(1) The United States largely relies on a direct 
tax system, whereas 164 countries currently employ 
one particular form of indirect tax known as value- 
added taxes (VAT) as well as direct taxes. The 
worldwide VAT average in 2015 was 15 percent, and 
in countries of the European Union it was 21 per-
cent. 
(2) Under the rules of the World Trade Organi-
zation (WTO), direct taxes, such as corporate in-
come taxes, if rebated or refunded upon the export 
of goods, are viewed as export subsidies and prohib-
ited on most goods and are at least potentially ac-
tionable 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 sub-
sidies 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 disadvan-
tage of United States service providers. 
(4) The disparate treatment of border taxes 
detrimentally affects United States agricultural pro-
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ducers, 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 do-
mestic production in the United States and hav-
ing their exported product or service face a bor-
der tax in the importing country consisting of 
indirect taxes. 
(5) As one example, governments of member 
states of the European Union, with an average VAT 
of 21 percent in 2015 and total exports to the 
United States of $427.5 billion, paid their producers 
an estimated $91.9 billion of VAT rebates on goods 
exported to the United States in 2015. These gov-
ernments collected from United States producers an 
estimated $28.7 billion of VAT-equivalent taxes on 
their imported goods. For services, these govern-
ments paid their producers an estimated $47.6 bil-
lion of VAT-equivalent taxes on services exported to 
the United States and collected from United States 
producers an estimated $36.3 billion of VAT-equiva-
lent taxes on services imported from the United 
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States. The combined goods and services disadvan-
tage in 2015 was $204 billion. 
(6) For more than 45 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 bor-
der 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)), section 2102(b)(15) of Bi-
partisan Trade Promotion Authority Act of 
2002 (19 U.S.C. 3802(b)(15)), and section 
102(b)(18) of the Bipartisan Congressional 
Trade Priorities and Accountability Act of 2015 
(19 U.S.C. 4201(b)(18)) Congress declared that 
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a principal trade negotiating objective of the 
United States is to obtain a 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. 
(8) The disparate treatment of border taxes is 
arbitrary, inequitable, causes economic distortions 
based only on the type of tax system used by a coun-
try, 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 during cur-
rent and future WTO negotiations. 
(2) If such WTO negotiations fail to achieve the 
United States trade negotiating objective of revising 
rules with respect to the treatment of border taxes 
in order to redress the disadvantage to countries re-
lying primarily on direct taxes for revenue rather 
than indirect taxes, then effective action through 
legislation is warranted given the massive and in-
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equitable distortions to trade that United States ag-
ricultural producers, manufacturers, and service pro-
viders face as a result of border taxes. 
SEC. 3. REPORTS ON RESULTS OF WTO NEGOTIATIONS TO 
REVISE WTO RULES REGARDING BORDER 
TAXES AND FREE TRADE AGREEMENTS RE-
GARDING BORDER TAXES. 
(a) REPORT ON RESULTS OF WTO NEGOTIATIONS 
TO REVISE WTO RULES REGARDING BORDER TAXES.— 
(1) REPORT
REQUIRED.—Not later than 60 
days after the completion of WTO negotiations, or 
by January 1, 2018, 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 re-
garding border tax treatment, as specified in para-
graph (2), has been met as a result of such negotia-
tions. 
(2) U.S. TRADE NEGOTIATING OBJECTIVES RE-
GARDING
BORDER
TAX
TREATMENT
SPECIFIED.— 
The United States trade negotiating objectives re-
garding border tax treatment specified in this para-
graph are the following: 
(A) With respect to trade in goods, the re-
vision of WTO rules with respect to the treat-
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ment 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 
102(b)(18) of the Bipartisan Congressional 
Trade Priorities and Accountability Act of 2015 
(19 U.S.C. 4201(b)(18)). 
(B) With respect to trade in services— 
(i) the elimination of the disadvantage 
in trade in services that exists for coun-
tries relying primarily on direct taxes that 
are not adjusted at the border rather than 
indirect taxes that are adjusted at the bor-
der; and 
(ii) the revision of WTO rules regard-
ing 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. 
(3) DEFINITION.—In this subsection, the terms 
‘‘WTO negotiations’’ and ‘‘negotiations’’ mean any 
World Trade Organization negotiations that may re-
sult in revisions to WTO rules to meet the United 
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States trade negotiating objectives regarding border 
tax treatment, as specified in paragraph (2). 
(b) REPORT
ON FREE TRADE AGREEMENTS RE-
GARDING BORDER TAXES.— 
(1) REPORT
REQUIRED.—Not later than one 
year after the date of the enactment of this Act, the 
United States Trade Representative shall submit to 
Congress a report certifying whether or not each 
covered country that is a party to a multilateral, bi-
lateral, and regional trade agreement that has en-
tered into force on or before such date of enactment 
with respect to the United States and such covered 
country is taking or has taken the actions regarding 
border tax treatment, as specified in paragraph (2). 
