[House Report 106-19]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-19
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
AFRICAN GROWTH AND OPPORTUNITY ACT
_______
June 17, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Archer, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 434]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 434) to authorize a new trade and investment policy
for sub-Sahara Africa, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
I. Introduction.....................................................13
A. Purpose and Summary................................... 13
B. Background and Need for Legislation................... 14
C. Legislative History................................... 16
II. Explanation of the bill..........................................16
A. Short Title........................................... 16
B. Findings.............................................. 17
C. Statement of Policy................................... 17
D. Eligibility Requirements.............................. 18
E. United States-Sub-Saharan Africa Trade and Economic
Cooperation Forum...................................... 20
F. United States-Sub-Saharan Africa Free Trade Area...... 21
G. Eliminating Trade Barriers and Encouraging Exports.... 22
H. Generalized System of Preferences..................... 25
I. Executive Branch Initiatives.......................... 27
J. Assistant United States Trade Representative for Sub-
Saharan Africa......................................... 28
K. Reporting Requirement................................. 29
L. Sub-Saharan Africa Defined............................ 30
M. Limit Use of Non-Accrual Experience Method of
Accounting to Amounts to be Received for the
Performance of Qualified Personal Services............. 30
N. Denial of Charitable Contribution Deduction for
Transfers Associated with Charitable Split-Dollar
Insurance Arrangements................................. 32
III.Vote of the Committee............................................37
IV. Budget Effects of the Bill.......................................37
A. Committee Estimate of Budgetary Effects............... 37
B. Budget Authority and Tax Expenditures................. 37
C. Cost Estimate Prepared by the Congressional Budget
Office................................................. 37
V. Other Matters to be Discussed Under the Rules of the House.......42
A. Committee Oversight Findings and Recommendations...... 42
B. Summary of Findings and Recommendations of the
Committee on Government Reform......................... 42
C. Constitutional Authority Statement.................... 42
D. Information Relating to Unfunded Mandates............. 42
E. Applicability of House Rule XXI5(B)................... 43
F. Tax Complexity Analysis............................... 43
VI. Changes in Existing Law Made by the Bill as Reported.............43
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``African Growth and Opportunity Act''.
SEC. 2. FINDINGS.
The Congress finds that it is in the mutual economic interest of the
United States and sub-Saharan Africa to promote stable and sustainable
economic growth and development in sub-Saharan Africa and that
sustained economic growth in sub-Saharan Africa depends in large
measure upon the development of a receptive environment for trade and
investment. To that end, the United States seeks to facilitate market-
led economic growth in, and thereby the social and economic development
of, the countries of sub-Saharan Africa. In particular, the United
States seeks to assist sub-Saharan African countries, and the private
sector in those countries, to achieve economic self-reliance by--
(1) strengthening and expanding the private sector in sub-
Saharan Africa, especially women-owned businesses;
(2) encouraging increased trade and investment between the
United States and sub-Saharan Africa;
(3) reducing tariff and nontariff barriers and other trade
obstacles;
(4) expanding United States assistance to sub-Saharan
Africa's regional integration efforts;
(5) negotiating free trade areas;
(6) establishing a United States-Sub-Saharan Africa Trade and
Investment Partnership;
(7) focusing on countries committed to accountable
government, economic reform, and the eradication of poverty;
(8) establishing a United States-Sub-Saharan Africa Economic
Cooperation Forum; and
(9) continuing to support development assistance for those
countries in sub-Saharan Africa attempting to build civil
societies.
SEC. 3. STATEMENT OF POLICY.
The Congress supports economic self-reliance for sub-Saharan African
countries, particularly those committed to--
(1) economic and political reform;
(2) market incentives and private sector growth;
(3) the eradication of poverty; and
(4) the importance of women to economic growth and
development.
SEC. 4. ELIGIBILITY REQUIREMENTS.
(a) In General.--A sub-Saharan African country shall be eligible to
participate in programs, projects, or activities, or receive assistance
or other benefits under this Act if the President determines that the
country does not engage in gross violations of internationally
recognized human rights and has established, or is making continual
progress toward establishing, a market-based economy, such as the
establishment and enforcement of appropriate policies relating to--
(1) promoting free movement of goods and services between the
United States and sub-Saharan Africa and among countries in
sub-Saharan Africa;
(2) promoting the expansion of the production base and the
transformation of commodities and nontraditional products for
exports through joint venture projects between African and
foreign investors;
(3) trade issues, such as protection of intellectual property
rights, improvements in standards, testing, labeling and
certification, and government procurement;
(4) the protection of property rights, such as protection
against expropriation and a functioning and fair judicial
system;
(5) appropriate fiscal systems, such as reducing high import
and corporate taxes, controlling government consumption,
participation in bilateral investment treaties, and the
harmonization of such treaties to avoid double taxation;
(6) foreign investment issues, such as the provision of
national treatment for foreign investors, removing restrictions
on investment, and other measures to create an environment
conducive to domestic and foreign investment;
(7) supporting the growth of regional markets within a free
trade area framework;
(8) governance issues, such as eliminating government
corruption, minimizing government intervention in the market
such as price controls and subsidies, and streamlining the
business license process;
(9) supporting the growth of the private sector, in
particular by promoting the emergence of a new generation of
African entrepreneurs;
(10) encouraging the private ownership of government-
controlled economic enterprises through divestiture programs;
and
(11) observing the rule of law, including equal protection
under the law and the right to due process and a fair trial.
(b) Additional Factors.--In determining whether a sub-Saharan African
country is eligible under subsection (a), the President shall take into
account the following factors:
(1) An expression by such country of its desire to be an
eligible country under subsection (a).
(2) The extent to which such country has made substantial
progress toward--
(A) reducing tariff levels;
(B) binding its tariffs in the World Trade
Organization and assuming meaningful binding
obligations in other sectors of trade; and
(C) eliminating nontariff barriers to trade.
(3) Whether such country, if not already a member of the
World Trade Organization, is actively pursuing membership in
that Organization.
(4) Where applicable, the extent to which such country is in
material compliance with its obligations to the International
Monetary Fund and other international financial institutions.
(5) The extent to which such country has a recognizable
commitment to reducing poverty, increasing the availability of
health care and educational opportunities, the expansion of
physical infrastructure in a manner designed to maximize
accessibility, increased access to market and credit facilities
for small farmers and producers, and improved economic
opportunities for women as entrepreneurs and employees, and
promoting and enabling the formation of capital to support the
establishment and operation of micro-enterprises.
(6) Whether or not such country engages in activities that
undermine United States national security or foreign policy
interests.
(c) Continuing Compliance.--
(1) Monitoring and review of certain countries.--The
President shall monitor and review the progress of sub-Saharan
African countries in order to determine their current or
potential eligibility under subsection (a). Such determinations
shall be based on quantitative factors to the fullest extent
possible and shall be included in the annual report required by
section 15.
(2) Ineligibility of certain countries.--A sub-Saharan
African country described in paragraph (1) that has not made
continual progress in meeting the requirements with which it is
not in compliance shall be ineligible to participate in
programs, projects, or activities, or receive assistance or
other benefits, under this Act.
SEC. 5. UNITED STATES-SUB-SAHARAN AFRICA TRADE AND ECONOMIC COOPERATION
FORUM.
