[Senate Report 106-112]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 212
106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-112

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



 
                 THE AFRICAN GROWTH AND OPPORTUNITY ACT

                                _______
                                

                 July 20, 1999.--Ordered to be printed

                                _______


    Mr. Roth, from the Committee on Finance, submitted the following

                              R E P O R T

                         [To accompany S. 1387]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, having considered legislation to 
extend certain trade preferences to sub-Saharan African 
countries, reports favorably thereon and refers the bill to the 
full Senate with a recommendation that the bill do pass.

                             I. BACKGROUND

    The purpose of this legislation is to authorize ``a new 
trade and investment policy'' that is designed to encourage 
increased trade and economic cooperation between the United 
States and the sub-Saharan African (``SSA'') countries. It is 
the expectation of the Finance Committee that the increased 
trade and investment resulting from this legislation will 
encourage those sub-Saharan African countries committed to 
political and economic reform to continue to pursue such 
reforms.
    Currently, sub-Saharan Africa is a region that faces 
significant economic and political difficulties, as well as 
opportunities. The SSA countries are among the poorest and 
least developed in the world. According to World Bank data, the 
annual per capita GNP for the SSA countries averages only $490. 
The political climate in several of the SSA countries, however, 
has improved in recent years, though there remain a number of 
SSA countries that suffer from significant instability. 
Moreover, over 30 countries have taken steps toward economic 
reform, including some liberalizing of exchange rates and 
prices, privatizing state-owned enterprises, instituting 
tighter disciplines over government expenditures, limiting 
subsidies and reducing barriers to trade and investment.
    Currently, trade between the United States and the SSA 
countries is small. In 1998, U.S. merchandise exports to the 
SSA countries amounted to less than 1 percent of total U.S. 
merchandise exports ($6.7 billion), while imports from those 
countries totaled only 1.7 percent of U.S. merchandise imports 
($13.1 billion). Primary U.S. exports sectors are 
transportation equipment, agricultural products, machinery, 
electronic products and chemicals. Principal imports from sub-
Saharan Africa are energy-related products, minerals and 
metals.
    The United States' efforts to encourage trade with the SSA 
countries have had limited success. For example, under the 
Generalized System of Preferences (``GSP'') program, developing 
countries are eligible to receive duty-free access to the U.S. 
market for certain specified products. Although most of the SSA 
countries are eligible for preferential tariff treatment under 
the GSP program, only 14.6 percent of imports under the program 
in 1998 were from the SSA countries. United States imports from 
sub-Saharan Africa under GSP totaled $2.4 billion in 1998, with 
imports from Angola ($1,571.3 million in 1998) and South Africa 
($551.7 million in 1998) accounting for more than three-
quarters of this amount. Significantly, most petroleum 
products--which constitute the largest category of merchandise 
exports from the SSA countries--are not eligible for duty-free 
treatment under the GSP program, except for the least-developed 
countries (including Angola, whose GSP exports in 1998 were 
predominantly comprised of petroleum products).
    In the 105th Congress, the African Growth and Opportunity 
Act (H.R. 1432) was introduced in the House of Representatives 
on April 24, 1997, and was referred to the House Committees on 
International Relations, Ways and Means and Banking and 
Financial Services. The Committees on International Relations 
and Ways and Means each reported the bill on March 2, 1998. The 
Banking and Financial Services Committee was discharged of the 
bill on March 2, 1998. The bill was passed by the House on 
March 11, 1998, by a vote of 233-186.
    In the Senate, the Finance Committee held a hearing on the 
U.S.-sub-Saharan Africa trading relationship on June 17, 1998. 
During this hearing, the Committee heard testimony from the 
chief sponsors of the legislation from the House and Senate, 
officials from the Administration and interested parties from 
the private sector. The Committee also heard testimony on the 
issue of trade with Africa on September 17, 1997. The Finance 
Committee ordered an original measure (S. 2400) to be reported 
on July 21, 1998. This bill included legislation authorizing a 
new trade policy for sub-Saharan Africa.
    In the 106th Congress, the African Growth and Opportunity 
Act (H.R. 434) was introduced in the House of Representatives 
on February 2, 1999, and was referred to the House Committees 
on International Relations, Ways and Means, and Banking and 
Financial services. The Committee on International Relations 
ordered the bill to be reported with an amendment by a vote of 
24-8 on February 11, 1999. The Committee on Ways and Means 
ordered the bill to be reported with an amendment by voice vote 
on June 10, 1999. The Committee on Banking and Financial 
Services was discharged of the bill on June 17, 1999. A bill 
identical to H.R. 434 was also introduced in the Senate (S. 
666) on March 18, 1999.

