 
                country in sub-Saharan Africa that is a 
                beneficiary developing country, if, after 
                receiving the advice of the International Trade 
                Commission in accordance with subsection (e), 
                the President determines that such article is 
                not import-sensitive in the context of imports 
                from eligible countries in sub-Saharan Africa. 
                This subparagraph shall not affect the 
                designation of eligible articles under 
                subparagraph (B).
                  [(C)] (D) Three-year rule.--If, after 
                receiving the advice of the International Trade 
                Commission under subsection (e), an article has 
                been formally considered for designation as an 
                eligible article under this title and denied 
                such designation, such article may not be 
                reconsidered for such designation for a period 
                of 3 years after such denial.
          (2) Rule of origin.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Eligible countries in sub-saharan 
                africa.--For purposes of determining the 
                percentage referred to in subparagraph (A) in 
                the case of an article of an eligible country 
                in sub-Saharan Africa that is a beneficiary 
                developing country--
                          (i) if the cost or value of materials 
                        produced in the customs territory of 
                        the United States is included with 
                        respect to that article, an amount not 
                        to exceed 15 percent of the appraised 
                        value of the article at the time it is 
                        entered that is attributed to such 
                        United States cost or value may be 
                        applied toward determining the 
                        percentage referred to in subparagraph 
                        (A); and
                          (ii) the cost or value of the 
                        materials included with respect to that 
                        article that are produced in any 
                        beneficiary developing country that is 
                        an eligible country in sub-Saharan 
                        Africa shall be applied in determining 
                        such percentage.

           *       *       *       *       *       *       *

  (c) Withdrawal, Suspension, or Limitation of Duty-Free 
Treatment; Competitive Need Limitation.--
          (1) * * *
          (2) Competitive need limitation.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) Least-developed beneficiary developing 
                countries.--Subparagraph (A) shall not apply to 
                any least-developed beneficiary developing 
                country.]
                  (D) Least-developed beneficiary developing 
                countries and eligible countries in sub-saharan 
                africa.--Subparagraph (A) shall not apply to 
                any least-developed beneficiary developing 
                country or any eligible country in sub-Saharan 
                Africa.

           *       *       *       *       *       *       *


[SEC. 505. DATE OF TERMINATION.

  [No duty-free treatment provided under this title shall 
remain in effect after June 30, 1999.]

SEC. 505. DATE OF TERMINATION.

  (a) Countries in Sub-Saharan Africa.--No duty-free treatment 
provided under this title shall remain in effect after June 30, 
2009, with respect to beneficiary developing countries that are 
eligible countries in sub-Saharan Africa.
  (b) Other Countries.--No duty-free treatment provided under 
this title shall remain in effect after June 30, 1999, with 
respect to beneficiary developing countries other than those 
provided for in subsection (a).

           *       *       *       *       *       *       *


SEC. 507. DEFINITIONS.

  For purposes of this title:
          (1) * * *

           *       *       *       *       *       *       *

          (6) Eligible country in sub-saharan africa.--The 
        terms ``eligible country in sub-Saharan Africa'' and 
        ``eligible countries in sub-Saharan Africa'' mean a 
        country or countries that the President has determined 
        to be eligible under section 4 of the African Growth 
        and Opportunity Act.

           *       *       *       *       *       *       *

                              ----------                              


           SECTION 233 OF THE FOREIGN ASSISTANCE ACT OF 1961

  Sec. 233. Organization and Management.--(a) * * *

           *       *       *       *       *       *       *

  (e) Advisory Committee.--The Board shall take prompt measures 
to increase the loan, guarantee, and insurance programs, and 
financial commitments, of the Corporation in sub-Saharan 
Africa, including through the use of an advisory committee to 
assist the Board in developing and implementing policies, 
programs, and financial instruments with respect to sub-Saharan 
Africa. In addition, the advisory committee shall make 
recommendations to the Board on how the Corporation can 
facilitate greater support by the United States for trade and 
investment with and in sub-Saharan Africa. The advisory 
committee shall terminate 4 years after the date of the 
enactment of this subsection.
                              ----------                              