(a) Declaration of Policy.--The President shall convene annual high-
level meetings between appropriate officials of the United States
Government and officials of the governments of sub-Saharan African
countries in order to foster close economic ties between the United
States and sub-Saharan Africa.
(b) Establishment.--Not later than 12 months after the date of the
enactment of this Act, the President, after consulting with Congress
and the governments concerned, shall establish a United States-Sub-
Saharan Africa Trade and Economic Cooperation Forum (hereafter in this
section referred to as the ``Forum'').
(c) Requirements.--In creating the Forum, the President shall meet
the following requirements:
(1) The President shall direct the Secretary of Commerce, the
Secretary of the Treasury, the Secretary of State, and the
United States Trade Representative to host the first annual
meeting with the counterparts of such Secretaries from the
governments of sub-Saharan African countries eligible under
section 4, the Secretary General of the Organization of African
Unity, and government officials from other appropriate
countries in Africa, to discuss expanding trade and investment
relations between the United States and sub-Saharan Africa and
the implementation of this Act including encouraging joint
ventures between small and large businesses.
(2)(A) The President, in consultation with the Congress,
shall encourage United States nongovernmental organizations to
host annual meetings with nongovernmental organizations from
sub-Saharan Africa in conjunction with the annual meetings of
the Forum for the purpose of discussing the issues described in
paragraph (1).
(B) The President, in consultation with the Congress, shall
encourage United States representatives of the private sector
to host annual meetings with representatives of the private
sector from sub-Saharan Africa in conjunction with the annual
meetings of the Forum for the purpose of discussing the issues
described in paragraph (1).
(3) The President shall, to the extent practicable, meet with
the heads of governments of sub-Saharan African countries
eligible under section 4 not less than once every two years for
the purpose of discussing the issues described in paragraph
(1). The first such meeting should take place not later than
twelve months after the date of the enactment of this Act.
(d) Dissemination of Information by USIA.--In order to assist in
carrying out the purposes of the Forum, the United States Information
Agency shall disseminate regularly, through multiple media, economic
information in support of the free market economic reforms described in
this Act.
(e) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out this section.
(f) Limitation on Use of Funds.--None of the funds authorized under
this section may be used to create or support any nongovernmental
organization for the purpose of expanding or facilitating trade between
the United States and sub-Saharan Africa.
SEC. 6. UNITED STATES-SUB-SAHARAN AFRICA FREE TRADE AREA.
(a) Declaration of Policy.--The Congress declares that a United
States-Sub-Saharan Africa Free Trade Area should be established, or
free trade agreements should be entered into, in order to serve as the
catalyst for increasing trade between the United States and sub-Saharan
Africa and increasing private sector development in sub-Saharan Africa.
(b) Plan Requirement.--
(1) In general.--The President, taking into account the
provisions of the treaty establishing the African Economic
Community and the willingness of the governments of sub-Saharan
African countries to engage in negotiations to enter into free
trade agreements, shall develop a plan for the purpose of
entering into one or more trade agreements with sub-Saharan
African countries eligible under section 4 in order to
establish a United States-Sub-Saharan Africa Free Trade Area
(hereafter in this section referred to as the ``Free Trade
Area'').
(2) Elements of plan.--The plan shall include the following:
(A) The specific objectives of the United States with
respect to the establishment of the Free Trade Area and
a suggested timetable for achieving those objectives.
(B) The benefits to both the United States and sub-
Saharan Africa with respect to the Free Trade Area.
(C) A mutually agreed-upon timetable for establishing
the Free Trade Area.
(D) The implications for and the role of regional and
sub-regional organizations in sub-Saharan Africa with
respect to the Free Trade Area.
(E) Subject matter anticipated to be covered by the
agreement for establishing the Free Trade Area and
United States laws, programs, and policies, as well as
the laws of participating eligible African countries
and existing bilateral and multilateral and economic
cooperation and trade agreements, that may be affected
by the agreement or agreements.
(F) Procedures to ensure the following:
(i) Adequate consultation with the Congress
and the private sector during the negotiation
of the agreement or agreements for establishing
the Free Trade Area.
(ii) Consultation with the Congress regarding
all matters relating to implementation of the
agreement or agreements.
(iii) Approval by the Congress of the
agreement or agreements.
(iv) Adequate consultations with the relevant
African governments and African regional and
subregional intergovernmental organizations
during the negotiations of the agreement or
agreements.
(c) Reporting Requirement.--Not later than 12 months after the date
of the enactment of this Act, the President shall prepare and transmit
to the Congress a report containing the plan developed pursuant to
subsection (b).
SEC. 7. ELIMINATING TRADE BARRIERS AND ENCOURAGING EXPORTS.
(a) Findings.--The Congress makes the following findings:
(1) The lack of competitiveness of sub-Saharan Africa in the
global market, especially in the manufacturing sector, make it
a limited threat to market disruption and no threat to United
States jobs.
(2) Annual textile and apparel exports to the United States
from sub-Saharan Africa represent less than 1 percent of all
textile and apparel exports to the United States, which totaled
$54,001,863,000 in 1997.
(3) Sub-Saharan Africa has limited textile manufacturing
capacity. During 1999 and the succeeding 4 years, this limited
capacity to manufacture textiles and apparel is projected to
grow at a modest rate. Given this limited capacity to export
textiles and apparel, it will be very difficult for these
exports from sub-Saharan Africa, during 1999 and the succeeding
9 years, to exceed 3 percent annually of total imports of
textile and apparel to the United States. If these exports from
sub-Saharan Africa remain around 3 percent of total imports,
they will not represent a threat to United States workers,
consumers, or manufacturers.
(b) Sense of the Congress.--It is the sense of the Congress that--
(1) it would be to the mutual benefit of the countries in
sub-Saharan Africa and the United States to ensure that the
commitments of the World Trade Organization and associated
agreements are faithfully implemented in each of the member
countries, so as to lay the groundwork for sustained growth in
textile and apparel exports and trade under agreed rules and
disciplines;
(2) reform of trade policies in sub-Saharan Africa with the
objective of removing structural impediments to trade,
consistent with obligations under the World Trade Organization,
can assist the countries of the region in achieving greater and
greater diversification of textile and apparel export
commodities and products and export markets; and
(3) the President should support textile and apparel trade
reform in sub-Saharan Africa by, among other measures,
providing technical assistance, sharing of information to
expand basic knowledge of how to trade with the United States,
and encouraging business-to-business contacts with the region.
(c) Treatment of Quotas.--
(1) Kenya and mauritius.--Pursuant to the Agreement on
Textiles and Clothing, the United States shall eliminate the
existing quotas on textile and apparel exports to the United
States--
(A) from Kenya within 30 days after that country
adopts an efficient visa system to guard against
unlawful transshipment of textile and apparel goods and
the use of counterfeit documents; and
(B) from Mauritius within 30 days after that country
adopts such a visa system.
The Customs Service shall provide the necessary technical
assistance to Kenya and Mauritius in the development and
implementation of those visa systems.
(2) Other sub-saharan countries.--The President shall
continue the existing no quota policy for countries in sub-
Saharan Africa. The President shall submit to the Congress, not
later than March 31 of each year, a report on the growth in
textiles and apparel exports to the United States from
countries in sub-Saharan Africa in order to protect United
States consumers, workers, and textile manufacturers from
economic injury on account of the no quota policy.
