I 

110TH CONGRESS 

1ST SESSION H. R. 2600 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 6, 2007 

Mr. PASCRELL (for himself, Mr. JONES of North Carolina, Mr. MICHAUD, and 

Mr. HUNTER) introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Border Tax Equity 

3 Act of 2007’’. 

4 SEC. 2. FINDINGS AND DECLARATIONS OF POLICY. 

5 (a) FINDINGS.—Congress makes the following find6 ings: 

7 (1) The United States largely relies on a direct 

8 tax system, whereas 137 countries currently employ 

9 one particular form of indirect tax known as value10 added taxes (VAT) as well as direct taxes. The 

11 worldwide VAT tax average in 2005 was 15.7 per12 cent, and in countries of the European Union it 

13 ranges between 15 and 25 percent. 

14 (2) Under the rules of the World Trade Organi15 zation (WTO), direct taxes, such as corporate in16 come taxes, if rebated or refunded upon the export 

17 of goods are viewed as export subsidies and prohib18 ited on most goods and are at least potentially ac19 tionable on all goods. However, indirect taxes, such 

20 as sales taxes and VAT, may be rebated or refunded 

21 upon the export of goods and such rebate or refund 

22 is not defined as constituting a subsidy and hence is 

23 not actionable under WTO rules. 

24 (3) At present, there are no WTO rules on sub25 sidies as applied to trade in services. However, a 

26 number of countries currently impose taxes on the 


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1 import of services and exempt or rebate or refund 

2 taxes upon the export of services, to the disadvan3 tage of United States services providers. 

4 (4) The disparate treatment of border taxes 

5 detrimentally affects United States agricultural pro6 ducers, manufacturers, and service providers in 

7 that— 

8 (A) refunds of indirect taxes effectively act 

9 as export subsidies to foreign exporters; and 

10 (B) United States exporters are subject to 

11 double taxation, by paying direct taxes on do12 mestic production in the United States and hav13 ing their exported product or service face a bor14 der tax in the importing country consisting of 

15 indirect taxes. 

16 (5) The disparate treatment of border taxes re17 sults in a large monetary disadvantage to United 

18 States exporters, estimated to equal $93 billion on 

19 goods and $47 billion on services. Moreover, since 

20 remission of VAT by foreign countries equates to ap21 proximately $201 billion in export subsidies on goods 

22 exported to the United States and another $38 bil23 lion on services exported to the United States, 

24 United States producers, in total, suffer an artificial 


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1 disadvantage of up to $294,000,000,000 on trade in 

2 goods and $85,000,000,000 on trade in services. 

3 (6) For more than 40 years, United States 

4 businesses have complained of border tax inequity 

5 and, since 1968, prior United States Administra6 tions and Congresses have sought to resolve it. 

7 (7) Congress has repeatedly recognized the 

8 prejudicial effect of the disparate treatment of bor9 der taxes with respect to goods and has directed the 

10 United States to seek a negotiated solution: 

11 (A) In passing the Trade Act of 1974 (19 

12 U.S.C. 2101 et seq.), Congress sought ‘‘revision 

13 of GATT articles with respect to the treatment 

14 of border adjustments for international taxes to 

15 redress the disadvantage to countries relying 

16 primarily on direct rather than indirect taxes 

17 for revenue needs.’’. 

18 (B) In section 1101(b)(16) of the Omnibus 

19 Trade and Competitiveness Act of 1988 (19 

20 U.S.C. 2901(b)(16) and section 2102(b)(15) of 

21 Bipartisan Trade Promotion Authority Act of 

22 2002 (19 U.S.C. 3802(b)(15)), Congress de23 clared that a principal trade negotiating objec24 tive of the United States is to obtain a revision 

25 of WTO rules with respect to the treatment of 


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1 border taxes in order to redress the disadvan2 tage to countries relying primarily on direct 

3 taxes for revenue rather than indirect taxes. 

4 (8) The disparate treatment of border taxes is 

5 arbitrary, inequitable, causes economic distortions 

6 based only on the type of tax system used by a coun7 try, and is a primary obstacle to more balanced 

8 trade relations between the United States and its 

9 major trading partners. 