            SECTION 2 OF THE EXPORT-IMPORT BANK ACT OF 1945

  Sec. 2. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (13)(A) The Board of Directors of the Bank shall take prompt 
measures, consistent with the credit standards otherwise 
required by law, to promote the expansion of the Bank's 
financial commitments in sub-Saharan Africa under the loan, 
guarantee, and insurance programs of the Bank.
  (B)(i) The Board of Directors shall establish and use an 
advisory committee to advise the Board of Directors on the 
development and implementation of policies and programs 
designed to support the expansion described in subparagraph 
(A).
  (ii) The advisory committee shall make recommendations to the 
Board of Directors on how the Bank can facilitate greater 
support by United States commercial banks for trade with sub-
Saharan Africa.
  (iii) The advisory committee shall terminate 4 years after 
the date of the enactment of this subparagraph.

           *       *       *       *       *       *       *

                              ----------                              


                     INTERNAL REVENUE CODE OF 1986

                        Subtitle A--Income Taxes

           *       *       *       *       *       *       *


                  CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *


               Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *


     PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

           *       *       *       *       *       *       *


SEC. 170. CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Disallowance of Deduction in Certain Cases and Special 
Rules.--
          (1) * * *

           *       *       *       *       *       *       *

          (10) Split-dollar life insurance, annuity, and 
        endowment contracts.--
                  (A) In general.--Nothing in this section or 
                in section 545(b)(2), 556(b)(2), 642(c), 2055, 
                2106(a)(2), or 2522 shall be construed to allow 
                a deduction, and no deduction shall be allowed, 
                for any transfer to or for the use of an 
                organization described in subsection (c) if in 
                connection with such transfer--
                          (i) the organization directly or 
                        indirectly pays, or has previously 
                        paid, any premium on any personal 
                        benefit contract with respect to the 
                        transferor, or
                          (ii) there is an understanding or 
                        expectation that any person will 
                        directly or indirectly pay any premium 
                        on any personal benefit contract with 
                        respect to the transferor.
                  (B) Personal benefit contract.--For purposes 
                of subparagraph (A), the term ``personal 
                benefit contract'' means, with respect to the 
                transferor, any life insurance, annuity, or 
                endowment contract if any direct or indirect 
                beneficiary under such contract is the 
                transferor, any member of the transferor's 
                family, or any other person (other than an 
                organization described in subsection (c)) 
                designated by the transferor.
                  (C) Application to charitable remainder 
                trusts.--In the case of a transfer to a trust 
                referred to in subparagraph (E), references in 
                subparagraphs (A) and (F) to an organization 
                described in subsection (c) shall be treated as 
                a reference to such trust.
                  (D) Exception for certain annuity 
                contracts.--If, in connection with a transfer 
                to or for the use of an organization described 
                in subsection (c), such organization incurs an 
                obligation to pay a charitable gift annuity (as 
                defined in section 501(m)) and such 
                organization purchases any annuity contract to 
                fund such obligation, persons receiving 
                payments under the charitable gift annuity 
                shall not be treated for purposes of 
                subparagraph (B) as indirect beneficiaries 
                under such contract if--
                          (i) such organization possesses all 
                        of the incidents of ownership under 
                        such contract,
                          (ii) such organization is entitled to 
                        all the payments under such contract, 
                        and
                          (iii) the timing and amount of 
                        payments under such contract are 
                        substantially the same as the timing 
                        and amount of payments to each such 
                        person under such obligation (as such 
                        obligation is in effect at the time of 
                        such transfer).
                  (E) Exception for certain contracts held by 
                charitable remainder trusts.--A person shall 
                not be treated for purposes of subparagraph (B) 
                as an indirect beneficiary under any life 
                insurance, annuity, or endowment contract held 
                by a charitable remainder annuity trust or a 
                charitable remainder unitrust (as defined in 
                section 664(d)) solely by reason of being 
                entitled to any payment referred to in 
                paragraph (1)(A) or (2)(A) of section 664(d) 
                if--
                          (i) such trust possesses all of the 
                        incidents of ownership under such 
                        contract, and