(d) Customs Procedures and Enforcement.--
(1) Actions by countries against transshipment and
circumvention.--The President should ensure that any country in
sub-Saharan Africa that intends to export textile and apparel
goods to the United States--
(A) has in place a functioning and effective visa
system and domestic laws and enforcement procedures to
guard against unlawful transshipment of textile and
apparel goods and the use of counterfeit documents; and
(B) will cooperate fully with the United States to
address and take action necessary to prevent
circumvention, as provided in Article 5 of the
Agreement on Textiles and Clothing.
(2) Penalties against exporters.--If the President
determines, based on sufficient evidence, that an exporter has
willfully falsified information regarding the country of
origin, manufacture, processing, or assembly of a textile or
apparel article for which duty-free treatment under section
503(a)(1)(C) of the Trade Act of 1974 is claimed, then the
President shall deny to such exporter, and any successors of
such exporter, for a period of 2 years, duty-free treatment
under such section for textile and apparel articles.
(3) Applicability of united states laws and procedures.--All
provisions of the laws, regulations, and procedures of the
United States relating to the denial of entry of articles or
penalties against individuals or entities for engaging in
illegal transshipment, fraud, or other violations of the
customs laws shall apply to imports from Sub-Saharan countries.
(4) Monitoring and reports to congress.--The Customs Service
shall monitor and the Commissioner of Customs shall submit to
the Congress, not later than March 31 of each year, a report on
the effectiveness of the visa systems described in subsection
(c)(1) and paragraph (1) of this subsection and on measures
taken by countries in Sub-Saharan Africa which export textiles
or apparel to the United States to prevent circumvention as
described in Article 5 of the Agreement on Textiles and
Clothing.
(e) Definition.--For purposes of this section, the term ``Agreement
on Textiles and Clothing'' means the Agreement on Textiles and Clothing
referred to in section 101(d)(4) of the Uruguay Round Agreements Act
(19 U.S.C. 3511(d)(4)).
SEC. 8. GENERALIZED SYSTEM OF PREFERENCES.
(a) Preferential Tariff Treatment for Certain Articles.--Section
503(a)(1) of the Trade Act of 1974 (19 U.S.C. 2463(a)(1)) is amended--
(1) by redesignating subparagraph (C) as subparagraph (D);
and
(2) by inserting after subparagraph (B) the following:
``(C) Eligible countries in sub-saharan africa.--The
President may provide duty-free treatment for any
article set forth in paragraph (1) of subsection (b)
that is the growth, product, or manufacture of an
eligible country in sub-Saharan Africa that is a
beneficiary developing country, if, after receiving the
advice of the International Trade Commission in
accordance with subsection (e), the President
determines that such article is not import-sensitive in
the context of imports from eligible countries in sub-
Saharan Africa. This subparagraph shall not affect the
designation of eligible articles under subparagraph
(B).''.
(b) Rules of Origin.--Section 503(a)(2) of the Trade Act of 1974 (19
U.S.C. 2463(a)(2)) is amended by adding at the end the following:
``(C) Eligible countries in sub-saharan africa.--For
purposes of determining the percentage referred to in
subparagraph (A) in the case of an article of an
eligible country in sub-Saharan Africa that is a
beneficiary developing country--
``(i) if the cost or value of materials
produced in the customs territory of the United
States is included with respect to that
article, an amount not to exceed 15 percent of
the appraised value of the article at the time
it is entered that is attributed to such United
States cost or value may be applied toward
determining the percentage referred to in
subparagraph (A); and
``(ii) the cost or value of the materials
included with respect to that article that are
produced in any beneficiary developing country
that is an eligible country in sub-Saharan
Africa shall be applied in determining such
percentage.''.
(c) Waiver of Competitive Need Limitation.--Section 503(c)(2)(D) of
the Trade Act of 1974 (19 U.S.C. 2463(c)(2)(D)) is amended to read as
follows:
``(D) Least-developed beneficiary developing
countries and eligible countries in sub-saharan
africa.--Subparagraph (A) shall not apply to any least-
developed beneficiary developing country or any
eligible country in sub-Saharan Africa.''.
(d) Extension of Program.--Section 505 of the Trade Act of 1974 (19
U.S.C. 2465) is amended to read as follows:
``SEC. 505. DATE OF TERMINATION.
``(a) Countries in Sub-Saharan Africa.--No duty-free treatment
provided under this title shall remain in effect after June 30, 2009,
with respect to beneficiary developing countries that are eligible
countries in sub-Saharan Africa.
``(b) Other Countries.--No duty-free treatment provided under this
title shall remain in effect after June 30, 1999, with respect to
beneficiary developing countries other than those provided for in
subsection (a).''.
(e) Definition.--Section 507 of the Trade Act of 1974 (19 U.S.C.
2467) is amended by adding at the end the following:
``(6) Eligible country in sub-saharan africa.--The terms
`eligible country in sub-Saharan Africa' and `eligible
countries in sub-Saharan Africa' mean a country or countries
that the President has determined to be eligible under section
4 of the African Growth and Opportunity Act.''.
(f) Effective Date.--The amendments made by this section take effect
on July 1, 1999.
SEC. 9. INTERNATIONAL FINANCIAL INSTITUTIONS AND DEBT REDUCTION.
(a) Better Mechanisms To Further Goals for Sub-Saharan Africa.--It is
the sense of the Congress that the Secretary of the Treasury should
instruct the United States Executive Directors of the International
Bank for Reconstruction and Development, the International Monetary
Fund, and the African Development Bank to use the voice and votes of
the Executive Directors to encourage vigorously their respective
institutions to develop enhanced mechanisms which further the following
goals in eligible countries in sub-Saharan Africa:
(1) Strengthening and expanding the private sector,
especially among women-owned businesses.
(2) Reducing tariffs, nontariff barriers, and other trade
obstacles, and increasing economic integration.
(3) Supporting countries committed to accountable government,
economic reform, the eradication of poverty, and the building
of civil societies.
(4) Supporting deep debt reduction at the earliest possible
date with the greatest amount of relief for eligible poorest
countries under the ``Heavily Indebted Poor Countries'' (HIPC)
debt initiative.
(b) Sense of Congress.--It is the sense of the Congress that relief
provided to countries in sub-Saharan Africa which qualify for the
Heavily Indebted Poor Countries debt initiative should primarily be
made through grants rather than through extended-term debt, and that
interim relief or interim financing should be provided for eligible
countries that establish a strong record of macroeconomic reform.
SEC. 10. EXECUTIVE BRANCH INITIATIVES.
(a) Statement of Congress.--The Congress recognizes that the stated
policy of the executive branch in 1997, the ``Partnership for Growth
and Opportunity in Africa'' initiative, is a step toward the
establishment of a comprehensive trade and development policy for sub-
Saharan Africa. It is the sense of the Congress that this Partnership
is a companion to the policy goals set forth in this Act.
(b) Technical Assistance To Promote Economic Reforms and
Development.--In addition to continuing bilateral and multilateral
economic and development assistance, the President shall target
technical assistance toward--
(1) developing relationships between United States firms and
firms in sub-Saharan Africa through a variety of business
associations and networks;
(2) providing assistance to the governments of sub-Saharan
African countries to--
(A) liberalize trade and promote exports;
(B) bring their legal regimes into compliance with
the standards of the World Trade Organization in
conjunction with membership in that Organization;
(C) make financial and fiscal reforms; and
(D) promote greater agribusiness linkages;
(3) addressing such critical agricultural policy issues as
market liberalization, agricultural export development, and
agribusiness investment in processing and transporting
agricultural commodities;
(4) increasing the number of reverse trade missions to
growth-oriented countries in sub-Saharan Africa;
(5) increasing trade in services; and
(6) encouraging greater sub-Saharan participation in future
negotiations in the World Trade Organization on services and
making further commitments in their schedules to the General
Agreement on Trade in Services in order to encourage the
removal of tariff and nontariff barriers.