                     II. GENERAL DESCRIPTION OF ACT


                                Summary

    This Act has five primary components. First, the Act 
provides eligible SSA countries with enhanced benefits under 
the GSP program and extends both the enhanced and the regular 
GSP benefits through September 30, 2006. Second, the Act 
provides those countries quota-free and duty-free access to the 
United States for certain textile and apparel products. Third, 
the Act directs the President to create a United States-sub-
Saharan African Trade and Economic Cooperation Forum. Fourth, 
the Act directs the President to examine the feasibility of 
negotiating a free trade agreement with one or more of the SSA 
countries. Fifth, the Act includes two revenue offsets.

               Section-by-Section Description of the Act

Section 1: Short title; Table of contents

    Section 1 of the bill provides that this Act may be 
referred to as the ``African Growth and Opportunity Act.'' It 
also lays out a table of contents for the Act.

Section 2: Findings

    Section 2 of the bill enumerates 12 findings with regard to 
this Act:
     That it is in the mutual interest of the United 
States and the countries of sub-Saharan Africa to promote 
stable and sustainable economic growth and development in sub-
Saharan Africa.
     That the 48 countries of sub-Saharan Africa form a 
region richly endowed with both natural and human resources.
     That sub-Saharan Africa represents a region of 
enormous economic potential and of enduring political 
significance to the United States.
     That the region has experienced a rise in both 
economic development and political freedom as countries in sub-
Saharan Africa have taken steps toward liberalizing their 
economies and encouraged broader participation in the political 
process.
     That the countries of sub-Saharan Africa have made 
progress toward regional economic integration that can have 
positive benefits for the region.
     That despite these gains, the per capita income in 
sub-Saharan Africa averages less than $500 annually.
     That U.S. foreign direct investment in the region 
has fallen in recent years and the sub-Saharan African region 
receives only minor inflows of direct investment from around 
the world.
     That trade between the U.S. and sub-Saharan 
Africa, apart from the import of oil, remains an insignificant 
part of total U.S. trade.
     That trade and investment, as the American 
experience has shown, can represent powerful tools for economic 
development and for building a stable political environment in 
which political freedom can flourish.
     That increased trade and investment flows have the 
greatest impact in an economic environment in which trading 
partners eliminate barriers to trade and capital flows and 
encourage the development of a vibrant private sector that 
offers individual African citizens the freedom to expand their 
economic opportunities and provide for their families.
     That offering the countries of sub-Saharan Africa 
enhanced trade preferences will encourage both higher levels of 
trade and direct investment for the region as well as enhance 
commercial and political ties between the United States and 
sub-Saharan Africa.
     That encouraging the reciprocal reduction of trade 
and investment barriers in Africa will enhance the benefits of 
trade and investment for the region as well as enhance 
commercial and political ties between the United States and 
sub-Saharan Africa.

Section 3: Statement of policy

    Section 3 of the bill states the support of Congress for:
     Encouraging increased trade and investment between 
the United States and sub-Saharan Africa.
     Reducing tariff and nontariff barriers and other 
obstacles to sub-Saharan African and U.S. trade.
     Expanding U.S. assistance to sub-Saharan Africa's 
regional integration efforts.
     Negotiating reciprocal and mutually beneficial 
trade agreements, including the possibility of establishing 
free trade areas that serve the interests of both the United 
States and the countries of sub-Saharan Africa.
     Focusing on countries committed to accountable 
government, economic reform, and the eradication of poverty.
     Strengthening and expanding the private sector in 
sub-Saharan Africa.
     Supporting the development of civil societies and 
political freedom in sub-Saharan Africa.
     Establishing a United States-sub-Saharan African 
Economic Cooperation Forum.

Section 4: Sub-Saharan Africa defined

    Section 4 defines sub-Saharan Africa as the forty-eight 
countries listed in that section.

