To authorize the imposition of a tax on imports from any country that employs indirect taxes and grants rebates of the same upon export and to authorize compensatory payments to eligible United States exporters to neutralize the discriminatory effect of such taxes paid by such exporters if United States trade negotiating objectives regarding border tax treatment in World Trade Organization negotiations are not met.

Summary: Border Tax Equity Act of 2007 - Requires the United States Trade Representative (USTR) to submit to Congress a report certifying whether or not U.S. objectives to revise World Trade Organization (WTO) rules on border tax treatment of goods and services from countries with indirect tax systems have been met in WTO negotiations.

Amends the Internal Revenue Code to: (1) impose a tax on imports of goods and services from any country with an indirect tax system and deposits taxes so collected into a special account; and (2) upon request of a U.S. exporter, grant a rebate to such exporter from such account of indirect taxes paid. Imposes such requirements if the USTR fails to certify to Congress that U.S. objectives have been met.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Border Tax Equity Act of 2007''.

SEC. 2. FINDINGS AND DECLARATIONS OF POLICY.

    (a) Findings.--Congress makes the following findings:
            (1) The United States largely relies on a direct tax 
        system, whereas 137 countries currently employ one particular 
        form of indirect tax known as value-added taxes (VAT) as well 
        as direct taxes. The worldwide VAT tax average in 2005 was 15.7 
        percent, and in countries of the European Union it ranges 
        between 15 and 25 percent.
            (2) Under the rules of the World Trade Organization (WTO), 
        direct taxes, such as corporate income taxes, if rebated or 
        refunded upon the export of goods are viewed as export 
        subsidies and prohibited on most goods and are at least 
        potentially actionable on all goods. However, indirect taxes, 
        such as sales taxes and VAT, may be rebated or refunded upon 
        the export of goods and such rebate or refund is not defined as 
        constituting a subsidy and hence is not actionable under WTO 
        rules.
            (3) At present, there are no WTO rules on subsidies as 
        applied to trade in services. However, a number of countries 
        currently impose taxes on the import of services and exempt or 
        rebate or refund taxes upon the export of services, to the 
        disadvantage of United States services providers.
            (4) The disparate treatment of border taxes detrimentally 
        affects United States agricultural producers, manufacturers, 
        and service providers in that--
                    (A) refunds of indirect taxes effectively act as 
                export subsidies to foreign exporters; and
                    (B) United States exporters are subject to double 
                taxation, by paying direct taxes on domestic production 
                in the United States and having their exported product 
                or service face a border tax in the importing country 
                consisting of indirect taxes.
            (5) The disparate treatment of border taxes results in a 
        large monetary disadvantage to United States exporters, 
        estimated to equal $93 billion on goods and $47 billion on 
        services. Moreover, since remission of VAT by foreign countries 
        equates to approximately $201 billion in export subsidies on 
        goods exported to the United States and another $38 billion on 
        services exported to the United States, United States 
        producers, in total, suffer an artificial disadvantage of up to 
        $294,000,000,000 on trade in goods and $85,000,000,000 on trade 
        in services.
            (6) For more than 40 years, United States businesses have 
        complained of border tax inequity and, since 1968, prior United 
        States Administrations and Congresses have sought to resolve 
        it.
            (7) Congress has repeatedly recognized the prejudicial 
        effect of the disparate treatment of border taxes with respect 
        to goods and has directed the United States to seek a 
        negotiated solution:
                    (A) In passing the Trade Act of 1974 (19 U.S.C. 
                2101 et seq.), Congress sought ``revision of GATT 
                articles with respect to the treatment of border 
                adjustments for international taxes to redress the 
                disadvantage to countries relying primarily on direct 
                rather than indirect taxes for revenue needs.''.
                    (B) In section 1101(b)(16) of the Omnibus Trade and 
                Competitiveness Act of 1988 (19 U.S.C. 2901(b)(16) and 
                section 2102(b)(15) of Bipartisan Trade Promotion 
                Authority Act of 2002 (19 U.S.C. 3802(b)(15)), Congress 
                declared that a principal trade negotiating objective 
                of the United States is to obtain a revision of WTO 
                rules with respect to the treatment of border taxes in 
                order to redress the disadvantage to countries relying 
                primarily on direct taxes for revenue rather than 
                indirect taxes.
            (8) The disparate treatment of border taxes is arbitrary, 
        inequitable, causes economic distortions based only on the type 
        of tax system used by a country, and is a primary obstacle to 
        more balanced trade relations between the United States and its 
        major trading partners.
    (b) Declarations of Policy.--Congress declares the following:
            (1) It is critically necessary that the issue of border 
        taxes be addressed and resolved in WTO negotiations, whether in 
        the ongoing Doha Development Round of WTO negotiations or 
        subsequent WTO negotiations.
            (2) If such WTO negotiations fail to achieve the United 
        States trade negotiating objective of revising WTO rules with 
        respect to the treatment of border taxes in order to redress 
        the disadvantage to countries relying primarily on direct taxes 
        for revenue rather than indirect taxes, then effective action 
        through legislation is warranted given the massive and 
        inequitable distortions to trade that United States 
        agricultural producers, manufacturers, and service providers 
        face as a result of border taxes.