SEC. 11. SUB-SAHARAN AFRICA INFRASTRUCTURE FUND.
(a) Initiation of Funds.--It is the sense of the Congress that the
Overseas Private Investment Corporation should exercise the authorities
it has to initiate an equity fund or equity funds in support of
projects in the countries in sub-Saharan Africa, in addition to the
existing equity fund for sub-Saharan Africa created by the Corporation.
(b) Structure and Types of Funds.--
(1) Structure.--Each fund initiated under subsection (a)
should be structured as a partnership managed by professional
private sector fund managers and monitored on a continuing
basis by the Corporation.
(2) Capitalization.--Each fund should be capitalized with a
combination of private equity capital, which is not guaranteed
by the Corporation, and debt for which the Corporation provides
guaranties.
(3) Infrastructure fund.--One or more of the funds, with
combined assets of up to $500,000,000, should be used in
support of infrastructure projects in countries of sub-Saharan
Africa.
(4) Emphasis.--The Corporation shall ensure that the funds
are used to provide support in particular to women
entrepreneurs and to innovative investments that expand
opportunities for women and maximize employment opportunities
for poor individuals.
SEC. 12. OVERSEAS PRIVATE INVESTMENT CORPORATION AND EXPORT-IMPORT BANK
INITIATIVES.
(a) Overseas Private Investment Corporation.--
(1) Advisory committee.--Section 233 of the Foreign
Assistance Act of 1961 is amended by adding at the end the
following:
``(e) Advisory Committee.--The Board shall take prompt measures to
increase the loan, guarantee, and insurance programs, and financial
commitments, of the Corporation in sub-Saharan Africa, including
through the use of an advisory committee to assist the Board in
developing and implementing policies, programs, and financial
instruments with respect to sub-Saharan Africa. In addition, the
advisory committee shall make recommendations to the Board on how the
Corporation can facilitate greater support by the United States for
trade and investment with and in sub-Saharan Africa. The advisory
committee shall terminate 4 years after the date of the enactment of
this subsection.''.
(2) Reports to the congress.--Within 6 months after the date
of the enactment of this Act, and annually for each of the 4
years thereafter, the Board of Directors of the Overseas
Private Investment Corporation shall submit to the Congress a
report on the steps that the Board has taken to implement
section 233(e) of the Foreign Assistance Act of 1961 (as added
by paragraph (1)) and any recommendations of the advisory board
established pursuant to such section.
(b) Export-Import Bank.--
(1) Advisory committee for sub-saharan africa.--Section 2(b)
of the Export-Import Bank Act of 1945 (12 U.S.C. 635(b)) is
amended by inserting after paragraph (12) the following:
``(13)(A) The Board of Directors of the Bank shall take prompt
measures, consistent with the credit standards otherwise required by
law, to promote the expansion of the Bank's financial commitments in
sub-Saharan Africa under the loan, guarantee, and insurance programs of
the Bank.
``(B)(i) The Board of Directors shall establish and use an advisory
committee to advise the Board of Directors on the development and
implementation of policies and programs designed to support the
expansion described in subparagraph (A).
``(ii) The advisory committee shall make recommendations to the Board
of Directors on how the Bank can facilitate greater support by United
States commercial banks for trade with sub-Saharan Africa.
``(iii) The advisory committee shall terminate 4 years after the date
of the enactment of this subparagraph.''.
(2) Reports to the congress.--Within 6 months after the date
of the enactment of this Act, and annually for each of the 4
years thereafter, the Board of Directors of the Export-Import
Bank of the United States shall submit to the Congress a report
on the steps that the Board has taken to implement section
2(b)(13)(B) of the Export-Import Bank Act of 1945 (as added by
paragraph (1)) and any recommendations of the advisory
committee established pursuant to such section.
SEC. 13. ASSISTANT UNITED STATES TRADE REPRESENTATIVE FOR SUB-SAHARAN
AFRICA.
(a) Sense of Congress.--It is the sense of the Congress that the
position of Assistant United States Trade Representative for African
Affairs is integral to the United States commitment to increasing
United States--sub-Saharan African trade and investment.
(b) Maintenance of Position.--The President shall maintain a position
of Assistant United States Trade Representative for African Affairs
within the Office of the United States Trade Representative to direct
and coordinate interagency activities on United States-Africa trade
policy and investment matters and serve as--
(1) a primary point of contact in the executive branch for
those persons engaged in trade between the United States and
sub-Saharan Africa; and
(2) the chief advisor to the United States Trade
Representative on issues of trade with Africa.
(c) Funding and Staff.--The President shall ensure that the Assistant
United States Trade Representative for African Affairs has adequate
funding and staff to carry out the duties described in subsection (b),
subject to the availability of appropriations.
SEC. 14. EXPANSION OF THE UNITED STATES AND FOREIGN COMMERCIAL SERVICE
IN SUB-SAHARAN AFRICA.
(a) Findings.--The Congress makes the following findings:
(1) The United States and Foreign Commercial Service
(hereafter in this section referred to as the ``Commercial
Service'') plays an important role in helping United States
businesses identify export opportunities and develop reliable
sources of information on commercial prospects in foreign
countries.
(2) During the 1980s, the presence of the Commercial Service
in sub-Saharan Africa consisted of 14 professionals providing
services in eight countries. By early 1997, that presence had
been reduced by half to seven, in only four countries.
(3) Since 1997, the Department of Commerce has slowly begun
to increase the presence of the Commercial Service in sub-
Saharan Africa, adding five full-time officers to established
posts.
(4) Although the Commercial Service Officers in these
countries have regional responsibilities, this kind of coverage
does not adequately service the needs of United States
businesses attempting to do business in sub-Saharan Africa.
(5) The Congress has, on several occasions, encouraged the
Commercial Service to focus its resources and efforts in
countries or regions in Europe or Asia to promote greater
United States export activity in those markets.
(6) Because market information is not widely available in
many sub-Saharan African countries, the presence of additional
Commercial Service Officers and resources can play a significant
role in assisting United States businesses in markets in those
countries.
(b) Appointments.--Subject to the availability of appropriations, by
not later than December 31, 2000, the Secretary of Commerce, acting
through the Assistant Secretary of Commerce and Director General of the
United States and Foreign Commercial Service, shall take steps to
ensure that--
(1) at least 20 full-time Commercial Service employees are
stationed in sub-Saharan Africa; and
(2) full-time Commercial Service employees are stationed in
not less than ten different sub-Saharan African countries.
(c) Commercial Service Initiative for Sub-Saharan Africa.--In order
to encourage the export of United States goods and services to sub-
Saharan African countries, the Commercial Service shall make a special
effort to--
(1) identify United States goods and services which are not
being exported to sub-Saharan African countries but which are
being exported to those countries by competitor nations;
(2) identify, where appropriate, trade barriers and
noncompetitive actions, including violations of intellectual
property rights, that are preventing or hindering sales of
United States goods and services to, or the operation of United
States companies in, sub-Saharan Africa;
(3) present, periodically, a list of the goods and services
identified under paragraph (1), and any trade barriers or
noncompetitive actions identified under paragraph (2), to
appropriate authorities in sub-Saharan African countries with a
view to securing increased market access for United States
exporters of goods and services;
(4) facilitate the entrance by United States businesses into
the markets identified under paragraphs (1) and (2); and
(5) monitor and evaluate the results of efforts to increase
the sales of goods and services in such markets.