10 (b) DECLARATIONS OF POLICY.—Congress declares 

11 the following: 

12 (1) It is critically necessary that the issue of 

13 border taxes be addressed and resolved in WTO ne14 gotiations, whether in the ongoing Doha Develop15 ment Round of WTO negotiations or subsequent 

16 WTO negotiations. 

17 (2) If such WTO negotiations fail to achieve the 

18 United States trade negotiating objective of revising 

19 WTO rules with respect to the treatment of border 

20 taxes in order to redress the disadvantage to coun21 tries relying primarily on direct taxes for revenue 

22 rather than indirect taxes, then effective action 

23 through legislation is warranted given the massive 

24 and inequitable distortions to trade that United 


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1 States agricultural producers, manufacturers, and 

2 service providers face as a result of border taxes. 

3 SEC. 3. REPORT ON RESULTS OF WTO NEGOTIATIONS TO 

4 REVISE WTO RULES REGARDING BORDER 

5 TAXES. 

6 (a) REPORT REQUIRED.—Not later than 60 days 

7 after the completion of WTO negotiations, or by January 

8 1, 2009, whichever occurs first, the United States Trade 

9 Representative shall submit to Congress a report certi10 fying whether or not each of the United States trade nego11 tiating objectives regarding border tax treatment, as speci12 fied in subsection (b), has been met as a result of such 

13 negotiations. 

14 (b) U.S. TRADE NEGOTIATING OBJECTIVES RE15 GARDING BORDER TAX TREATMENT SPECIFIED.—The 

16 United States trade negotiating objectives regarding bor17 der tax treatment specified in this subsection are the fol18 lowing: 

19 (1) With respect to trade in goods, the revision 

20 of WTO rules with respect to the treatment of bor21 der adjustments for internal taxes to redress the dis22 advantage to countries relying primarily on direct 

23 taxes for revenue rather than indirect taxes, as pro24 vided for in section 2102(b)(15) of Bipartisan Trade 


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1 Promotion Authority Act of 2002 (19 U.S.C. 

2 3802(b)(15)). 

3 (2) With respect to trade in services— 

4 (A) the elimination of the disadvantage in 

5 trade in services that exists for countries rely6 ing primarily on direct taxes that are not ad7 justed at the border rather than indirect taxes 

8 that are adjusted at the border; and 

9 (B) the revision of WTO rules regarding 

10 trade in services to ensure that such rules do 

11 not result in disparate treatment of border ad12 justments for internal taxes based on the direct 

13 or indirect nature of such taxes. 

14 (c) DEFINITION.—In this section, the terms ‘‘WTO 

15 negotiations’’ and ‘‘negotiations’’ mean the ongoing Doha 

16 Development Round of World Trade Organization negotia17 tions or subsequent WTO negotiations that may result in 

18 revisions to WTO rules to meet the United States trade 

19 negotiating objectives regarding border tax treatment, as 

20 specified in subsection (b). 

21 SEC. 4. TAX ON IMPORTS FROM FOREIGN COUNTRIES WITH 

22 AN INDIRECT TAX SYSTEM. 

23 Subtitle D of the Internal Revenue Code (26 U.S.C. 

24 4461 et seq.) is amended by adding at the end the fol25 lowing new subchapter G: 


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1 ‘‘Subchapter G—Tax on Imports From For2 eign Countries With An Indirect Tax Sys3 tem 

‘‘Sec. 4491. Imposition of tax. 

4 ‘‘SEC. 4491. IMPOSITION OF TAX. 

5 ‘‘(a) GENERAL RULE.—There is hereby imposed a 

6 tax on imports of goods and services from any foreign 

7 country that employs an indirect tax system and grants 

8 rebates of indirect taxes paid on goods or services exported 

9 from that country. 

10 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im11 posed by subsection (a) on an imported good or service 

12 shall be an amount equal to the excess of— 

13 ‘‘(1) the indirect taxes that are rebated or not 

14 paid on the good or service upon its export, over 

15 ‘‘(2) any indirect taxes imposed on the good or 

16 service at the border of the United States. 

17 ‘‘(c) LIABILITY AND TIME OF IMPOSITION OF TAX.— 

18 ‘‘(1) LIABILITY.—The tax imposed by sub19 section (a) on a good or service shall be paid by the 

20 importer of such good or service. 

21 ‘‘(2) TIME OF IMPOSITION.—The tax imposed 

22 by subsection (a) shall be imposed on imports at the 

23 time of entry. 


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1 ‘‘(d) PERIOD OF APPLICABILITY.—The tax imposed 

2 by subsection (a) shall apply during the period beginning 

3 as prescribed in section 6(a)(1) of the Border Tax Equity 

4 Act of 2007 and ending on the date on which the United 

5 States Trade Representative certifies to Congress that the 

6 United States trade negotiating goals of equitable border 

7 tax treatment have been met. 