   TITLE I: Extension of certain trade benefits to sub-Saharan Africa

Section 101. Eligibility for certain benefits

    Section 101 of the bill amends the Generalized System of 
Preferences (GSP) program, Title V of the Trade Act of 1974, by 
inserting a new section 506A. This new section authorizes the 
President to designate certain countries as beneficiary SSA 
countrieseligible for certain enhanced benefits under the GSP 
program.
    In order to be designated as a beneficiary SSA country, and 
therefore eligible for the benefits set forth in this section, 
a country must satisfy three sets of criteria. First, the 
President must find that the sub-Saharan African country has 
established or is making continual progress toward 
establishing:
     A market-based economy, where private property 
rights are protected and the principles of an open, rules-based 
trading system are observed.
     A democratic society, where the rule of law, 
political freedom, participatory democracy, and the right to 
due process and a fair trial are observed.
     An open trading system through the elimination of 
barriers to U.S. trade and investment and the resolution of 
bilateral trade and investment disputes.
     Economic policies to reduce poverty, increase the 
availability of health care and educational opportunities, 
expand physical infrastructure, and promote the establishment 
of private enterprise.
    Second, the President must find that the SSA country does 
not engage in gross violations of internationally recognized 
human rights or provide support for international terrorism and 
cooperates in international efforts to eliminate human rights 
violations and terrorist activities. Third, the SSA country 
must satisfy the eligibility criteria for the GSP program.
    Once a country has satisfied the eligibility criteria, it 
can be designated by the President as a beneficiary sub-Saharan 
African country and receive the enhanced GSP benefits set forth 
in this section. The Committee intends that the eligibility 
criteria described in section 101 apply only to the new 
benefits described in the new section 506A and are not meant to 
limit the GSP benefits available to the SSA countries under 
current law.
    The new section 506A would authorize the President to 
provide duty-free treatment for any item, other than textiles 
or apparel products or textile luggage, that is designated as 
import sensitive under section 503(b)(1) of Title V. The 
general rules of origin governing duty-free entry under the GSP 
program will continue to apply, except that, in determining 
whether products are eligible for the enhanced benefits of the 
bill, up to 15 percent of the appraised value of the article at 
the time of importation may be derived from materials produced 
in the United States. In addition, under the new section 506A, 
the value of materials produced in any beneficiary SSA country 
may be applied in determining whether the product meets the 
applicable rules of origin for purposes of determining the 
eligibility of an article to receive the duty-free treatment 
provided by this section. Section 101 also amends section 
503(c)(2)(D) to waive permanently the competitive need limits 
that would otherwise apply to beneficiary SSA countries.
    The new section 506A established by section 101 of the Act 
also requires the President to monitor, and report annually to 
Congress, on the progress the SSA countries have made in 
meeting the three categories of eligibility criteria set forth 
above. The Committee expects that in the annual report required 
in section 105 of this Act, the President will provide an 
explanation of his assessment of the progress being made by 
each country listed in section 4 toward meeting the stated 
eligibility requirements, citing specific examples where 
possible.
    The new section 506A would require the President to 
terminate the designation of a country as a beneficiary SSA 
country if that country is not making continual progress in 
meeting the eligibility requirements. Any such termination 
would be effective on January 1 of the year following the year 
in which the determination is made that the eligibility 
criteria are no longer met.
    Section 101 of this Act will also create a new section 
505A, which sets a termination date for the duty-free treatment 
provided by this Act as September 30, 2006. It also extends the 
general GSP program for SSA countries through September 30, 
2006. It further includes a clerical amendment to the table of 
contents in title V of the Trade Act of 1974 and sets the 
effective date for this Act as October 1, 1999.

Section 102: Treatment of certain textiles and apparel

    Section 102 provides beneficiary sub-Saharan African 
countries (as designated under the new section 506A of the 
Trade Act of 1974 added by section 101 above) with duty-free 
and quota-free access to the U.S. market for certain textiles 
and apparel products. In order to receive these benefits, a 
beneficiary Sub-Saharan African country must (1) adopt an 
effective and efficient visa system to guard against unlawful 
transshipment of textile and apparel products and the use of 
counterfeit documents; and (2) enact legislation or regulations 
that would permit the U.S. Customs Service to investigate 
thoroughly allegations of transshipment through such country. 
Section 5 directs the U.S. Customs Service to provide technical 
assistance to the beneficiary sub-Saharan African countries in 
complying with these two requirements.
    The benefits under section 102 are available only for the 
following textile and apparel products:
     Apparel articles assembled in beneficiary sub-
Saharan African countries from fabrics wholly formed and cut in 
the United States, from yarns wholly formed in the United 
States.
     Apparel articles cut and assembled in beneficiary 
sub-Saharan African countries from fabric wholly formed in the 
United States from yarns wholly formed in the United States, 
and assembled with thread formed in the United States.
     Handloomed, handmade and folklore articles, that 
have been certified as such by the competent authority in the 
beneficiary sub-Saharan African country.
    The Committee expects that only genuinely handcrafted 
articles, normally produced in limited quantities, will be 
designated as eligible; this provision is not intended to 
benefit large-scale, industrial production of textile or 
apparel articles. Rather, consistent with the WTO Agreement on 
Textiles and Clothing, the Committee intends that the 
handloomed, handmade or folklore articles to which the benefits 
will apply include only handloom fabrics of the cottage 
industry, or hand-made cottage industry products made of such 
handloom fabrics, or traditional folklore handicraft textile 
and clothing products. In addition, the Committee intends that 
textile luggage (i.e., luggage made of textile material 
identified in headings 4202.12 and 4202.92 of the Harmonized 
Tariff Schedule of the United States) be treated as a textile 
product, and therefore it will not be eligible for duty-free or 
quota-free treatment under this legislation (except when such 
textile luggage has been certified as a handloomed, handmade or 
folklore article).
    The Committee also intends that this new program of textile 
and apparel benefits will be administered in a manner 
consistent with the regulations that currently apply under the 
``Special Access Program'' for textile and apparel articles 
from Caribbean Basin and Andean Trade Preference Act countries, 
as described in 63 Fed. Reg. 16474-16476 (April 3, 1998). Thus, 
the requirement that products must be assembled from fabric 
formed in the United States applies to all textile components 
of the assembled products, including linings and pocketing, 
subject to the exceptions that currently apply under the 
``Special Access Program.''
    Section 102 provides that if an exporter is found to have 
engaged in transshipment with respect to textile or apparel 
products from a beneficiary SSA country, then the President 
must deny all benefits under this section and under section 101 
of this Act to such exporter, any successor of such exporter, 
and any other entity owned or operated by the principal of the 
exporter for a period of 2 years.
    Section 102 also includes a safeguard measure, authorizing 
the President to impose appropriate remedies, including 
restrictions on or the removal of quota-free and duty-free 
treatment, in the event that imports of textile and apparel 
articles from a beneficiary SSA country are being imported in 
such increased quantities as to cause serious damage, or actual 
threat of such damage, under the Agreement on Textiles and 
Clothing (``ATC''). The Committee intends that the injury 
standard be the same as set forth under the ATC, even though 
the remedies the President may impose under this provision 
include withdrawing or restricting both the duty-free and 
quota-free treatment provided under this section. With respect 
to the imposition of quotas, the intent of the Committee is 
that the President exercise his authority under the safeguard 
provisions of this section only in a manner consistent with the 
ATC; thus, the Committee does not intend that this provision 
would authorize the President to impose quotas once they are 
eliminated with respect to WTO members under the ATC in 2005.
    The benefits provided by this section will be effective 
from October 1, 1999 through September 30, 2006.
    The benefits available under section 102 with regard to 
textiles and apparel products are not provided as a part of the 
GSP program. It is not the intent of the Committee that tariff 
relief or quota removal for textile and apparel products become 
or be treated as benefits provided under the GSP program.