(d) Reports to Congress.--Not later than one year after the date of
the enactment of this Act, and each year thereafter for five years, the
Secretary of Commerce, in consultation with the Secretary of State,
shall report to the Congress on actions taken to carry out subsections
(b) and (c). Each report shall specify--
(1) in what countries full-time Commercial Service Officers
are stationed, and the number of such officers placed in each
such country;
(2) the effectiveness of the presence of the additional
Commercial Service Officers in increasing United States exports
to sub-Saharan African countries; and
(3) the specific actions taken by Commercial Service
Officers, both in sub-Saharan African countries and in the
United States, to carry out subsection (c), including
identifying a list of targeted export sectors and countries.
SEC. 15. REPORTING REQUIREMENT.
The President shall submit to the Congress, not later than 1 year
after the date of the enactment of this Act, and not later than the end
of each of the next 6 1-year periods thereafter, a comprehensive report
on the trade and investment policy of the United States for sub-Saharan
Africa, and on the implementation of this Act. The last report required
by section 134(b) of the Uruguay Round Agreements Act (19 U.S.C.
3554(b)) shall be consolidated and submitted with the first report
required by this section.
SEC. 16. DONATION OF AIR TRAFFIC CONTROL EQUIPMENT TO ELIGIBLE SUB-
SAHARAN AFRICAN COUNTRIES.
It is the sense of the Congress that, to the extent appropriate, the
United States Government should make every effort to donate to
governments of sub-Saharan African countries (determined to be eligible
under section 4 of this Act) air traffic control equipment that is no
longer in use, including appropriate related reimbursable technical
assistance.
SEC. 17. SUB-SAHARAN AFRICA DEFINED.
For purposes of this Act, the terms ``sub-Saharan Africa'', ``sub-
Saharan African country'', ``country in sub-Saharan Africa'', and
``countries in sub-Saharan Africa'' refer to the following or any
successor political entities:
Republic of Angola (Angola)
Republic of Botswana (Botswana)
Republic of Burundi (Burundi)
Republic of Cape Verde (Cape Verde)
Republic of Chad (Chad)
Democratic Republic of Congo
Republic of the Congo (Congo)
Republic of Djibouti (Djibouti)
State of Eritrea (Eritrea)
Gabonese Republic (Gabon)
Republic of Ghana (Ghana)
Republic of Guinea-Bissau (Guinea-Bissau)
Kingdom of Lesotho (Lesotho)
Republic of Madagascar (Madagascar)
Republic of Mali (Mali)
Republic of Mauritius (Mauritius)
Republic of Namibia (Namibia)
Federal Republic of Nigeria (Nigeria)
Democratic Republic of Sao Tome and Principe (Sao Tome and
Principe)
Republic of Sierra Leone (Sierra Leone)
Somalia
Kingdom of Swaziland (Swaziland)
Republic of Togo (Togo)
Republic of Zimbabwe (Zimbabwe)
Republic of Benin (Benin)
Burkina Faso (Burkina)
Republic of Cameroon (Cameroon)
Central African Republic
Federal Islamic Republic of the Comoros (Comoros)
Republic of Cote d'Ivoire (Cote d'Ivoire)
Republic of Equatorial Guinea (Equatorial Guinea)
Ethiopia
Republic of the Gambia (Gambia)
Republic of Guinea (Guinea)
Republic of Kenya (Kenya)
Republic of Liberia (Liberia)
Republic of Malawi (Malawi)
Islamic Republic of Mauritania (Mauritania)
Republic of Mozambique (Mozambique)
Republic of Niger (Niger)
Republic of Rwanda (Rwanda)
Republic of Senegal (Senegal)
Republic of Seychelles (Seychelles)
Republic of South Africa (South Africa)
Republic of Sudan (Sudan)
United Republic of Tanzania (Tanzania)
Republic of Uganda (Uganda)
Republic of Zambia (Zambia)
SEC. 18. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD OF
ACCOUNTING.
(a) In General.--Section 448(d)(5) of the Internal Revenue Code of
1986 (relating to special rule for services) is amended--
(1) by inserting ``in fields described in paragraph (2)(A)''
after ``services by such person'', and
(2) by inserting ``certain personal'' before ``services'' in
the heading.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment
of this Act.
(2) Change in method of accounting.--In the case of any
taxpayer required by the amendments made by this section to
change its method of accounting for its first taxable year
ending after the date of the enactment of this Act--
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the
consent of the Secretary of the Treasury, and
(C) the net amount of the adjustments required to be
taken into account by the taxpayer under section 481 of
the Internal Revenue Code of 1986 shall be taken into
account over a period (not greater than 4 taxable
years) beginning with such first taxable year.
SEC. 19. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOWMENT
CONTRACTS.
(a) In General.--Subsection (f) of section 170 of the Internal
Revenue Code of 1986 (relating to disallowance of deduction in certain
cases and special rules) is amended by adding at the end the following
new paragraph:
``(10) Split-dollar life insurance, annuity, and endowment
contracts.--
``(A) In general.--Nothing in this section or in
section 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2),
or 2522 shall be construed to allow a deduction, and no
deduction shall be allowed, for any transfer to or for
the use of an organization described in subsection (c)
if in connection with such transfer--
``(i) the organization directly or indirectly
pays, or has previously paid, any premium on
any personal benefit contract with respect to
the transferor, or
``(ii) there is an understanding or
expectation that any person will directly or
indirectly pay any premium on any personal
benefit contract with respect to the
transferor.
``(B) Personal benefit contract.--For purposes of
subparagraph (A), the term `personal benefit contract'
means, with respect to the transferor, any life
insurance, annuity, or endowment contract if any direct
or indirect beneficiary under such contract is the
transferor, any member of the transferor's family, or
any other person (other than an organization described
in subsection (c)) designated by the transferor.
``(C) Application to charitable remainder trusts.--In
the case of a transfer to a trust referred to in
subparagraph (E), references in subparagraphs (A) and
(F) to an organization described in subsection (c)
shall be treated as a reference to such trust.
``(D) Exception for certain annuity contracts.--If,
in connection with a transfer to or for the use of an
organization described in subsection (c), such
organization incurs an obligation to pay a charitable
gift annuity (as defined in section 501(m)) and such
organization purchases any annuity contract to fund
such obligation, persons receiving payments under the
charitable gift annuity shall not be treated for
purposes of subparagraph (B) as indirect beneficiaries
under such contract if--
``(i) such organization possesses all of the
incidents of ownership under such contract,
``(ii) such organization is entitled to all
the payments under such contract, and
``(iii) the timing and amount of payments
under such contract are substantially the same
as the timing and amount of payments to each
such person under such obligation (as such
obligation is in effect at the time of such
transfer).