SEC. 3. REPORT ON RESULTS OF WTO NEGOTIATIONS TO REVISE WTO RULES 
              REGARDING BORDER TAXES.

    (a) Report Required.--Not later than 60 days after the completion 
of WTO negotiations, or by January 1, 2009, whichever occurs first, the 
United States Trade Representative shall submit to Congress a report 
certifying whether or not each of the United States trade negotiating 
objectives regarding border tax treatment, as specified in subsection 
(b), has been met as a result of such negotiations.
    (b) U.S. Trade Negotiating Objectives Regarding Border Tax 
Treatment Specified.--The United States trade negotiating objectives 
regarding border tax treatment specified in this subsection are the 
following:
            (1) With respect to trade in goods, the revision of WTO 
        rules with respect to the treatment of border adjustments for 
        internal taxes to redress the disadvantage to countries relying 
        primarily on direct taxes for revenue rather than indirect 
        taxes, as provided for in section 2102(b)(15) of Bipartisan 
        Trade Promotion Authority Act of 2002 (19 U.S.C. 3802(b)(15)).
            (2) With respect to trade in services--
                    (A) the elimination of the disadvantage in trade in 
                services that exists for countries relying primarily on 
                direct taxes that are not adjusted at the border rather 
                than indirect taxes that are adjusted at the border; 
                and
                    (B) the revision of WTO rules regarding trade in 
                services to ensure that such rules do not result in 
                disparate treatment of border adjustments for internal 
                taxes based on the direct or indirect nature of such 
                taxes.
    (c) Definition.--In this section, the terms ``WTO negotiations'' 
and ``negotiations'' mean the ongoing Doha Development Round of World 
Trade Organization negotiations or subsequent WTO negotiations that may 
result in revisions to WTO rules to meet the United States trade 
negotiating objectives regarding border tax treatment, as specified in 
subsection (b).

SEC. 4. TAX ON IMPORTS FROM FOREIGN COUNTRIES WITH AN INDIRECT TAX 
              SYSTEM.

    Subtitle D of the Internal Revenue Code (26 U.S.C. 4461 et seq.) is 
amended by adding at the end the following new subchapter G:

``Subchapter G--Tax on Imports From Foreign Countries With An Indirect 
                               Tax System

``Sec. 4491. Imposition of tax.

``SEC. 4491. IMPOSITION OF TAX.