                          (ii) such trust is entitled to all 
                        the payments under such contract.
                  (F) Excise tax on premiums paid.--
                          (i) In general.--There is hereby 
                        imposed on any organization described 
                        in subsection (c) an excise tax equal 
                        to the premiums paid by such 
                        organization on any life insurance, 
                        annuity, or endowment contract if the 
                        payment of premiums on such contract is 
                        in connection with a transfer for which 
                        a deduction is not allowable under 
                        subparagraph (A), determined without 
                        regard to when such transfer is made.
                          (ii) Payments by other persons.--For 
                        purposes of clause (i), payments made 
                        by any other person pursuant to an 
                        understanding or expectation referred 
                        to in subparagraph (A) shall be treated 
                        as made by the organization.
                          (iii) Reporting.--Any organization on 
                        which tax is imposed by clause (i) with 
                        respect to any premium shall file an 
                        annual return which includes--
                                  (I) the amount of such 
                                premiums paid during the year 
                                and the name and TIN of each 
                                beneficiary under the contract 
                                to which the premium relates, 
                                and
                                  (II) such other information 
                                as the Secretary may require.
                        The penalties applicable to returns 
                        required under section 6033 shall apply 
                        to returns required under this clause. 
                        Returns required under this clause 
                        shall be furnished at such time and in 
                        such manner as the Secretary shall by 
                        forms or regulations require.
                          (iv) Certain rules to apply.--The tax 
                        imposed by this subparagraph shall be 
                        treated as imposed by chapter 42 for 
                        purposes of this title other than 
                        subchapter B of chapter 42.
                  (G) Special rule where state requires 
                specification of charitable gift annuitant in 
                contract.--In the case of an obligation to pay 
                a charitable gift annuity referred to in 
                subparagraph (D) which is entered into under 
                the laws of a State which requires, in order 
                for the charitable gift annuity to be exempt 
                from insurance regulation by such State, that 
                each beneficiary under the charitable gift 
                annuity be named as a beneficiary under an 
                annuity contract issued by an insurance company 
                authorized to transact business in such State, 
                the requirements of clauses (i) and (ii) of 
                subparagraph (D) shall be treated as met if--
                          (i) such State law requirement was in 
                        effect on February 8, 1999,
                          (ii) each such beneficiary under the 
                        charitable gift annuity is a bona fide 
                        resident of such State at the time the 
                        obligation to pay a charitable gift 
                        annuity is entered into, and
                          (iii) the only persons entitled to 
                        payments under such contract are 
                        persons entitled to payments as 
                        beneficiaries under such obligation on 
                        the date such obligation is entered 
                        into.
                  (H) Regulations.--The Secretary shall 
                prescribe such regulations as may be necessary 
                or appropriate to carry out the purposes of 
                this paragraph, including regulations to 
                prevent the avoidance of such purposes.

           *       *       *       *       *       *       *


        Subchapter E--Accounting Periods and Methods of Accounting

           *       *       *       *       *       *       *


                     PART II--METHODS OF ACCOUNTING

           *       *       *       *       *       *       *


               Subpart A--Methods of Accounting in General

           *       *       *       *       *       *       *


SEC. 448. LIMITATION ON USE OF CASH METHOD OF ACCOUNTING.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Definition and Special Rules.--For purposes of this 
section--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Special rule for certain personal services.--In 
        the case of any person using an accrual method of 
        accounting with respect to amounts to be received for 
        the performance of services by such person in fields 
        described in paragraph (2)(A), such person shall not be 
        required to accrue any portion of such amounts which 
        (on the basis of experience) will not be collected. 
        This paragraph shall not apply to any amount if 
        interest is required to be paid on such amount or there 
        is any penalty for failure to timely pay such amount.

           *       *       *       *       *       *       *


                                  
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