``(E) Exception for certain contracts held by
charitable remainder trusts.--A person shall not be
treated for purposes of subparagraph (B) as an indirect
beneficiary under any life insurance, annuity, or
endowment contract held by a charitable remainder
annuity trust or a charitable remainder unitrust (as
defined in section 664(d)) solely by reason of being
entitled to any payment referred to in paragraph (1)(A)
or (2)(A) of section 664(d) if--
``(i) such trust possesses all of the
incidents of ownership under such contract, and
``(ii) such trust is entitled to all the
payments under such contract.
``(F) Excise tax on premiums paid.--
``(i) In general.--There is hereby imposed on
any organization described in subsection (c) an
excise tax equal to the premiums paid by such
organization on any life insurance, annuity, or
endowment contract if the payment of premiums
on such contract is in connection with a
transfer for which a deduction is not allowable
under subparagraph (A), determined without
regard to when such transfer is made.
``(ii) Payments by other persons.--For
purposes of clause (i), payments made by any
other person pursuant to an understanding or
expectation referred to in subparagraph (A)
shall be treated as made by the organization.
``(iii) Reporting.--Any organization on which
tax is imposed by clause (i) with respect to
any premium shall file an annual return which
includes--
``(I) the amount of such premiums
paid during the year and the name and
TIN of each beneficiary under the
contract to which the premium relates,
and
``(II) such other information as the
Secretary may require.
The penalties applicable to returns required
under section 6033 shall apply to returns
required under this clause. Returns required
under this clause shall be furnished at such
time and in such manner as the Secretary shall
by forms or regulations require.
``(iv) Certain rules to apply.--The tax
imposed by this subparagraph shall be treated
as imposed by chapter 42 for purposes of this
title other than subchapter B of chapter 42.
``(G) Special rule where state requires specification
of charitable gift annuitant in contract.--In the case
of an obligation to pay a charitable gift annuity
referred to in subparagraph (D) which is entered into
under the laws of a State which requires, in order for
the charitable gift annuity to be exempt from insurance
regulation by such State, that each beneficiary under
the charitable gift annuity be named as a beneficiary
under an annuity contract issued by an insurance
company authorized to transact business in such State,
the requirements of clauses (i) and (ii) of
subparagraph (D) shall be treated as met if--
``(i) such State law requirement was in
effect on February 8, 1999,
``(ii) each such beneficiary under the
charitable gift annuity is a bona fide resident
of such State at the time the obligation to pay
a charitable gift annuity is entered into, and
``(iii) the only persons entitled to payments
under such contract are persons entitled to
payments as beneficiaries under such obligation
on the date such obligation is entered into.
``(H) Regulations.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this paragraph, including
regulations to prevent the avoidance of such
purposes.''
(b) Effective Date.--
(1) In general.--Except as otherwise provided in this
section, the amendment made by this section shall apply to
transfers made after February 8, 1999.
(2) Excise tax.--Except as provided in paragraph (3) of this
subsection, section 170(f)(10)(F) of the Internal Revenue Code
of 1986 (as added by this section) shall apply to premiums paid
after the date of the enactment of this Act.
(3) Reporting.--Clause (iii) of such section 170(f)(10)(F)
shall apply to premiums paid after February 8, 1999 (determined
as if the tax imposed by such section applies to premiums paid
after such date).
H.R. 434, AFRICAN GROWTH AND OPPORTUNITY ACT
I. INTRODUCTION
A. Purpose and Summary
H.R. 434, as reported by Committee on Ways and Means, would
authorize a new trade and investment policy toward countries in
sub-Saharan Africa. The bill states that the United States
seeks to facilitate market-led economic growth in the countries
in sub-Saharan Africa. To this end, H.R. 434 contains a
statement of policy that Congress supports economic self-
reliance for sub-Saharan African countries, particularly those
committed to economic and political reform; market incentives
and private sector growth; the eradication of poverty; and the
importance of women to economic growth and development.
The bill would require the President to identify individual
countries in sub-Saharan Africa that have established, or are
making continual progress toward establishing, a market-based
economy consistent with the criteria outlined. After consulting
with the governments of eligible countries, H.R. 434 would
require the President to establish a United States-sub-Saharan
Africa Trade and Economic Cooperation Forum, not later than 12
months after the date of enactment, for the purpose of
convening annual high-level meetings between U.S. government
officials and officials of participating sub-Saharan African
countries.
H.R. 434 also declares that a United States-sub-Saharan
Africa Free Trade Area should be established, or free trade
agreements entered into, to serve as the catalyst for
increasing trade between the United States and sub-Saharan
Africa and for increasing private sector development in the
region. On this basis, the bill would require the President to
develop a plan for entering into one or more trade agreements
with eligible sub-Saharan African countries, and report to
Congress within 12 months of enactment.
The bill would also require the United States to eliminate
the existing quotas on textile and apparel exports to the
United States from Kenya and Mauritius within 30 days of those
countries adopting visa systems to guard against unlawful
transshipments of textile and apparel goods and the use of
counterfeit documents. In addition, the provision would require
the President to continue the existing policy of not imposing
quotas on textile and apparel exports to the United States from
other sub-Saharan African countries.
The bill would direct the President to ensure that any
country in Africa that intends to export textile and apparel
goods to the United States: (1) has in place an effective visa
system and domestic laws and enforcement procedures to guard
against unlawful transshipment and the use of counterfeit
documents; and (2) cooperates fully with the U.S. to address
and take action necessary to prevent transshipment or other
types of circumvention. In addition, the bill would require the
President to deny all trade benefits under the bill for two
years to any exporter, or the successor of any exporter,
determined to have engaged in illegal transshipment.
The bill would extend duty-free treatment under the
Generalized System of Preferences (GSP) for beneficiary
countries in sub-Saharan Africa that are eligible to
participate in the Act until June 30, 2009. In addition,
effective July 1, 1999, the bill would amend the GSP statute to
extend a series of enhanced benefits to sub-Saharan African
beneficiary countries participating in the bill, subject to
whether those countries meet the statutory criteria and rules
of origin under the GSP program. Specifically, these amendments
would authorize the President to grant duty-free treatment to
products from eligible sub-Saharan African countries that are
currently excluded from the GSP program if he makes a
determination after receiving advice from the International
Trade Commission (ITC) that imports of those products are not
import sensitive in the context of imports from sub-Saharan
Africa. The bill would also provide that the competitive need
limits in the GSP program do not apply to imports from sub-
Saharan African countries and would allow up to 15 percent U.S.
content of an article to count toward the 35 percent local
content requirement of the GSP program. Moreover, the bill
would allow the 35 percent minimum value content requirement to
be cumulated in any eligible sub-Saharan African country.
H.R. 434 would require the President to maintain a position
of Assistant United States Trade Representative (AUSTR) for
African Affairs within the Office of the United States Trade
Representative (USTR) to direct and coordinate interagency
activities on United States-Africa trade policy and investment
matters and serve as a primary point of contact in the
executive branch for those persons engaged in trade between the
United States and sub-Saharan Africa. The AUSTR for African
Affairs also serves as the chief advisor to the USTR on trade
issues with Africa.
The bill would require the President to submit to Congress
a report on the trade and investment policy of the United
States for sub-Saharan Africa and on the implementation of this
Act, not later than one year after the date of enactment, and
not later than the end of each of the next six one-year periods
thereafter.