Section 103: United States-Sub-Saharan Africa Trade and Economic 
        Cooperation Forum

    Section 103 of the bill directs the President to establish 
a United States-sub-Saharan African Trade and Economic 
Cooperation Forum with interested SSA countries. The purpose of 
this Forum is to foster close economic ties between the United 
States and sub- Saharan Africa by encouraging meetings between 
private sector, governmental and nongovernmental leaders to 
discuss expanding trade and investment relations between the 
United States and sub-Saharan Africa. Section 103 also directs 
the President to meet with the heads of the governments of 
interested SSA countries for the purpose of discussing 
expanding trade and investment relations between the United 
States and sub-Saharan Africa.

Section 104: United States-Sub-Saharan African free trade area

    Section 104 directs the President to examine, and report 
back to the Senate Committee on Finance and the House Committee 
on Ways and Means regarding the feasibility of negotiating a 
free trade agreement with interested sub-Saharan African 
countries. If the President finds that such an agreement is 
feasible, then the President must provide a detailed plan for 
such negotiation(s) that outlines the objectives, timing, 
potential benefits to the United States and sub-Saharan Africa, 
and likely economic impact of any such agreement.

Section 105: Reporting requirement

    Section 105 directs the President to submit to Congress 
each year, for 5 years following enactment of the this Act, a 
report on the implementation of this Act.

                      TITLE II: Revenue Provisions

Section 201. Limit use of non-accrual experience method of accounting 
        to amounts to be received for the performance of qualified 
        personal services (sec. 448 of the Internal Revenue Code)

                              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.

                           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.

                        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.

                             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 4 years under principles consistent with 
those in Rev. Proc. 98-60. 1
---------------------------------------------------------------------------
    \1\ 1998-51 I.R.B. 16.
---------------------------------------------------------------------------

Section 202. Expand reporting of cancellation of indebtedness income 
        (sec. 6050P of the Internal Revenue Code)

