FOREIGN SALES CORPORATIONS are an illegal export subsidy, the World Trade Organization said again on February 24

FOREIGN SALES CORPORATIONS are an illegal export subsidy, the World Trade Organization said again on February 24

March 01, 2000
FOREIGN SALES CORPORATIONS are an illegal export subsidy, the World Trade Organization said again on February 24.

The US is expected to negotiate a settlement in the case but not by the October 1 deadline the World Trade Organization set to avert trade sanctions. European officials seem prepared to agree to another 12 to 15 months to work out a compromise.

US companies that run their exports of US-made goods through offshore companies called “foreign sales corporations” are able to reduce US taxes on their export earnings by 15% to 30%. FSCs have been incorporated into lease structures where US-made equipment — like airplanes and turbines — are used overseas. This reduces the US taxes on rents paid to the US lessor of the equipment.

Approximately one in every four US export dollars is run through a FSC.

Keith Martin