Brussels Mandates Sanctions Over U.S. FSCs

By Agence France-Presse The European Union's executive arm said Nov. 5 it had agreed to slap multimillion dollar trade sanctions on the United States in a bid to overturn a U.S. corporate tax break. The European Commission said it has adopted a proposal to impose duties on U.S. goods starting from $200 million next March unless the Foreign Sales Corporation (FSC) law is repealed. A Commission spokeswoman said the duties would rise by $40 million a month if U.S. authorities do not lift the tax break, which has been ruled illegal by the World Trade Organization (WTO). The WTO ruled in January 2002 that the FSC law flouted its rules by allowing thousands of U.S. firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes. The duties recommended by the Commission were well below what the Geneva-based trade body had ruled the EU could impose -- $4 billion -- if the FSC system was not dismantled by the end of 2003. EU Trade Commissioner Pascal Lamy, during a visit to Washington, D.C., on Tuesday, said that changes in U.S. law being considered by Congress did not bring the tax arrangement into line with WTO rules. U.S. legislators are understood to be considering a transitional period before the FSC scheme would be finally lifted, which Brussels rejected out of hand. Copyright Agence France-Presse, 2003