                              present law

    Under section 61(a)(12), a taxpayer's gross income includes 
income from the discharge of indebtedness. Section 6050P 
requires ``applicable entities'' to file information returns 
with the Internal Revenue Service (IRS) regarding any discharge 
of indebtedness of $600 or more.
    The information return must set forth the name, address, 
and taxpayer identification number of the person whose debt was 
discharged, the amount of debt discharged, the date on which 
the debt was discharged, and any other information that the IRS 
requires to be provided. The information return must be filed 
in the manner and at the time specified bythe IRS. The same 
information also must be provided to the person whose debt is 
discharged by January 31 of the year following the discharge.
    ``Applicable entities'' include: (1) the Federal Deposit 
Insurance Corporation (FDIC), the Resolution Trust Corporation 
(RTC), the National Credit Union Administration, and any 
successor or subunit of any of them; (2) any financial 
institution (as described in sec. 581 (relating to banks) or 
sec. 591(a) (relating to savings institutions)); (3) any credit 
union; (4) any corporation that is a direct or indirect 
subsidiary of an entity described in (2) or (3) which, by 
virtue of being affiliated with such entity, is subject to 
supervision and examination by a Federal or State agency 
regulating such entities; and (5) an executive, judicial, or 
legislative agency (as defined in 31 U.S.C. sec. 3701(a)(4)).
    Failures to file correct information returns with the IRS 
or to furnish statements to taxpayers with respect to these 
discharges of indebtedness are subject to the same general 
penalty that is imposed with respect to failures to provide 
other types of information returns. Accordingly, the penalty 
for failure to furnish statements to taxpayers is generally $50 
per failure, subject to a maximum of $100,000 for any calendar 
year. These penalties are not applicable if the failure is due 
to reasonable cause and not to willful neglect.

                           reasons for change

    The Committee believes that it is appropriate to treat 
discharges of indebtedness that are made by similar entities in 
a similar manner. Accordingly, the Committee believes that it 
is appropriate to extend the scope of this information 
reporting provision to include indebtedness discharged by any 
organization a significant trade or business of which is the 
lending of money (such as finance companies and credit card 
companies whether or not affiliated with financial 
institutions).

                        explanation of provision

    The bill requires information reporting on indebtedness 
discharged by any organization a significant trade or business 
of which is the lending of money (such as finance companies and 
credit card companies whether or not affiliated with financial 
institutions).

                             effective date

    The provision is effective with respect to discharges of 
indebtedness after December 31, 1999.

                       III. CONGRESSIONAL ACTION

    The Committee considered the legislation in the form of an 
original bill on June 22, 1999, and ordered it reported 
favorably on the basis of a voice vote.

                       IV. VOTE OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
African Growth and Opportunity Act was ordered favorably 
reported by a voice vote on June 22, 1999.

                          V. BUDGETARY IMPACT


                         A. Committee Estimates

    In compliance with sections 308 and 403 of the 
Congressional Budget Act of 1974, and paragraph 11(a) of rule 
XXVI of the Standing Rules of the Senate, the following 
statement is made concerning the estimated budget effects of 
the bill.

                                ESTIMATED BUDGET EFFECTS OF THE ``AFRICAN GROWTH AND OPPORTUNITY ACT,'' AS APPROVED BY THE COMMITTEE ON FINANCE ON JUNE 22, 1999
                                                                        [Fiscal Years 1999-2009, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
              Provision                          Effective             1999    2000    2001    2002    2003    2004    2005    2006    2007    2008    2009    2000-2004   2005-2009   2000-2009
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Expansion of Generalized System of     10/1/99......................  ......     -46     -43     -44     -46     -49     -52     -56  ......  ......  ......        -228        -108        -336
 Preferences to Sub-Saharan Africa\1\.
Revenue Offset Provisions:
    1. Limit use of non-accrual        tyea DOE.....................      12      77      60      33      28      10      12      14      16      18      20         208          80         288
     experience method of accounting
     to amounts to be received for
     the performance of qualified
     professional services.
    2. Information reporting on        coda 12/31/99................  ......  ......       7       7       7       7       7       7       7       7       7          28          35          63
     cancellation of indebtedness by
     non-bank financial institutions.
                                                                     ---------------------------------------------------------------------------------------------------------------------------
      Net total......................  .............................      12      31      24      -4     -11     -32     -33     -35      23      25      27           7           8          15
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimate provided by the Congressional Budget Office.

Note: Details may not add to totals due to rounding.

Legend for ``Effective'' column: coda=cancellation of indebtedness after; DOE=date of enactment; and tyea=taxable years ending after.

Source: Joint Committee on Taxation.

                B. Budget Authority and Tax Expenditures

1. Budget authority

    In accordance with section 308(a)(1) of the Budget Act the 
Committee states that the African Growth and Opportunity Act 
involves no new or increased budget authority.

2. Tax expenditures

    In accordance with section 308(a)(2) of the Budget Act, the 
Committee states that the African Growth and Opportunity Act 
will result in no change in tax expenditures over the period 
fiscal years 1999-2009.

            C. Consultation with Congressional Budget Office

    In accordance with section 403 of the Budget Act, the 
Committee advises that the Congressional Budget Office has 
submitted the following statement on the budgetary impact of 
the African Growth and Opportunity Act:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 15, 1999.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for 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.

