[Senate Report 106-137]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 213
106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-137

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



 
            GENERALIZED SYSTEM OF PREFERENCES EXTENSION ACT

                                _______
                                

                 August 4, 1999.--Ordered to be printed

                                _______


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

                              R E P O R T

                         [To accompany S. 1388]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, having considered legislation to 
extend the Generalized System of Preferences, reports favorably 
thereon and refers the bill to the full Senate with a 
recommendation that the bill do pass.

                             I. BACKGROUND

    The Generalized System of Preferences (GSP) expires on June 
30, 1999. The last extension of GSP was included in Public Law 
105-277, the Omnibus Consolidated and Emergency Appropriations 
Act, 1999, which was enacted on October 21, 1998. Prior to that 
extension, the program had expired on September 30, 1998, and 
the extension was made retroactively to that date. The Finance 
Committee approved legislation that would extend the program in 
the 105th Congress as a part of S. 2400, the Trade and Tariff 
Act of 1998, which passed the Committee on July 31, 1998.

                     II. GENERAL DESCRIPTION OF ACT


  Section 1: Extension of Duty-Free Treatment Under General System of 
                              Preferences

Present law

    The Generalized System of Preferences (GSP), title V of the 
Trade Act of 1974, as amended, grants authority to the 
President to provide duty-free treatment to imports of eligible 
articles from designated beneficiary developing countries, 
subject to certain conditions and limitations. To qualify for 
GSP benefits, each beneficiary country is subject to various 
mandatory and discretionary eligibility criteria. Import 
sensitive products are ineligible for GSP. The President's 
authority to grant GSP benefits expires on June 30, 1999.
    The Committee notes that under 19 U.S.C. 2462(b)(2)(C), 
Congress expressly enjoined the grant of benefits under the 
Generalized System of Preferences to countries that offered 
preferential treatment to the products of a developed country 
other than the United States if the treatment has, or is likely 
to have, a significant effect on United States commerce. As the 
Committee indicated in its 1974 report on legislation that 
established the GSP program, one of the objectives of the GSP 
program was to provide an alternative to the proliferation of 
preferential trading arrangements created by the European Union 
and developing countries that generally involved a reverse 
grant of preferences in favor of the European Union and to the 
exclusion of products from other countries, including the 
United States. The Committee than recognized the discriminatory 
impact of those preferential trading arrangements, their 
capacity to seriously distort trade, and the extent to which 
they undermine the benefits of a rules-based international 
trading system.
    In recent years, the European Union has pressed for the 
creation of such preferential arrangements with certain 
countries in Central and Eastern Europe that benefit from GSP. 
That has led certain GSP beneficiary counrties effectively to 
discriminate against U.S. goods. Given that trend, the 
Committee underscores the importance of enforcing the condition 
on GSP treatment established in 19 U.S.C. 2462(b)(2)(C) in 
order to discourage the reestablishment of the preferential 
tariff systems that the GSP was originally designed to 
supplant, and which the rules of the World Trade Organization, 
and its predecessor, the General Agreement on Tariffs and Trade 
sought to eliminate. The intent, as it was in 1974, is to bring 
pressure to bear on both developed and developing countries to 
remove the aforementioned ``reverse preferences'' as promptly 
as possible. If such action is not taken within a reasonable 
period, GSP benefts should be withdrawn.

Explanation of provision

    Section 1(a) of this Act extends the GSP program through 
June 30, 2004. Section 1(b)(2) of this legislation provides for 
retroactive application for certain liquidations and 
reliquidations. Specifically, this subparagraph allows the 
Secretary of the Treasury to liquidate or reliquidate as free 
of duty any article that was entered after June 30, 1999, and 
before the date of enactment, and that would have been 
otherwise eligible for duty-free treatment under the GSP 
program if the entry had been made on June 30, 1999.
    Section 1(b)(3) provides that requests for liquidation or 
reliquidation under this section must be filed with the Customs 
Service within 180 days after the enactment of this Act. Such 
requests must contain sufficient information to enable the 
Customs Service to locate the entry or to reconstruct the entry 
if it cannot be located.

Effective date

    The provision is effective on the date of enactment.

Reason for change

    The GSP program has been an important element of American 
trade policy since it was first enacted as part of the Trade 
Act of 1974. In recent years, the need to offset the tariff 
revenue losses generated by the GSP benefits has resulted in 
only short-term extensions of the program, disrupting trade and 
creating uncertainty for importers and GSP beneficiary 
countries. The Committee believes that a four and one-half year 
extension of the program will help to minimize the disruptions 
created by short-term extensions and periodic suspension of the 
program.