Finally, the bill includes two revenue offsets. The first
denies a charitablecontributions tax deduction for a transfer
to a charity which is subject to an understanding that the charity will
pay premiums on life insurance benefiting the transferor (or some other
designated person) and imposes an excise tax and reporting requirement
with respect to any such premium payments. The second limits the use of
the non-accrual experience tax accounting method to amounts received
for qualified personal services (services in the fields of health, law,
engineering, architecture, actuarial science, performing arts or
consulting).
B. Background and Need for Legislation
Sub-Saharan Africa consists of 48 diverse countries, many
of which have undergone significant political and economic
change in recent years. Since 1990, more than 25 African
nations have held democratic elections. At the same time, more
than 30 countries have instituted programs to replace their
centralized economies with free markets under the guidance of
bilateral and multilateral donors such as the World Bank and
the International Monetary Fund.
Despite the fact that 33 countries in sub-Saharan Africa
are members of the World Trade Organization (WTO), U.S. trade
with sub-Saharan African countries relative to overall U.S.
trade levels remains low. In 1998, U.S. merchandise exports to
the region were valued at $6.7 billion, while U.S. merchandise
imports in return totaled $13.1 billion. Although virtually all
countries in sub-Saharan Africa qualify for duty-free entry on
a wide range of products under the Generalized System of
Preferences (GSP) program, GSP imports from the region equaled
$1.9 billion in 1998, a figure representing about 12 percent of
all U.S. GSP imports for the year. Imports of goods from sub-
Saharan Africa under GSP grew by 78 percent in 1998, however,
most of this increase was due to the inclusion of petroleum
imports under the GSP program. Most duty-free petroleum imports
from the region last year came from Angola.
In 1994, Congress passed the Uruguay Round Agreements Act
(P.L. 103-465), which required the President to submit five
annual reports to Congress on the Administration's
comprehensive trade and development policy for countries in
Africa. On January 13, 1999, the President submitted his fourth
report pursuant to this provision of law. The report describes
the progress made in the implementation of the five components
of the Administration's Partnership for Economic Growth and
Opportunity in Africa: enhanced trade benefits to increase
U.S.-African trade and investment flows; technical assistance;
enhanced dialogue with African countries; financing and debt
relief; and continued U.S. leadership in multilateral fora to
support private sector development, trade development, and
institutional capacity building in African countries.
On January 14, 1997, the Committee on Ways and Means
requested the International Trade Commission (ITC) to conduct a
study of the effect on the U.S. economy of providing quota-free
and duty-free access to textiles and apparel from sub-Saharan
Africa. In the report sent to Congress on September 2, 1997,
the ITC found that the effect on the U.S. industry and workers
would be negligible. The ITC noted that sub-Saharan Africa
represents a small portion of overall textiles and apparel
imports, accounting for less than one percent, or $383 million,
of total U.S. imports in this sector, which were $46 billion in
1996.
The ITC report states that removal of all duties and quotas
on imports from sub-Saharan Africa would result in a 26-46
percent increase in these imports from the region (between $100
million and $175 million), and that the increase would
primarily displace imports from other countries. According to
these estimates, imports from sub-Saharan Africa are likely to
remain below 3 percent of total U.S. imports of textile and
apparel products for at least ten years after the provisions in
H.R. 434 take effect. In fact, the ITC indicated that this
estimate most likely overstates the potential increase in sub-
Saharan African imports because of structural problems in many
of these economies.
With certain exceptions, the ITC found that the textile and
apparel industry in sub-Saharan Africa is underdeveloped
because of lack of capital, management expertise, experience
exporting to developed countries, and poor infrastructure and
transportation problems. The exceptions to this finding are
Mauritius, which has a well developed, exporting industry
(including investment in nearby Madagascar), South Africa
(including investments in nearby Lesotho and Swaziland),
Zimbabwe, and Kenya. However, the report notes that the
industries in these countries have traditionally focused their
exports to Europe because of longstanding colonial ties.
Currently, Mauritius and Kenya are the only two sub-Saharan
countries under textile and apparel quota arrangements in the
U.S. market. Kenya has two quotas and did not fill either in
1998. Mauritius filled two quota categories of cotton knit
shirts and pants in 1998.
C. Legislative History
Committee bill
On February 2, 1999, Chairman Crane, for himself and for
Reps. Rangel, Jefferson, Houghton, Levin, Dunn, Johnson,
McNulty, Neal, Portman, Ramstad, and Thomas, et alia introduced
H.R. 434, the ``African Growth and Opportunity Act'' to
authorize a new trade and investment policy toward the
countries of sub-Saharan Africa.
On February 3, 1999, the Subcommittee on Trade of the
Committee on Ways and Means favorably reported H.R. 434 to the
full Committee by a recorded vote of 14-0.
On June 10, 1999, the Committee on Ways and Means favorably
reported H.R. 434 to the House of Representatives, as amended,
by a voice vote.
Legislative hearing
On February 3, 1999, the Subcommittee on Trade held a
hearing on U.S. trade relations with sub-Saharan Africa. The
Subcommittee received testimony from both invited and public
witnesses, many of whom stressed the importance of trade and
investment relations with sub-Saharan Africa to the economic
development and future self-reliance of countries in the
region. To this end, witnesses from the U.S. private sector and
representatives of sub-Saharan African governments expressed
support for H.R. 434. Secretary of Commerce William Daley
expressed the Administration's support for the legislation. Two
witnesses representing the American Textile Manufacturers
Institute and the Union of Needletrades, Industrial and Textile
Employees expressed their opposition to the bill.
II. EXPLANATION OF THE BILL
A. Section 1: Short Title
Present law
No provision.
Explanation of provision
Section 1 states that the Act may be cited as the ``African
Growth and Opportunity Act.''
Reason for change
The section names the legislation for identification
purposes.
Effective date
The provision is effective upon enactment.
B. Section 2: Findings
Present law
No provision.
Explanation of provision
Section 2 contains the findings of the Congress that it is
in the mutual economic interest of the United States and sub-
Saharan Africa to promote stable and sustainable economic
growth and development in sub-Saharan Africa and that sustained
economic growth in sub-Saharan Africa depends in large measure
upon the development of a receptive environment for trade and
investment. To that end, the United States seeks to facilitate
market-led economic growth in, and thereby the social and
economic development of, the countries of sub-Saharan Africa.
In particular, the United States seeks to assist sub-Saharan
African countries, and the private sector in those countries,
to achieve economic self-reliance by:
(1) strengthening and expanding the private sector in
sub-Saharan Africa, especially women-owned businesses;
(2) encouraging increased trade and investment
between the U.S. and sub-Saharan Africa;
(3) reducing tariff and non-tariff barriers and other
trade obstacles;
(4) expanding U.S. assistance to sub-Saharan Africa's
regional integration efforts;
(5) negotiating free trade areas;
(6) establishing a United States-sub-Saharan Africa
Trade and Investment Partnership;
(7) focusing on countries committed to accountable
government, economic reform, and the eradication of
poverty;
(8) establishing a United States-sub-Saharan Africa
Economic Cooperation Forum; and
(9) continuing to support development assistance for
those countries in sub-Saharan Africa attempting to
build civil societies.
Reason for change
In the section, Congress finds that the United States and
countries in sub-Saharan Africa have a shared interest in the
economic development of sub-Saharan Africa. On this basis, the
provision notes ways in which the United States seeks to assist
the region in achieving economic self-reliance.
Effective date
The provision is effective upon enactment.
C. Section 3: Statement of Policy
Present law
No provision.
