I 

112TH CONGRESS 

1ST SESSION H. R. 2666 

To neutralize the discriminatory effect of any country that employs indirect 

taxes and grants rebates of the same upon export if United States 

trade negotiating objectives regarding border tax treatment in World 

Trade Organization negotiations are not met. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 27, 2011 

Mr. PASCRELL (for himself, Mr. JONES, and Mr. MICHAUD) introduced the 

following bill; which was referred to the Committee on Ways and Means 

A BILL 

To neutralize the discriminatory effect of any country that 

employs indirect taxes and grants rebates of the same 

upon export 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, 

3 SECTION 1. SHORT TITLE. 

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

5 Act of 2011’’. 


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1 SEC. 2. FINDINGS AND DECLARATIONS OF POLICY. 

2 (a) FINDINGS.—Congress makes the following find3 ings: 

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

5 tax system, whereas 167 countries currently employ 

6 one particular form of indirect tax known as value7 added taxes (VAT) as well as direct taxes. The 

8 worldwide VAT tax average in 2008 was 15.2 per9 cent, and in countries of the European Union it 

10 ranges between 15 and 25 percent. 

11 (2) Under the rules of the World Trade Organi12 zation (WTO), direct taxes, such as corporate in13 come taxes, if rebated or refunded upon the export 

14 of goods are viewed as export subsidies and prohib15 ited on most goods and are at least potentially ac16 tionable on all goods. However, indirect taxes, such 

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

18 upon the export of goods and such rebate or refund 

19 is not defined as constituting a subsidy and hence is 

20 not actionable under WTO rules. 

21 (3) At present, there are no WTO rules on sub22 sidies as applied to trade in services. However, a 

23 number of countries currently impose taxes on the 

24 import of services and exempt or rebate or refund 

25 taxes upon the export of services, to the disadvan26 tage of United States services providers. 


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1 (4) The disparate treatment of border taxes 

2 detrimentally affects United States agricultural pro3 ducers, manufacturers, and service providers in 

4 that— 

5 (A) refunds of indirect taxes effectively act 

6 as export subsidies to foreign exporters; and 

7 (B) United States exporters are subject to 

8 double taxation, by paying direct taxes on do9 mestic production in the United States and hav10 ing their exported product or service face a bor11 der tax in the importing country consisting of 

12 indirect taxes. 

13 (5) Foreign governments paid their producers 

14 an estimated $254.3 billion of VAT rebates on goods 

15 exported to the United States. Foreign governments 

16 collected from United States producers an estimated 

17 $143.7 billion of VAT equivalent taxes on their im18 ported goods. For services, foreign governments paid 

19 their producers an estimated $48.2 billion of VAT 

20 equivalent taxes on services exported to the United 

21 States and collected from United States producers 

22 an estimated $72.3 billion of VAT equivalent taxes 

23 on services imported from the United States. The 

24 combined goods and services disadvantage in 2008 

25 was $518.4 billion. 


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

2 businesses have complained of border tax inequity 

3 and, since 1968, prior United States Administra4 tions and Congresses have sought to resolve it. 

5 (7) Congress has repeatedly recognized the 

6 prejudicial effect of the disparate treatment of bor7 der taxes with respect to goods and has directed the 

8 United States to seek a negotiated solution: 

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

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

11 of GATT articles with respect to the treatment 

12 of border adjustments for international taxes to 

13 redress the disadvantage to countries relying 

14 primarily on direct rather than indirect taxes 

15 for revenue needs.’’. 

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

17 Trade and Competitiveness Act of 1988 (19 

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

19 Bipartisan Trade Promotion Authority Act of 

20 2002 (19 U.S.C. 3802(b)(15)), Congress de21 clared that a principal trade negotiating objec22 tive of the United States is to obtain a revision 

23 of WTO rules with respect to the treatment of 

24 border taxes in order to redress the disadvanVerDate Mar 15 2010 03:07 Jul 28, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2666.IH H2666

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1 tage to countries relying primarily on direct 

2 taxes for revenue rather than indirect taxes. 

3 (8) The disparate treatment of border taxes is 

4 arbitrary, inequitable, causes economic distortions 

5 based only on the type of tax system used by a coun6 try, and is a primary obstacle to more balanced 

7 trade relations between the United States and its 

8 major trading partners. 

9 (b) DECLARATIONS OF POLICY.—Congress declares 

10 the following: 

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

12 border taxes be addressed and resolved during cur13 rent or future WTO negotiations. 