     Section 2: Entry Procedures for Foreign Trade Zone Operations

Present law

    Section 484 of the Tariff Act of 1930 (19 U.S.C. 1484) sets 
forth the procedures for the entry of merchandise imported into 
the United States. Under section 484, the Customs Servicehas 
permitted a limited weekly entry procedure for foreign trade zones 
(FTZ) since May 12, 1986 (as authorized by T.D. 86-16, 51 Fed. Reg. 
5040). This procedure has been limited to merchandise which is 
manufactured or changed into its final form just prior to its transfer 
from the zone. Section 637 of the Customs Modernization Act (included 
as Title VI of the North American Free Trade Agreement Implementation 
Act, Pub. L. 103-182, 107 Stat. 2057) provided the Customs Service with 
additional statutory support for the weekly entry procedure.

Explanation of provision

    This provision amends Section 484 of the Tariff Act of 1930 
(19 U.S.C. 1484) to allow merchandise withdrawn from a foreign-
trade zone during a week (i.e., any 7 calendar day period) to 
be the subject of a single entry, at the option of the zone 
operator or user. Such an entry is treated under the new 
provision as a single entry or release of merchandise for 
purposes of assessment of the merchandise processing fee of 19 
U.S.C. 8c(a)(9)(A) and thus may not be assessed such fee in 
excess of the fee limitations provided for under 19 U.S.C. 
58c(b)(8)(A)(i). All other pertinent exceptions and exclusions 
from the merchandise processing fee would also apply, as 
appropriate. The amendment establishes a new section 19 USC 
1484(a)(3). The provision is self executing and accordingly 
does not require the issuance of implementing regulations by 
the Secretary of the Treasury in order for it to go into 
effect.
    The net effect of the provision is to require Customs to 
expand the weekly entry system (which currently is only 
available to certain manufactured goods) to permit FTZ 
operators and users to use a weekly entry system, under certain 
limitations, if they so choose. This expanded procedure allows 
for goods stored in a FTZ for the purpose of warehouse and 
distribution to be removed from the zone under a weekly Customs 
entry process. This provision would also mean that the 
merchandise processing fee (MPF) that Customs collects would be 
collected on the basis of that single weekly entry at the same 
rate applicable to any other single entry of such merchandise 
into the Customs territory of the United States.

Effective date

    The provision is effective 60 days from the date of 
enactment.

Reason for change

    While the Customs Service issued proposed regulations to 
expand the weekly entry system (62 Fed. Reg. 12129 (March 14, 
1997) consistent with Congress' intent as set out in the 
Customs Modernization Act, those regulations were never 
finalized. The new provision would remedy that failure by 
requiring such treatment as a matter of law.
    The new provision is not intended to qualify, limit or 
restrict any foreign-trade zone weekly entry procedures now in 
effect. Rather, it is intended to broaden the availability of 
weekly entry procedures to all zones, including general purpose 
zones and special purpose subzones, and to all zone operations 
and processes authorized by law. Consistent with the Foreign 
Trade Zones Act, the new procedure is available for merchandise 
of every description, except such as is prohibited by law, 
regardless whether such merchandise is of the same class, type 
or category or of different classes, types, and categories.

 Section 3. Modify Installment Method and Prohibit Its Use by Accrual 
   Method Taxpayers (secs. 453 and 453A of the Internal Revenue Code)

Present law

    An accrual method taxpayer is generally required to 
recognize income when all the events have occurred that fix the 
right to the receipt of the income and the amount of the income 
can be determined with reasonable accuracy. The installment 
method of accounting provides an exception to this general 
principle of income recognition by allowing a taxpayer to defer 
the recognition of income from the disposition of certain 
property until payment is received. Sales to customers in the 
ordinary course of business are not eligible for the 
installment method, except for sales of property used or 
produced in the trade or business of farming and sales of 
timeshares and residential lots if an election to pay interest 
under section 453(l)(2)(B) is made.
    A pledge rule provides that if an installment obligation is 
pledged as security for any indebtedness, the net proceeds 
1 of such indebtedness are treated as a payment on 
the obligation, triggering the recognition of income. Actual 
payments received on the installment obligation subsequent to 
the receipt of the loan proceeds are not taken into account 
until such subsequent payments exceed the loan proceeds that 
were treated as payments. The pledge rule does not apply to 
sales of property used or produced in the trade or business of 
farming, to sales of timeshares and residential lots where the 
taxpayer elects to pay interest under section 453(l)(2), or to 
dispositions where the sales price does not exceed $150,000.
---------------------------------------------------------------------------
    \1\ The net proceeds equal the gross loan proceeds less the direct 
expenses of obtaining the loan.
---------------------------------------------------------------------------
    An additional rule requires the payment of interest on the 
deferred tax that is attributable to most large installment 
sales.