8 ‘‘(e) SPECIAL ACCOUNT.—The tax on imports under 

9 subsection (a) shall be collected by the Bureau of Customs 

10 and Border Protection and deposited into a special ac11 count. This special account shall be the source of pay12 ments to qualified United States exporters under section 

13 314(b) of the Tariff Act of 1930. 

14 ‘‘(f) DEFINITIONS.—For purposes of this sub15 chapter— 

16 ‘‘(1) SECRETARY.—The term ‘Secretary’ means 

17 the Secretary of Homeland Security. 

18 ‘‘(2) IMPORTER.—The term ‘importer’ means— 

19 ‘‘(A) as such term relates to imports of 

20 goods, one of the parties eligible to file the re21 quired customs entry documentation or infor22 mation pursuant to section 484(a)(2)(B) of the 

23 Tariff Act of 1930 (19 U.S.C. 1484(a)(2)(B)), 

24 and 


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1 ‘‘(B) as such term relates to imports of 

2 services, the importer of the service as defined 

3 by the Secretary in rules and regulations pro4 mulgated under this subchapter. 

5 ‘‘(3) TIME OF ENTRY.—The term ‘time of 

6 entry’ means— 

7 ‘‘(A) as relates to imports of goods, the 

8 time generally specified in section 484(a)(2)(A) 

9 of the Tariff Act of 1930 (19 U.S.C. 

10 1484(a)(2)(A)) and prescribed in regulations 

11 (19 C.F.R. 141.68), and 

12 ‘‘(B) as relates to imports of services, the 

13 time specified by the Secretary in rules and reg14 ulations promulgated under this subchapter. 

15 ‘‘(4) INDIRECT TAX SYSTEM AND GRANTS RE16 BATES OF INDIRECT TAXES.—A foreign country em17 ploys an indirect tax system and grants rebates of 

18 indirect taxes paid on goods or services exported 

19 from that country if such country imposes indirect 

20 taxes (including sales taxes and value-added taxes 

21 (VAT)) on goods or services, and permits a rebate 

22 of such indirect taxes paid on goods or services ex23 ported from such country. 

24 ‘‘(5) VALUE-ADDED TAXES (VAT).—The term 

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1 sumption tax that is levied by the exporting country 

2 on the value added to goods and services in that 

3 country at multiple stages of the production and 

4 supply chain. This type of tax is also referred to as 

5 a goods and services tax (GST). 

6 ‘‘(g) REGULATIONS.—The Secretary may prescribe 

7 such rules and regulations as are necessary to carry out 

8 this section.’’. 

9 SEC. 5. PAYMENTS TO UNITED STATES EXPORTERS TO 

10 NEUTRALIZE DISCRIMINATORY EFFECT OF 

11 BORDER TAXES IMPOSED BY IMPORTING 

12 COUNTRIES. 

13 Part II of title III of the Tariff Act of 1930 (19 

14 U.S.C. 1305 et seq.) is amended by inserting after section 

15 313 the following: 

16 ‘‘SEC. 314. PAYMENTS TO UNITED STATES EXPORTERS TO 

17 NEUTRALIZE DISCRIMINATORY EFFECT OF 

18 BORDER TAXES IMPOSED BY IMPORTING 

19 COUNTRIES. 

20 ‘‘(a) PAYMENTS REQUIRED.— 

21 ‘‘(1) IN GENERAL.—Upon exportation of goods 

22 or services from the United States to any foreign 

23 country that employs an indirect tax system and im24 poses or applies indirect taxes on imports of goods 

25 or services at the border, the Secretary of Homeland 


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1 Security, acting through the Commissioner of the 

2 Bureau of Customs and Border Protection, shall, if 

3 requested by the exporter, pay to the exporter an 

4 amount equal to the amount of indirect taxes that 

5 the importing foreign country imposes or applies at 

6 the border to such goods or services, minus any 

7 United States taxes paid on such goods or services 

8 that have been rebated or refunded upon expor9 tation. 

10 ‘‘(2) INFORMATION TO BE INCLUDED IN RE11 QUEST.—An exporter who requests a payment under 

12 paragraph (1) shall, in such request, identify the in13 direct taxes imposed by the importing foreign coun14 try and present proof of the payment of such taxes 

15 to the importing foreign country’s authorities within 

16 a reasonable period of time after exportation of the 

17 goods or services. 

