[Senate Report 106-137]
[From the U.S. Government Publishing Office]
Calendar No. 213
106th Congress Report
SENATE
1st Session 106-137
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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.
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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]
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Provision Effective 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000-04 2005-09 2000-09
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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
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\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--
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1999 2000 2001 2002 2003 2004
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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.......................................
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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.
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SEC. 453A. SPECIAL RULES FOR NONDEALERS.
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(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--
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(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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