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

15 United States trade negotiating objective of revising 

16 WTO rules with respect to the treatment of border 

17 taxes in order to redress the disadvantage to coun18 tries relying primarily on direct taxes for revenue 

19 rather than indirect taxes, then effective action 

20 through legislation is warranted given the massive 

21 and inequitable distortions to trade that United 

22 States agricultural producers, manufacturers, and 

23 service providers face as a result of border taxes. 


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

2 REVISE WTO RULES REGARDING BORDER 

3 TAXES. 

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

5 after the completion of WTO negotiations, or by January 

6 1, 2013, whichever occurs first, the United States Trade 

7 Representative shall submit to Congress a report certi8 fying whether or not each of the United States trade nego9 tiating objectives regarding border tax treatment, as speci10 fied in subsection (b), has been met as a result of such 

11 negotiations. 

12 (b) U.S. TRADE NEGOTIATING OBJECTIVES RE13 GARDING BORDER TAX TREATMENT SPECIFIED.—The 

14 United States trade negotiating objectives regarding bor15 der tax treatment specified in this subsection are the fol16 lowing: 

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

18 of WTO rules with respect to the treatment of bor19 der adjustments for internal taxes to redress the dis20 advantage to countries relying primarily on direct 

21 taxes for revenue rather than indirect taxes, as pro22 vided for in section 2102(b)(15) of Bipartisan Trade 

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

24 3802(b)(15)). 

25 (2) With respect to trade in services— 


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1 (A) the elimination of the disadvantage in 

2 trade in services that exists for countries rely3 ing primarily on direct taxes that are not ad4 justed at the border rather than indirect taxes 

5 that are adjusted at the border; and 

6 (B) the revision of WTO rules regarding 

7 trade in services to ensure that such rules do 

8 not result in disparate treatment of border ad9 justments for internal taxes based on the direct 

10 or indirect nature of such taxes. 

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

12 negotiations’’ and ‘‘negotiations’’ mean any World Trade 

13 Organization negotiations that may result in revisions to 

14 WTO rules to meet the United States trade negotiating 

15 objectives regarding border tax treatment, as specified in 

16 subsection (b). 

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

18 AN INDIRECT TAX SYSTEM. 

19 (a) IN GENERAL.—Subtitle D of the Internal Rev20 enue Code (26 U.S.C. 4461 et seq.) is amended by adding 

21 at the end the following new subchapter: 

22 ‘‘Subchapter E—Tax on Imports From For23 eign Countries With An Indirect Tax Sys24 tem 

‘‘Sec. 4491. Imposition of tax. 


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1 ‘‘SEC. 4491. IMPOSITION OF TAX. 

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

3 tax on imports of goods and services from any foreign 

4 country that employs an indirect tax system and grants 

5 rebates of indirect taxes paid on goods or services exported 

6 from that country. 

7 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im8 posed by subsection (a) on an imported good or service 

9 shall be an amount equal to the excess of— 

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

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

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

13 service at the border of the United States. 

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

15 ‘‘(1) LIABILITY.—The tax imposed by sub16 section (a) on a good or service shall be paid by the 

17 importer of such good or service. 

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

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

20 time of entry. 

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

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

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

24 Act of 2011 and ending on the date on which the United 

25 States Trade Representative certifies to Congress that the 


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1 United States trade negotiating goals of equitable border 

2 tax treatment have been met. 

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

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

5 and Border Protection and deposited into a special ac6 count. This special account shall be the source of pay7 ments to qualified United States exporters under section 

8 314(b) of the Tariff Act of 1930. 

9 ‘‘(f) DEFINITIONS.—For purposes of this sub10 chapter— 

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

12 the Secretary of Homeland Security. 

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

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

15 goods, one of the parties eligible to file the re16 quired customs entry documentation or infor17 mation pursuant to section 484(a)(2)(B) of the 

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

19 and 

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

21 services, the importer of the service as defined 

22 by the Secretary in rules and regulations pro23 mulgated under this subchapter. 

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

25 entry’ means— 


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

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

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

4 1484(a)(2)(A)) and prescribed in regulations 

5 (19 C.F.R. 141.68), and 

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

7 time specified by the Secretary in rules and reg8 ulations promulgated under this subchapter. 