African Growth and Opportunity Act

    Summary: 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 September 30, 
2006. The legislation would also amend the Internal Revenue 
Code in order to limit the use of the nonaccrual experience 
method of accounting and to require information reporting on 
cancellations of indebtedness by nonbank financial 
institutions. CBO and the Joint Committee on Taxation (JCT) 
estimate that the bill would increase governmental receipts by 
$23 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 an average of about $2 million a year, assuming 
appropriation of the necessary amounts. The legislation would 
authorize annual high-level meetings between officials of the 
United States government and their counterparts of sub-Saharan 
countries eligible for benefits under the bill. The bill would 
increase the number of foreign commercial service employees 
stationed in Africa. The legislation would require the creation 
of advisory committees and expanded reporting on trade and 
investment policy with sub-Saharan Africa.
    The bill 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 
legislation would impose two new private-sector mandates by 
limiting the use of the nonaccrual experience method of 
accounting and by requiring information reporting on 
cancellations of indebtedness by nonbank financial 
institutions. 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 by UMRA 
in each of fiscal years 1999 through 2004.
    Estimated cost of the Federal Government: The estimated 
budgetary impact of the bill is shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                      By fiscal year, in millions of dollars
                                                                 -----------------------------------------------
                                                                   1999    2000    2001    2002    2003    2004
----------------------------------------------------------------------------------------------------------------

                                               Changes in revenues

Trade Provisions:
    Extension of GSP............................................       0     -40     -33     -34     -36     -38
    Expansion of GSP............................................       0      -3     -10     -10     -10     -11
                                                                 -----------------------------------------------
      Subtotal of Trade Provisions..............................       0     -43     -43     -44     -46     -49
Revenue Offset Provisions.......................................      12      77      67      40      35      17
                                                                 -----------------------------------------------
Net Effect on Revenues..........................................      12      34      24      -4     -11     -32


                                  Changes in spending subject to appropriation

Estimated Authorization Level...................................       0       3       2       3       3       3
Estimated Outlays...............................................       0       2       3       2       2       2
----------------------------------------------------------------------------------------------------------------

Basis of estimate

            Revenues
    The bill would extend GSP, which expired on June 30, 1999, 
for sub-Saharan Africa on October 1, 1999, through September 
30, 2006. The bill would allow for refunds for GSP-eligible 
goods entered between June 30, 1999, and October 1, 1999. The 
estimate of extending the existing GSP program with respect to 
sub-Saharan Africa was based on recent trade data imports for 
U.S. consumption of goods from eligible countries. CBO assumes 
that GSP imports would remain a constant portion of total 
imports. CBO estimates a trade diversion of one-half of a 
percentage point from non-sub-Saharan African GSP beneficiaries 
who will no longer receive duty-free GSP treatment. 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). CBO estimates that extending the existing GSP program 
with respect to sub-Saharan Africa would reduce governmental 
receipts by $182 million over the 2000-2004 period.
    The current GSP excludes articles determined by the U.S. 
Trade Representative (USTR) to be import sensitive from 
receiving duty-free GSP treatment. The bill would allow 
countries of sub-Saharan Africa to ask the President to 
redetermine import sensitivity of GSO-excludedimports in the 
context of imports from sub-Saharan Africa. Based on discussions with 
the International Trade Commission (ITC), CBO identified products that 
are now import-sensitive 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 on October 1, 1999. CBO does not expect that sub-
Saharan Africa will receive duty-free treatment for these articles 
prior to May 1, 2000. Using trade-weighted duty rates adjusted for 
reductions scheduled by the WTO, CBO estimates that this provision 
would reduce receipts by $39 million over the 2000-2004 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. 
The legislation 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 duty-free and quota-
free treatment to apparel products assembled in sub-Saharan 
Africa from fabrics wholly formed and cut in the United States 
from yarn wholly formed in the United States. CBO estimates 
that almost no apparel imports would qualify for special 
treatment under this provision. CBO projects that granting 
these additional products duty-free GSP treatment would reduce 
receipts by $5 million over the 2000-2004 period.
    All other revenue provisions in the bill were estimated by 
JCT.
            Spending subject to appropriation
    CBO estimates that implementing the legislation would 
increase discretionary spending by $3 million in fiscal year 
2000 and between $2 million and $2.5 million each year 
thereafter, assuming appropriation of the necessary amounts.
    The bill would authorize the U.S. Trade Representative and 
the Secretaries of Commerce, Treasury, and State 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.
    The legislation includes several reporting requirements. It 
would require the Administration to determine whether sub-
Saharan countries are eligible to benefit from the bill's 
preferential trade provisions and to monitor their compliance 
with certain requirements. The bill also would require the 
Customs Service to provide technical assistance to sub-Saharan 
African countries that benefit from the preferential trade 
provisions. To some extent, the Administration already performs 
these responsibilities under current law. CBO estimates that, 
subject to the availability of appropriated funding, 
implementing these provisions would cost about $1 million in 
fiscal year 2000 and less than $500,000 each year thereafter. 
The estimated cost for fiscal year 2000 is higher because the 
bill would require the administration to complete a one-time 
study of the feasibility of negotiating free-trade agreements 
with interested sub-Saharan countries. If the President 
determines that such agreements are feasible, the bill would 
require him to submit a detailed plan for such negotiations to 
the Congress.
    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 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-go 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.............................................      12      34      24      -4     -11     -32     -33     -35      23      25      27
Changes in outlays..............................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Not applicable.