18 ‘‘(b) SOURCE OF PAYMENTS.— 

19 ‘‘(1) SPECIAL ACCOUNT.—The payments re20 quired under subsection (a) shall be paid from 

21 amounts contained in the special account authorized 

22 under section 4491(e) of the Internal Revenue Code 

23 of 1986. 

24 ‘‘(2) APPROPRIATION OF ADDITIONAL

25 AMOUNTS.—To the extent that, at any time, 


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1 amounts contained in the special account described 

2 in paragraph (1) are inadequate to make payments 

3 required under subsection (a), there are hereby ap4 propriated, out of any money in the Treasury of the 

5 United States not otherwise appropriated, such sums 

6 as may be necessary for such purpose. 

7 ‘‘(c) PERIOD OF APPLICABILITY.—The requirement 

8 to make payments under subsection (a) shall apply during 

9 the period beginning as prescribed in subsection (a)(2) or 

10 (b) of section 6 of the Border Tax Equity Act of 2007, 

11 as the case may be, and ending on the date on which the 

12 United States Trade Representative certifies to Congress 

13 that each of the United States trade negotiating goals re14 garding border tax treatment have been met. 

15 ‘‘(d) REGULATIONS.—The Secretary of Homeland 

16 Security is authorized to prescribe such rules and regula17 tions as are necessary to carry out the provisions of this 

18 section. 

19 ‘‘(e) DEFINITIONS.—In this section: 

20 ‘‘(1) INDIRECT TAX SYSTEM AND IMPOSES OR

21 APPLIES INDIRECT TAXES ON IMPORTS OF GOODS OR

22 SERVICES AT THE BORDER.—A foreign country em23 ploys an indirect tax system and imposes or applies 

24 indirect taxes on imports of goods or services at the 

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1 cluding sales taxes and value-added taxes (VAT)) on 

2 goods or services, and imposes or applies such indi3 rect taxes on imports of goods or services at the bor4 der 

5 ‘‘(2) VALUE-ADDED TAXES (VAT).—The term 

6 ‘value-added taxes’ means an indirect general con7 sumption tax that is levied by the exporting country 

8 on the value added to goods and services in that 

9 country at multiple stages of the production and 

10 supply chain. This type of tax is also referred to as 

11 a goods and services tax (GST).’’. 

12 SEC. 6. EFFECTIVE DATES. 

13 (a) GENERAL EFFECTIVE DATE.—If, pursuant to 

14 subsection (a) of section 3 of this Act, the United States 

15 Trade Representative fails to certify to Congress by the 

16 dates specified in such subsection that each of the United 

17 States trade negotiating objectives regarding border tax 

18 treatment described in subsection (b) of such section has 

19 been met as a result of WTO negotiations, then— 

20 (1) section 4491 of the Internal Revenue Code 

21 of 1986, as added by section 4 of this Act, shall take 

22 effect 90 days after such date; and 

23 (2) subject to subsection (b), section 314 of the 

24 Tariff Act of 1930, as added by section 5 of this 

25 Act, shall take effect 120 days after such date. 


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1 (b) EARLIER EFFECTIVE DATE FOR EXPORTS OF

2 SERVICES.— 

3 (1) IN GENERAL.—If, pursuant to subsection 

4 (a) of section 3 of this Act, the United States Trade 

5 Representative fails to certify to Congress by Janu6 ary 1, 2008, that each of the United States trade 

7 negotiating objectives regarding border tax treat8 ment described in subsection (b) of such section has 

9 been met as a result of WTO negotiations, then sec10 tion 314 of the Tariff Act of 1930, as added by sec11 tion 5 of this Act, shall take effect on January 1, 

12 2008, with respect to exports of services from the 

13 United States as described in section 314 of the 

14 Tariff Act of 1930. 

15 (2) APPROPRIATION OF AMOUNTS.—There are 

16 hereby appropriated, out of any money in the Treas17 ury of the United States not otherwise appropriated, 

18 such sums as may be necessary for making pay19 ments with respect to exports of services from the 

20 United States in accordance with section 314 of the 

21 Tariff Act of 1930, as added by section 5 of this 

22 Act, until such time as the special account author23 ized under subsection (e) of section 4491 of the In24 ternal Revenue Code of 1986, as added by section 4 

25 of this Act, is established and amounts contained in 


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1 the special account are adequate to make such pay2 ments. 

Æ 


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