Reasons for change

    The Committee believes that the installment method is 
inconsistent with the use of the accrual method of accounting 
and should not be allowed in situations where the disposition 
of property would otherwise be reported using the accrual 
method. The Committee is concernedthat the continued use of the 
installment method in such situations would allow a deferral of gain 
that is inconsistent with the requirement of the accrual method that 
income be reported in the period it is earned, rather than the period 
it is received.
    The Committee also believes that the installment method, 
where its use is appropriate, should not serve to defer the 
recognition of gain beyond the time when funds are received. 
Accordingly, the Committee believes that proceeds of a loan 
should be treated in the same manner as a payment on an 
installment obligation if the loan is dependent on the 
existence of the installment obligation, such as where the loan 
is secured by the installment obligation or can be satisfied by 
the delivery of the installment obligation.
    The Committee recognizes that special considerations exist 
in the disposition of property that is used or produced in the 
trade or business of farming, as well as certain dispositions 
of timeshares and residential lots where an election is made to 
pay interest on deferred taxes. The Committee does not believe 
that the rules applicable to such situations should be modified 
at this time.

Explanation of provision

            Use of the installment method for accrual method 
                    dispositions
    The installment method of accounting generally may not be 
used for dispositions of property that otherwise would be 
reported for Federal income tax purposes using an accrual 
method of accounting. The bill does not change present law 
regarding the availability of the installment method for 
dispositions of property used or produced in the trade or 
business of farming. The bill also does not change present law 
regarding the availability of the installment method for 
dispositions of timeshares and residential lots if the taxpayer 
elects to pay interest under section 453(l)(2).
    The bill does not change the ability of a cash method 
taxpayer to use the installment method. For example, a cash 
method individual who owns all of the stock of a closely held 
accrual method corporation sells his stock for cash, a 10 year 
note, and a percentage of the gross revenues of the company for 
the next 10 years. Because the individual would otherwise 
report the disposition of the stock on the cash method, his 
ability to use the installment method in reporting the gain on 
the sale of the stock is not affected.
            Modify pledge rule
    The bill also modifies the pledge rule to provide that 
entering into any arrangement that gives the taxpayer the right 
to satisfy an obligation with an installment note will be 
treated in the same manner as the direct pledge of the 
installment note. For example, a taxpayer disposes of property 
for an installment note. The disposition is properly reported 
using the installment method. The taxpayer only recognizes gain 
as it receives the deferred payments. However, were the 
taxpayer to pledge the installment note as security for a loan, 
the taxpayer would be required to treat the proceeds of such 
loan as a payment on the installment note and recognize the 
appropriate amount of gain. Under the bill, the taxpayer would 
also be required to treat the proceeds of a loan as payment on 
the installment note to the extent the taxpayer had the right 
to ``put'' or repay the loan by transferring the installment 
note to the taxpayer's creditor. Other arrangements that have a 
similar effect would be treated in the same manner.
    The modification of the pledge rule only applies to 
installment sales where the pledge rule of present law applies. 
Accordingly, the modified pledge rule does not apply to 
installment method sales made by a dealer in timeshares and 
residential lots where the taxpayer elects to pay interest 
under section 453(l)(2), to sales of property used or produced 
in the trade or business of farming, or to dispositions where 
the sales price does not exceed $150,000, because such sales 
are not subject to the pledge rule under present law.

Effective date

    The provision is effective for sales or dispositions on or 
after the date of enactment.