    ``(a) General Rule.--There is hereby imposed a tax on imports of 
goods and services from any foreign country that employs an indirect 
tax system and grants rebates of indirect taxes paid on goods or 
services exported from that country.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) on an imported good or service shall be an amount equal to the 
excess of--
            ``(1) the indirect taxes that are rebated or not paid on 
        the good or service upon its export, over
            ``(2) any indirect taxes imposed on the good or service at 
        the border of the United States.
    ``(c) Liability and Time of Imposition of Tax.--
            ``(1) Liability.--The tax imposed by subsection (a) on a 
        good or service shall be paid by the importer of such good or 
        service.
            ``(2) Time of imposition.--The tax imposed by subsection 
        (a) shall be imposed on imports at the time of entry.
    ``(d) Period of Applicability.--The tax imposed by subsection (a) 
shall apply during the period beginning as prescribed in section 
6(a)(1) of the Border Tax Equity Act of 2007 and ending on the date on 
which the United States Trade Representative certifies to Congress that 
the United States trade negotiating goals of equitable border tax 
treatment have been met.
    ``(e) Special Account.--The tax on imports under subsection (a) 
shall be collected by the Bureau of Customs and Border Protection and 
deposited into a special account. This special account shall be the 
source of payments to qualified United States exporters under section 
314(b) of the Tariff Act of 1930.
    ``(f) Definitions.--For purposes of this subchapter--
            ``(1) Secretary.--The term `Secretary' means the Secretary 
        of Homeland Security.
            ``(2) Importer.--The term `importer' means--
                    ``(A) as such term relates to imports of goods, one 
                of the parties eligible to file the required customs 
                entry documentation or information pursuant to section 
                484(a)(2)(B) of the Tariff Act of 1930 (19 U.S.C. 
                1484(a)(2)(B)), and
                    ``(B) as such term relates to imports of services, 
                the importer of the service as defined by the Secretary 
                in rules and regulations promulgated under this 
                subchapter.
            ``(3) Time of entry.--The term `time of entry' means--
                    ``(A) as relates to imports of goods, the time 
                generally specified in section 484(a)(2)(A) of the 
                Tariff Act of 1930 (19 U.S.C. 1484(a)(2)(A)) and 
                prescribed in regulations (19 C.F.R. 141.68), and
                    ``(B) as relates to imports of services, the time 
                specified by the Secretary in rules and regulations 
                promulgated under this subchapter.
            ``(4) Indirect tax system and grants rebates of indirect 
        taxes.--A foreign country employs an indirect tax system and 
        grants rebates of indirect taxes paid on goods or services 
        exported from that country if such country imposes indirect 
        taxes (including sales taxes and value-added taxes (VAT)) on 
        goods or services, and permits a rebate of such indirect taxes 
        paid on goods or services exported from such country.
            ``(5) Value-added taxes (vat).--The term `value-added 
        taxes' means an indirect general consumption tax that is levied 
        by the exporting country on the value added to goods and 
        services in that country at multiple stages of the production 
        and supply chain. This type of tax is also referred to as a 
        goods and services tax (GST).
    ``(g) Regulations.--The Secretary may prescribe such rules and 
regulations as are necessary to carry out this section.''.

SEC. 5. PAYMENTS TO UNITED STATES EXPORTERS TO NEUTRALIZE 
              DISCRIMINATORY EFFECT OF BORDER TAXES IMPOSED BY 
              IMPORTING COUNTRIES.

    Part II of title III of the Tariff Act of 1930 (19 U.S.C. 1305 et 
seq.) is amended by inserting after section 313 the following:

``SEC. 314. PAYMENTS TO UNITED STATES EXPORTERS TO NEUTRALIZE 
              DISCRIMINATORY EFFECT OF BORDER TAXES IMPOSED BY 
              IMPORTING COUNTRIES.