    Estimated impact on State, local, and tribal governments: 
The bill contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: JCT has determined 
that the bill would impose two new private-sector mandates by 
limiting the use of the nonaccrual experience method of 
accounting and by requiring information reporting on 
cancellations of indebtedness by nonbank financial 
institutions. 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 and though 2004.
    Estimated prepared by: Federal revenues: Hester Grippando; 
Federal spending: Mark Grabowicz, Sunita D'Monte, and John 
Righter.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis and Paul N. Van de Water, Assistant 
Director for Budget Analysis.

              VI. REGULATORY IMPACT AND UNFUNDED MANDATES


                          A. Regulatory Impact

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact of the African 
Growth and Opportunity Act:

1. Impact on individuals and businesses

    The Committee states that the non-revenue offset portion of 
this Act does not alter any of the substantive or procedural 
requirements of the programs involved and would not, as a 
consequence, involve any new paperwork or regulatory burdens on 
individuals.
    The Committee further states that the bill provides the 
following revenue offsets: (1) a limitation on the use of the 
non-accrual experience method of accounting to amounts to be 
received for the performance of qualified professional 
services, effective for taxable years ending after the date of 
enactment; and (2) a provision for information reporting on 
cancellation of indebtedness after December 31, 1999. The 
revenue offset provisions will increase the tax burden on the 
affected taxpayers.

2. Impact on personal privacy and paperwork

    The African Growth and Opportunity Act will have no impact 
on personal privacy or paperwork.

                          B. Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). 
The Committee on Finance has reviewed the provisions of the 
African Growth and Opportunity Act as approved by the Committee 
on June 22, 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.
     Expand reporting of cancellation of indebtedness 
income.
    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.

                       C. 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.

                      VII. CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of Rule XXVI of the 
Standing Rules of the Senate, 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 italics, existing law in which no change 
is proposed is shown in roman):

                          TRADE ACT OF 1974

           *       *       *       *       *       *       *



                           table of contents

           *       *       *       *       *       *       *


               title v--generalized system of preferences

Sec. 501. Authority to extend preferences.
Sec. 502. Designation of beneficiary developing countries.
Sec. 503. Designation of eligible articles.
Sec. 504. Review and reports to Congress.
Sec. 505. Date of termination.
Sec. 505A. Termination of benefits for sub-Saharan African countries.
Sec. 506. Agricultural exports of beneficiary developing countries.
Sec. 506A. Designation of sub-Saharan African countries for certain 
          benefits.
Sec. 507. Definitions.

SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

           *       *       *       *       *       *       *


    (c) Withdrawal, Suspension, or Limitation of Duty-Free 
Treatment; Competitive Need Limitation.--

           *       *       *       *       *       *       *

    (2) Competitive need limitation.--

           *       *       *       *       *       *       *

    (D) Least-developed beneficiary developing countries and 
beneficiary sub-saharan african countries._Subparagraph (A) 
shall not apply to any least-developed beneficiary developing 
country or any beneficiary sub-saharan African country.

           *       *       *       *       *       *       *


SEC. 505. DATE OF TERMINATION.

           *       *       *       *       *       *       *


SEC. 505A. TERMINATION OF BENEFITS FOR SUB-SAHARAN AFRICAN COUNTRIES.

    In the case of a country listed in section 4 of the African 
Growth and Opportunity Act that is a beneficiary developing 
country, duty-free treatment provided under this title shall 
remain in effect through September 30, 2006.

           *       *       *       *       *       *       *


SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.

           *       *       *       *       *       *       *


SEC. 506A. DESIGNATION OF SUB-SAHARAN AFRICAN COUNTRIES FOR CERTAIN 
                    BENEFITS.

