EU Takes New Step Against U.S. Export Tax Practice

By John S. McClenahen It's not certain that the 15-nation European Union (EU) will ever actually block U.S. imports worth $4 billion. However, the Europeans are keeping pressure on the Bush Administration and Congress to resolve a long-running bilateral dispute over so-called Foreign Sales Corporations (FSCs), a provision of U.S. law allowing American exporters to defer income-tax payments on foreign-source income. The World Trade Organization (WTO), siding with the EU, says FSCs are a subsidy that runs afoul of international trading rules and last August told the Europeans they could impose countermeasures. The European Commission, the EU's executive branch, this week sent to the 15 EU governments a revised draft list of products that could be subject to countermeasures. The governments are supposed to look over the list during the next several weeks, trying to assure that any sanctions would have minimal impact on their economies. Once the list is final, the commission could ask the WTO for authorization to impose sanctions against the U.S.

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