(2) ACTIONS REGARDING BORDER TAX TREAT-
MENT SPECIFIED.—The actions regarding border tax 
treatment specified in this paragraph are the fol-
lowing: 
(A) With respect to trade in goods, the re-
vision of laws of the covered country with re-
spect 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. 
(B) With respect to trade in services— 
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(i) the elimination of the disadvantage 
in trade in services that exists for coun-
tries relying primarily on direct taxes that 
are not adjusted at the border rather than 
indirect taxes that are adjusted at the bor-
der; and 
(ii) the revision of laws of the covered 
country regarding trade in services to en-
sure that such laws do not result in dis-
parate treatment of border adjustments for 
internal taxes based on the direct or indi-
rect nature of such taxes. 
(3) DEFINITION.—In this subsection, the term 
‘‘covered country’’ means a country that relies pri-
marily on indirect taxes that are adjusted at the bor-
der rather than direct taxes that are not adjusted at 
the border. 
SEC. 4. TAX ON IMPORTS FROM FOREIGN COUNTRIES WITH 
AN INDIRECT TAX SYSTEM. 
(a) IN GENERAL.—Subtitle D of chapter 36 of the 
Internal Revenue Code (26 U.S.C. 4461 et seq.) is amend-
ed by adding at the end the following new subchapter: 
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‘‘Subchapter E—Tax on Imports From For-
eign Countries With An Indirect Tax Sys-
tem 
‘‘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 im-
posed 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 sub-
section (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. 
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‘‘(d) PERIOD OF APPLICABILITY.—The tax imposed 
by subsection (a) shall apply during the period beginning 
as prescribed in section 6(1) of the Border Tax Equity 
Act of 2016 and ending on the date on which the United 
States Trade Representative certifies to Congress that the 
United States trade negotiating objectives of equitable 
border tax treatment have been met. 
‘‘(e) SPECIAL ACCOUNT.—The tax on imports under 
subsection (a) shall be collected by U.S. Customs and Bor-
der Protection and deposited into a special account. This 
special account shall be the source of payments to quali-
fied United States exporters under section 314 of the Tar-
iff Act of 1930. 
‘‘(f) DEFINITIONS.—For purposes of this sub-
chapter— 
‘‘(1) IMPORTER.—The term ‘importer’ means— 
‘‘(A) as such term relates to imports of 
goods, one of the parties eligible to file the re-
quired customs entry documentation or infor-
mation 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 
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by the Secretary in rules and regulations pro-
mulgated under this subchapter. 
‘‘(2) 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 reg-
ulations promulgated under this subchapter. 
‘‘(3) INDIRECT TAX SYSTEM AND GRANTS RE-
BATES OF INDIRECT TAXES.—A foreign country em-
ploys 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 ex-
ported from such country. 
‘‘(4) VALUE-ADDED
TAXES
(VAT).—The term 
‘value-added taxes’ means an indirect general con-
sumption tax that is levied by the exporting country 
on the value added to goods and services in that 
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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.’’. 
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for subtitle D of chapter 36 of such Code is 
amended by adding at the end of the following new item: 
‘‘SUBCHAPTER E. TAX ON IMPORTS FROM FOREIGN COUNTRIES WITH AN 
INDIRECT TAX SYSTEM’’. 
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 im-
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poses or applies indirect taxes on imports of goods 
or services at the border, the Secretary of the Treas-
ury, acting through the Commissioner of U.S. Cus-
toms 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 funded upon exportation. 
‘‘(2) INFORMATION TO BE INCLUDED IN RE-
QUEST.—An exporter who requests a payment under 
paragraph (1) shall, in such request, identify the in-
direct taxes imposed by the importing foreign coun-
try 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) 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. 
‘‘(c) PERIOD OF APPLICABILITY.—The requirement 
to make payments under subsection (a) shall apply during 
the period beginning as prescribed in section 6(2) of the 
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Border Tax Equity Act of 2016 and ending on the date 
on which the United States Trade Representative certifies 
to Congress that each of the United States trade negoti-
ating objectives regarding border tax treatment have been 
met. 
‘‘(d) REGULATIONS.—The Secretary of the Treasury 
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 em-
ploys 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 (in-
cluding sales tax and value-added taxes (VAT)) on 
goods or services, and imposes or applies such indi-
rect taxes on imports of goods or services at the bor-
der. 
‘‘(2) VALUE-ADDED
TAXES
(VAT).—The term 
‘value-added taxes’ means an indirect general con-
sumption 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 
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supply chain. This type of tax is also referred to as 
a goods and services tax (GST).’’. 
SEC. 6. EFFECTIVE DATES. 
If, pursuant to subsection (a)(1) of section 3 of this 
Act, the United States Trade Representative fails to cer-
tify to Congress by the date specified in such subsection 
that each of the United States trade negotiating objectives 
regarding border tax treatment described in section (a)(2) 
of such section has been met as a result of WTO negotia-
tions, 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) section 314 of the Tariff Act of 1930, as 
added by section 5 of this Act, shall take effect 120 
days after such date. 
Æ 
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