    (a) Authority To Designate.--
          (1) In general.--Notwithstanding any other provision 
        of law, the President is authorized to designate a 
        country listed in section 4 of the African Growth and 
        Opportunity Act as a beneficiary sub-Saharan African 
        country eligible for the benefits described in 
        subsection (b), if the President determines that the 
        country--
                  (A) has established, or is making continual 
                progress toward establishing--
                          (i) a market-based economy, where 
                        private property rights are protected 
                        and the principles of an open, rules-
                        based trading system are observed;
                          (ii) a democratic society, where the 
                        rule of law, political freedom, 
                        participatory democracy, and the right 
                        to due process and a fair trail are 
                        observed;
                          (iii) an open trading system through 
                        the elimination of barriers to United 
                        States trade and investment and the 
                        resolution of bilateral trade and 
                        investment disputes; and
                          (iv) economic policies to reduce 
                        poverty, increase the availability of 
                        health care and educational 
                        opportunities, expand physical 
                        infrastructure, and promote the 
                        establishment of private enterprise;
                  (B) does not engage in gross violations of 
                internationally recognized human rights or 
                provide support for acts of international 
                terrorism and cooperates in international 
                efforts to eliminate human rights violations 
                and terrorist activities; and
                  (C) subject to the authority granted to the 
                President under section 502 (a), (d), and (e), 
                otherwise satisfies the eligibility criteria 
                set forth in section 502.
          (2) Monitoring and review of certain countries.--The 
        President shall monitor and review the progress of each 
        country listed in section 4 of the African Growth and 
        Opportunity Act in meeting the requirements described 
        in paragraph (1) in order to determine the current or 
        potential eligibility of each country to be designated 
        as a beneficiary sub-Saharan African country for 
        purposes of sub-section (a). The President shall 
        include the reasons for the President's determinations 
        in the annual report required by section 105 of the 
        African Growth and Opportunity Act.
          (3) Continuing compliance.--If the President 
        determines that a beneficiary sub-Saharan African 
        country is not making continual progress in meeting the 
        requirements described in paragraph (1), the President 
        shall terminate the designation of that country as a 
        beneficiary sub-Saharan African country for purposes of 
        this section, effective on January 1 of the year 
        following the year in which such determination is made.
    (b) Preferential Tariff Treatment for Certain Articles.--
          (1) In general.--The President may provide duty-free 
        treatment for any article described in section 
        503(b)(1) (B) through (G) (except for textile luggage) 
        that is the growth, product, or manufacture of a 
        beneficiary sub-Saharan African country described in 
        subsection (a), if, after receiving the advice of the 
        International Trade Commission in accordance with 
        section 503(e), the President determines that such 
        article is not import-sensitive in the context of 
        imports from beneficiary sub-Saharan African countries.
          (2) Rules of origin.--The duty-free treatment 
        provided under paragraph (1) shall apply to any article 
        described in that paragraph that meets the requirements 
        of section 503(a)(2), except that--
                  (A) 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) of section 503(a)(2); and
                  (B) the cost or value of the materials 
                included with respect to that article that are 
                produced in one or more beneficiary sub-Saharan 
                African countries shall be applied in 
                determining such percentage.
    (c) Beneficiary Sub-Saharan African Countries, Etc.--For 
purposes of this title, the terms ``beneficiary sub-Saharan 
African country'' and ``beneficiary sub-Saharan African 
countries'' mean a country or countries listed in section 4 of 
the African Growth and Opportunity Act that the President has 
determined is eligible under subsection (a) of this section.

           *       *       *       *       *       *       *


                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *



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

    (a) General Rule.--Except as otherwise provided in this 
section, in the case of a--

           *       *       *       *       *       *       *

    (d) Definitions and Special Rules.--For purposes of this 
section--

           *       *       *       *       *       *       *

          (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 in required to be paid on such amount or there 
        is any penalty for failure to timely pay such amount.

           *       *       *       *       *       *       *


SEC. 6050P. RETURNS RELATING TO THE CANCELLATION OF INDEBTEDNESS BY 
                    CERTAIN ENTITIES.

           *       *       *       *       *       *       *


    (c) Definitions and Special Rules.--For purposes of this 
section--

           *       *       *       *       *       *       *

          (1) Applicable entity.--The term ``applicable 
        entity'' means
                  (A) an executive, judicial, or legislative 
                agency (as defined in section 3701(a)(4) of 
                title 31, United States Code), and
                  (B) an applicable financial entity.
          (2) Applicable financial entity.--The term 
        ``applicable entity'' means--
                  (A) any financial institution described in 
                section 581 or 591(a) and any credit union,
                  (B) the Federal Deposit Insurance 
                Corporation, the Resolution Trust Corporation, 
                the National Credit Union Administration, and 
                any other Federal executive agency (as defined 
                in section 6050M), and any successor or subunit 
                of any of the foregoing, [and]
                  (C) any other corporation which is a direct 
                or indirect subsidiary of an entity referred to 
                in subparagraph (A) but only if, by virtue of 
                being affiliated with such entity, such other 
                corporation is subject to supervision and 
                examination by a Federal or State agency which 
                regulates entities referred to in subparagraph 
                (A)[.] and
                  (D) any organization a significant trade or 
                business of which is the lending of money.

           *       *       *       *       *       *       *


                                  
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