                       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 
Generalized System of Preferences Extension 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 ``GENERALIZED SYSTEM OF PREFERENCES EXTENSION 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     2000-04   2005-09   2000-09
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Extension of Generalized System of    10/1/99............  ......     -438     -360     -373      -393      -313  ........  ........  ........  ........  ........    -1,877  ........    -1,877
 preferences \1\.
Permit importers to File Weekly       10/1/99............  ......  .......        3        3         3         3         3         3         3         3         3        12        15        27
 Entries into the U.S. Through
 Foreign Trade Zones \1\.
Revenue Offset Provision:
    1. Repeal installment method for  Iseio/a DOE........       4      477      677      406       257        72         8        21        35        48        62     1,889       174     2,063
     most accrual basis taxpayers;
     adjust pledge rules.
      Net total.....................  ...................       4       39      320       36      -133      -238        11        24        38        51        65        24       189       213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimate provided by the Congressional Budget Office.

NOTE.-Details may not add to totals due to rounding.
Legend for ``Effective'' column: DOE=date of enactment; iseio/a=installment sales entered into on or 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 Generalized System of Preferences 
Extension 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 Generalized System of Preferences 
Extension Act will result in no increased 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 Generalized System of Preferences Extension Act:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 16, 1999.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dar Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for a bill to extend the 
Generalized System of Preferences.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Hester 
Grippando (for revenues) and Mark Grabowicz (for spending).
            Sincerely,
                                          Dan L. Crippen, Director.
    Enclosure.

A bill to extend the Generalized System of Preferences

            Summary
    The bill to extend the Generalized System of Preferences 
(GSP) would extend these trade preferences, which expired on 
June 30, 1999, through June 30, 2004. In addition, the 
legislation would amend the Internal Revenue Code to prohibit 
the use of the installment method of accounting and modify the 
pledge rule for dispositions of property. The bill also would 
change procedures for the entry of goods into the United States 
through foreign trade zones. CBO and the Joint Committee on 
Taxation (JCT) estimate that enacting this bill would increase 
revenues by $16 million and increase direct spending by $12 
million over the 1999-2004 period. Because the bill would 
affect revenues and direct spending, pay-as-you-go procedures 
would apply.
    The bill contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments. The 
legislation contains a private-sector mandate that would 
prohibit the use of the installment method of accounting and 
modify the pledge rule for dispositions of property. JCT 
estimates that the costs of the mandate would exceed the 
threshold for private-sector mandates established in UMRA ($100 
million in 1996, adjusted annually for inflation) in fiscal 
years 2000 through 2004.
            Estimated cost to the Federal Government
    The estimated budgetary impact of the bill is shown in the 
following table. In addition to affecting revenues, the bill 
would affect spending in budget function 750 (administration of 
justice).

----------------------------------------------------------------------------------------------------------------
                                                                By fiscal year in millions of dollars--
                                                     -----------------------------------------------------------
                                                        1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Extension of the GSP................................         0      -438      -360      -373      -393      -313
Repeal Installment Method of Accounting; Adjust              4       477       677       406       257        72
 Pledge Rules.......................................
                                                     -----------------------------------------------------------
      Total Change in Revenues......................         4        39       317        33      -136      -241

                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority..........................         0     (\1\)         3         3         3         3
Estimated Outlays...................................         0     (\1\)         3         3         3         3
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.

Sources: Congressional Budget Office and Joint Committee on Taxation.

            Basis of estimate

Revenues

    GSP affords nonreciprocal tariff preferences to 
approximately 140 developing countries to aid their economic 
development, and to diversify and expand their production and 
exports. Generally, duty-free treatment of imported goods from 
GSP-designated developing countries is extended to products 
that are not competitive internationally. The bill would renew 
GSP, which expired on June 30, 1999, through June 30, 2004. 
Taxpayers could apply for refunds for the period since July 1, 
1999.
    This estimate is based on projections of U.S. imports and 
recent data on collections from beneficiary countries under the 
GSP program. The estimate of the revenue loss from extending 
the existing GSP program 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. Losses of revenues from customs duties were 
projected using a trade-weighted duty rate adjusted for tariff 
reductions scheduled by the World Trade Organization (WTO). 
Assuming an October 1, 1999, enactment date, CBO estimates that 
renewing GSP would reduce governmental receipts by $438 million 
in fiscal year 2000 and by $1,877 million over the 2000-2004 
period, net of payroll and income tax offsets.
    The Joint Committee on Taxation estimated the revenue 
impact of repealing the installment method of accounting and 
modifying the pledge rule for distributions of property.