9 ‘‘(4) INDIRECT TAX SYSTEM AND GRANTS RE10 BATES OF INDIRECT TAXES.—A foreign country em11 ploys an indirect tax system and grants rebates of 

12 indirect taxes paid on goods or services exported 

13 from that country if such country imposes indirect 

14 taxes (including sales taxes and value-added taxes 

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

16 of such indirect taxes paid on goods or services ex17 ported from such country. 

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

19 ‘value-added taxes’ means an indirect general con20 sumption tax that is levied by the exporting country 

21 on the value added to goods and services in that 

22 country at multiple stages of the production and 

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

24 a goods and services tax (GST). 


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

2 such rules and regulations as are necessary to carry out 

3 this section.’’. 

4 (b) CLERICAL AMENDMENT.—The table of sub5 chapters for subtitle D of such Code is amended by adding 

6 at the end the following new item: 

‘‘SUBCHAPTER E. TAX ON IMPORTS FROM FOREIGN COUNTRIES WITH AN

INDIRECT TAX SYSTEM.’’. 

7 SEC. 5. PAYMENTS TO UNITED STATES EXPORTERS TO 

8 NEUTRALIZE DISCRIMINATORY EFFECT OF 

9 BORDER TAXES IMPOSED BY IMPORTING 

10 COUNTRIES. 

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

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

13 313 the following: 

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

15 NEUTRALIZE DISCRIMINATORY EFFECT OF 

16 BORDER TAXES IMPOSED BY IMPORTING 

17 COUNTRIES. 

18 ‘‘(a) PAYMENTS REQUIRED.— 

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

20 or services from the United States to any foreign 

21 country that employs an indirect tax system and im22 poses or applies indirect taxes on imports of goods 

23 or services at the border, the Secretary of Homeland 

24 Security, acting through the Commissioner responVerDate Mar 15 2010 03:07 Jul 28, 2011 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2666.IH H2666

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1 sible for the Bureau of Customs and Border Protec2 tion, shall, if requested by the exporter, pay to the 

3 exporter an amount equal to the amount of indirect 

4 taxes that the importing foreign country imposes or 

5 applies at the border to such goods or services, 

6 minus any United States taxes paid on such goods 

7 or services that have been rebated or refunded upon 

8 exportation. 

9 ‘‘(2) INFORMATION TO BE INCLUDED IN RE10 QUEST.—An exporter who requests a payment under 

11 paragraph (1) shall, in such request, identify the in12 direct taxes imposed by the importing foreign coun13 try and present proof of the payment of such taxes 

14 to the importing foreign country’s authorities within 

15 a reasonable period of time after exportation of the 

16 goods or services. 

17 ‘‘(b) SOURCE OF PAYMENTS.— 

18 ‘‘(1) SPECIAL ACCOUNT.—The payments re19 quired under subsection (a) shall be paid from 

20 amounts contained in the special account authorized 

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

22 of 1986. 

23 ‘‘(2) APPROPRIATION OF ADDITIONAL

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

25 amounts contained in the special account described 


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1 in paragraph (1) are inadequate to make payments 

2 required under subsection (a), there are hereby ap3 propriated, out of any money in the Treasury of the 

4 United States not otherwise appropriated, such sums 

5 as may be necessary for such purpose. 

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

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

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

9 (b) of section 6 of the Border Tax Equity Act of 2011, 

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

11 United States Trade Representative certifies to Congress 

12 that each of the United States trade negotiating goals re13 garding border tax treatment have been met. 

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

15 Security is authorized to prescribe such rules and regula16 tions as are necessary to carry out the provisions of this 

17 section. 

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

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

20 APPLIES INDIRECT TAXES ON IMPORTS OF GOODS OR

21 SERVICES AT THE BORDER.—A foreign country em22 ploys an indirect tax system and imposes or applies 

23 indirect taxes on imports of goods or services at the 

24 border if such country imposes indirect taxes (in25 cluding sales taxes and value-added taxes (VAT)) on 


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1 goods or services, and imposes or applies such indi2 rect taxes on imports of goods or services at the bor3 der. 

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

5 ‘value-added taxes’ means an indirect general con6 sumption tax that is levied by the exporting country 

7 on the value added to goods and services in that 

8 country at multiple stages of the production and 

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

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

11 SEC. 6. EFFECTIVE DATES. 

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

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

14 Trade Representative fails to certify to Congress by the 

15 applicable date specified in such subsection that each of 

16 the United States trade negotiating objectives regarding 

17 border tax treatment described in subsection (b) of such 

18 section has been met as a result of WTO negotiations, 

19 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, 2012, 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 2012, 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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