    ``(a) Payments Required.--
            ``(1) In general.--Upon exportation of goods or services 
        from the United States to any foreign country that employs an 
        indirect tax system and imposes or applies indirect taxes on 
        imports of goods or services at the border, the Secretary of 
        Homeland Security, acting through the Commissioner of the 
        Bureau of Customs and Border Protection, shall, if requested by 
        the exporter, pay to the exporter an amount equal to the amount 
        of indirect taxes that the importing foreign country imposes or 
        applies at the border to such goods or services, minus any 
        United States taxes paid on such goods or services that have 
        been rebated or refunded upon exportation.
            ``(2) Information to be included in request.--An exporter 
        who requests a payment under paragraph (1) shall, in such 
        request, identify the indirect taxes imposed by the importing 
        foreign country and present proof of the payment of such taxes 
        to the importing foreign country's authorities within a 
        reasonable period of time after exportation of the goods or 
        services.
    ``(b) Source of Payments.--
            ``(1) Special account.--The payments required under 
        subsection (a) shall be paid from amounts contained in the 
        special account authorized under section 4491(e) of the 
        Internal Revenue Code of 1986.
            ``(2) Appropriation of additional amounts.--To the extent 
        that, at any time, amounts contained in the special account 
        described in paragraph (1) are inadequate to make payments 
        required under subsection (a), there are hereby appropriated, 
        out of any money in the Treasury of the United States not 
        otherwise appropriated, such sums as may be necessary for such 
        purpose.
    ``(c) Period of Applicability.--The requirement to make payments 
under subsection (a) shall apply during the period beginning as 
prescribed in subsection (a)(2) or (b) of section 6 of the Border Tax 
Equity Act of 2007, as the case may be, and ending on the date on which 
the United States Trade Representative certifies to Congress that each 
of the United States trade negotiating goals regarding border tax 
treatment have been met.
    ``(d) Regulations.--The Secretary of Homeland Security is 
authorized to prescribe such rules and regulations as are necessary to 
carry out the provisions of this section.
    ``(e) Definitions.--In this section:
            ``(1) Indirect tax system and imposes or applies indirect 
        taxes on imports of goods or services at the border.--A foreign 
        country employs an indirect tax system and imposes or applies 
        indirect taxes on imports of goods or services at the border if 
        such country imposes indirect taxes (including sales taxes and 
        value-added taxes (VAT)) on goods or services, and imposes or 
        applies such indirect taxes on imports of goods or services at 
        the border
            ``(2) Value-added taxes (vat).--The term `value-added 
        taxes' means an indirect general consumption tax that is levied 
        by the exporting country on the value added to goods and 
        services in that country at multiple stages of the production 
        and supply chain. This type of tax is also referred to as a 
        goods and services tax (GST).''.

SEC. 6. EFFECTIVE DATES.

    (a) General Effective Date.--If, pursuant to subsection (a) of 
section 3 of this Act, the United States Trade Representative fails to 
certify to Congress by the dates specified in such subsection that each 
of the United States trade negotiating objectives regarding border tax 
treatment described in subsection (b) of such section has been met as a 
result of WTO negotiations, then--
            (1) section 4491 of the Internal Revenue Code of 1986, as 
        added by section 4 of this Act, shall take effect 90 days after 
        such date; and
            (2) subject to subsection (b), section 314 of the Tariff 
        Act of 1930, as added by section 5 of this Act, shall take 
        effect 120 days after such date.
    (b) Earlier Effective Date for Exports of Services.--
            (1) In general.--If, pursuant to subsection (a) of section 
        3 of this Act, the United States Trade Representative fails to 
        certify to Congress by January 1, 2008, that each of the United 
        States trade negotiating objectives regarding border tax 
        treatment described in subsection (b) of such section has been 
        met as a result of WTO negotiations, then section 314 of the 
        Tariff Act of 1930, as added by section 5 of this Act, shall 
        take effect on January 1, 2008, with respect to exports of 
        services from the United States as described in section 314 of 
        the Tariff Act of 1930.
            (2) Appropriation of amounts.--There are hereby 
        appropriated, out of any money in the Treasury of the United 
        States not otherwise appropriated, such sums as may be 
        necessary for making payments with respect to exports of 
        services from the United States in accordance with section 314 
        of the Tariff Act of 1930, as added by section 5 of this Act, 
        until such time as the special account authorized under 
        subsection (e) of section 4491 of the Internal Revenue Code of 
        1986, as added by section 4 of this Act, is established and 
        amounts contained in the special account are adequate to make 
        such payments.