Direct spending

    This legislation would permit importers to file a weekly 
entry for certain merchandise entered into the United States 
through a foreign trade zone (FTZ). Under current law, most 
entries must be made on a daily basis. For each entry, an 
importer must pay a merchandise processing fee to the Customs 
Service equal to 0.21 percent of the value of the merchandise, 
up to $485. For users of FTZs that enter large quantities of 
goods more than once a week, this provision would lower the 
amounts of fees paid to the Customs Service. Because there are 
relatively few major importers in FTZs, CBO estimates that the 
loss of fees from current users of FTZs would total less than 
$500,000 annually.
    Under current law, a firm's decision to use an FTZ involves 
many variables, including proximity to a zone, potential 
savings in Customs duties paid on products manufactured in a 
zone, and the cost and time required for the FTZ approval 
process. CBO expects that enacting this legislation would 
prompt some firms to use FTZs in order to reduce their payment 
of merchandise processing fees. The 1,000 largest importers 
account for more than half of all entries and would seem most 
likely to utilize FTZs because they could achieve the greatest 
savings. In some cases, savings to importers could total about 
$100,000 annually, depending on the frequency and size of 
entries under current law. Assuming that 30 companies, or just 
3 percent of the largest 1,000 importers, join FTZs and save an 
average of $100,000 annually in merchandise processing fees, 
the government would lose about $3 million a year in fees 
(which are classified as offsetting receipts). If more 
companies choose to use FTZs, then the costs (from forgone 
fees) would be greater. Because the approval process for using 
an FTZ could take about a year in many cases, any significant 
loss of fees probably would not occur until fiscal year 2001.
            Pay-as-you-go considerations
    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting receipts 
or direct spending. The net changes in governmental receipts 
and outlays are shown in the following table. For the purposes 
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...........................................       4      39     317      33     -136     -241       8      21      35      48      62
Changes in outlays............................................       0       0       3       3        3        3       3       3       3       3       3
--------------------------------------------------------------------------------------------------------------------------------------------------------

            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
    The legislation contains a private-sector mandate that 
would prohibit the use of the installment method of accounting 
and modify the pledge rule for dispositions of property. JCT 
estimates that the mandate would cost $1.9 billion over the 
2000-2004 period, and that the costs would exceed the threshold 
for private-sector mandates established in UMRA ($100 million 
in 1996, adjusted annually for inflation) in fiscal years 2000 
through 2003.
    Estimate prepared by: Federal revenues: Hester Grippando; 
Federal spending: Mark Grabowicz.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis; G. Thomas Woodward, Assistant 
Director for Tax 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 Generalized 
System of Preferences Extension 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 offset: repeal of the installment method for 
most accrual basis taxpayers, effective for sales and other 
dispositions on or after the date of enactment. This revenue 
offset provision will increase the tax burden on the affected 
taxpayers.

2. Impact on personal privacy and paperwork

    The Generalized System of Preferences Extension 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 
Generalized System of Preferences 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 revenue 
provisions of the bill contain the following Federal private 
sector mandate:
          Modification of the installment method and to 
        prohibit its use by accrual method taxpayers.
    The Committee has determined that it is necessary to 
include this provision in the bill to provide a revenue offset 
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 italic, existing law in which no change is 
proposed is shown in roman):

                          TRADE ACT OF 1974

           *       *       *       *       *       *       *



SEC. 505. DATE OF TERMINATION.

    No duty-free treatment provided under this subchapter shall 
remain in effect after [June 30, 1999] June 30, 2004.

           *       *       *       *       *       *       *


                          TARIFF ACT OF 1930

           *       *       *       *       *       *       *



SEC. 484. ENTRY OF MERCHANDISE.

           *       *       *       *       *       *       *


    (i) Special Rule for Foreign Trade Zone Operations.--
          (1) In general.--Notwithstanding any other provision 
        of law and except as provided in paragraph (3), all 
        merchandise (including merchandise of different 
        classes, types, and categories), withdrawn from a 
        foreign trade zone during any 7-day period, shall, at 
        the option of the operator or user of the zone, be the 
        subject of a single estimated entry or release filed on 
        or before the first day of the 7-day period in which 
        the merchandise is to be withdrawnfrom the zone. The 
estimated entry or release shall be treated as a single entry and a 
single release of merchandise for purposes of section 13031(a)(9)(A) of 
the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 
58c(a)(9)(A)) and all fee exclusions and limitations of such section 
13031 shall apply, including the maximum and minimum fee amounts 
provided for under subsection (b)(8)(A)(i) of such section. The entry 
summary for the estimated entry or release shall cover only the 
merchandise actually withdrawn from the foreign trade zone during the 
7-day period.
          (2) Other requirements.--The Secretary of the 
        Treasury may require that the operator or user of the 
        zone--
                  (A) use an electronic data interchange 
                approved by the Customs Service--
                          (i) to file the entries described in 
                        paragraph (1); and
                          (ii) to pay the applicable duties, 
                        fees, and taxes with respect to the 
                        entries; and
                  (B) satisfy the Customs Service that 
                accounting, transportation, and other controls 
                over the merchandise are adequate to protect 
                the revenue and meet the requirements of other 
                Federal agencies.
          (3) Exception.--The provisions of paragraph (1) shall 
        not apply to merchandise the entry of which is 
        prohibited by law or merchandise for which the filing 
        of an entry summary is required before the merchandise 
        is released from customs custody.
          (4) Foreign trade zone; zone.--In this subsection, 
        the terms ``foreign trade zone'' and ``zone'' mean a 
        zone established pursuant to the Act of June 18, 1934, 
        commonly known as the foreign Trade Zones Act (19 
        U.S.C. 81a et seq.).

           *       *       *       *       *       *       *


                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *



SEC. 453. INSTALLMENT METHOD.

    [(a) General Rule.--Except as otherwise provided in this 
section, income from an installment sale shall be taken into 
account for purposes of this title under the installment 
method.]
    (a) Use of Installment Method.--
          (1) In general.--Except as otherwise provided in this 
        section, income from an installment sale shall be taken 
        into account for purposes of this title under the 
        installment method.
          (2) Accrual method taxpayer.--The installment method 
        shall not apply to income from an installment sale of 
        such income would be reported under an accrual method 
        of accounting without regard to this section. The 
        preceding sentence shall not apply to a disposition 
        described in subparagraph (A) or (B) of subsection 
        (l)(2).

           *       *       *       *       *       *       *

    (d) Election Out.--
          (1) In general.--Subsection [(a)] (a)(1) shall not 
        apply to any disposition if the taxpayer elects to have 
        subsection [(a)] (a)(1) not apply to such disposition.

           *       *       *       *       *       *       *

    (i) Recognition of Recapture Income in Year of 
Disposition.--
          (1) In general.--In the case of any installment sale 
        of property to which subsection [(a)] (a)(1) applies--
                  (A) notwithstanding subsection [(a)] (a)(1), 
                any recapture income shall be recognized in the 
                year of the disposition, and
                  (B) any gain in excess of the recapture 
                income shall be taken into account under the 
                installment method.

           *       *       *       *       *       *       *

    (k) Current Inclusion in Case of Revolving Credit Plans, 
etc.--
    In the case of--
          (1) any disposition of personal property under a 
        revolving credit plan, or
          (2) any installment obligation arising out of a sale 
        of--
                  (A) stock or securities which are traded on 
                an established securities market, or
                  (B) to the extent provided in regulations, 
                property (other than stock or securities) of a 
                kind regularly traded on an established market,
        subsection [(a)] (a)(1) shall not apply, and for 
        purposes of this title, all payments to be received 
        shall be treated as received in the year of 
        disposition. The Secretary may provide for the 
        application of this subsection in whole or in part for 
        transactions in which the rules of this subsection 
        otherwise would be avoided through the use of related 
        parties, pass-thru entities, or intermediaries.

           *       *       *       *       *       *       *


SEC. 453A. SPECIAL RULES FOR NONDEALERS.

           *       *       *       *       *       *       *


    (d) Pledges, Etc., of Installment Obligations.--(1) In 
general.--For purposes of section 453, if any indebtedness 
(hereinafter in this subsection referred to as ``secured 
indebtedness'') is secured by an installment obligation to 
which this section applies, the net proceeds of the secured 
indebtedness shall be treated as a payment received on such 
installment obligation as of the later of--

           *       *       *       *       *       *       *

    (4) Secured indebtedness.--For purposes of this subsection 
indebtedness is secured by an installment obligation to the 
extent that payment of principal or interest on such 
indebtedness is directly secured (under the terms of the 
indebtedness or any underlying arrangements) by any interest in 
such installment obligation. A payment shall be treated as 
directly secured by an interest in an installment obligation to 
the extent an arrangement allows the taxpayer to satisfy all or 
a portion of the indebtedness with the installment obligation.

           *       *       *       *       *       *       *


                                  
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