Explanation of provision
In Section 3, the Congress expresses its support for the
economic self-reliance of sub-Saharan African countries,
particularly those committed to economic and political reform,
market incentives and private sector growth; the eradication of
poverty; and the importance of women to economic growth and
development.
Reason for change
Congress expresses its support for the economic self-
reliance of countries in sub-Saharan Africa, particularly those
committed to implementing free market principles, political
reform, and economic opportunity for all citizens.
Effective date
The provision is effective upon enactment.
D. Section 4: Eligibility Requirements
Present law
No provision.
Explanation of provision
Section 4(a) states that a sub-Saharan African country
shall be eligible to participate in this Act only if the
President determines that the country does not engage in gross
violations of internationally recognized human rights and has
established, or is making continual progress toward
establishing, a market economy, such as the establishment and
enforcement of appropriate policies relating to:
(1) promoting free movement of goods and services
between the U.S. and sub-Saharan Africa and among
countries in the region;
(2) promoting the expansion of the production base
and the transformation of commodities and
nontraditional products for export through partnerships
between African and foreign investors;
(3) trade issues, such as the protection of
intellectual property rights, improvements in
standards, testing, labeling and certification, and
government procurement;
(4) the protection of property rights, such as
protection against expropriation and a functioning and
fair judicial system;
(5) appropriate fiscal systems, such as reducing high
import and corporate taxes, controlling government
consumption, participation in bilateral investment
treaties, and the harmonization of such treaties to
avoid double taxation;
(6) foreign investment issues, such as the provision
of national treatment for foreign investors; removing
restrictions on investment; and other measures to
create an environment conducive to domestic and foreign
investment;
(7) supporting the growth of regional markets within
a free trade area framework;
(8) governance issues, such as eliminating government
corruption and minimizing government intervention in
the market;
(9) supporting the growth of the private sector, in
particular by promoting the emergence of a new
generation of African entrepreneurs;
(10) encouraging the private ownership of government-
controlled economic enterprises through divestiture
programs; and,
(11) observing the rule of law, including equal
protection under the law and the right to due process
and a fair trial.
In determining whether a sub-Saharan African country is
eligible, section 4(b) requires the President to take into
account the following factors:
(1) An expression by such country of its desire to be
an eligible country;
(2) The extent to which such country has made
substantial progress toward reducing tariff and non-
tariff levels, binding its tariffs in the World Trade
Organization (WTO) and assuming meaningful binding
obligations in other sectors of trade;
(3) Whether such country, if not already a member of
the WTO, is actively pursuing membership;
(4) Where applicable, the extent to which such
country is in material compliance with its obligation
to the International Monetary Fund and other
international financial institutions;
(5) The extent to which such country has a
recognizable commitment to reducing poverty, increasing
the availability of health care and educational opportunities,
the expansion of physical infrastructure, increased access to
market and credit facilities for small farmers and producers,
and improved economic opportunities for women as entrepreneurs
and employees and promoting and enabling the formation of
capital to support the establishment and operation of micro-
enterprises; and
(6) Whether or not such country engages in activities
that undermine U.S. national security or foreign policy
interests.
Section 4(c) requires the President to monitor and review
the progress of sub-Saharan African countries in order to
determine their current or potential eligibility under
subsection (a). Such determinations shall be based on
quantitative factors to the fullest extent possible and shall
be included in the annual report required by section 15. The
provision also states that a sub-Saharan African country that
has not made continual progress in meeting the requirements
with which it is not in compliance shall be ineligible to
participate in this Act.
Reason for change
Section 4 outlines the eligibility requirements for
countries in sub-Saharan Africa to participate in the Act. In
particular, the provision requires the President to determine
whether individual countries in sub-Saharan Africa have
established, or are making continual progress toward
establishing, a market-based economy consistent with the
criteria outlined. The Committee urges the President to make
determinations regarding country eligibility as soon as
practicable.
Effective date
The provision is effective upon enactment.
E. Section 5: United States-Sub-Saharan Africa Trade and Economic
Cooperation Forum
Present law
No provision.
Explanation of provision
In order to foster close economic ties between the United
States and sub-Saharan Africa, section 5(a) directs the
President to convene annual high-level meetings between
appropriate officials of the U.S. government and government
officials of the sub-Saharan African countries eligible to
participate in the Act. After consulting with the governments
concerned, section 5(b) directs the President to establish a
United States-sub-Saharan Africa Trade and Economic Cooperation
Forum not later than 12 months after the date of enactment.
In creating the Forum, the President shall, under section
5(c), direct the Secretary of Commerce, the Secretary of the
Treasury, the Secretary of State, and the United States Trade
Representative to host the first annual meeting with their
counterparts from the eligible governments, as well as the
Secretary General of the Organization of African Unity, and
government officials from other appropriate countries in
Africa, to discuss expanding trade and investment relations
between the United States and sub-Saharan Africa and the
implementation of this Act. In consultation with Congress, the
President shall encourage U.S. non-governmental organizations
(NGOs) to host annual meetings with NGOs from sub-Saharan
Africa, and representatives of the U.S. private sector to host
annual meetings with representatives of the private sector in
sub-Saharan Africa, in conjunction with the annual Forum
meetings. To the extent practicable, the President shall meet
with the heads of governments of eligible sub-Saharan African
countries not less than once every two years for the purposes
of discussing expanding trade and investment relations between
the United States and sub-Saharan Africa and the implementation
of this Act. The President's first meeting with other heads of
state from sub-Saharan Africa should take place not less than
12 months after the date of enactment.
In order to assist in carrying out the purposes of the
Forum, section 5(d) requires the United States Information
Agency to disseminate regularly, through multiple media,
economic information in support of the free market economic
reforms described in this Act.
Section 5(e) authorizes such sums as may be necessary to
carry out this section. Section 5(f) prohibits the use of funds
authorized under the section to create or support any
nongovernmental organization for the purpose of expanding or
facilitating trade between the United States and sub-Saharan
Africa.
Reason for change
In order to expand U.S. trade and investment relations with
sub-Saharan Africa and achieve the goals of the Act, the
Committee believes that it is important to foster a regular
dialogue between U.S. government officials and their
counterparts from eligible sub-Saharan African countries. To
this end, section 5 requires the President to direct
theSecretary of Commerce, the Secretary of the Treasury, the Secretary
of State, and the United States Trade Representative to host the first
annual meeting of a United States-sub-Saharan Africa Trade and Economic
Cooperation Forum after consulting with eligible sub-Saharan African
governments. The Committee also believes that it would help to promote
the goals of this Act if the President, to the extent practicable, met
with the heads of state of the governments eligible to participate in
the Act not less than once every two years.
Effective date
The provision is effective upon enactment.
F. Section 6: United States-Sub-Saharan Africa Free Trade Area
Present law
No provision.
Explanation of provision
In section 6(a), Congress declares that a United States-
sub-Saharan Africa Free Trade Area should be established, or
free trade agreements entered into, in order to serve as the
catalyst for increasing trade between the United States and
sub-Saharan Africa and increasing private sector development in
sub-Saharan Africa.
To this end, section 6(b) requires the President, taking
into account the provisions of the treaty establishing the
African Economic Community and the willingness of the
governments of sub-Saharan African countries to engage in
negotiations to enter into free trade agreements, to develop a
plan for the purpose of entering into one or more trade
agreements with sub-Saharan African countries eligible to
participate in the Act. The President's plan shall include the
following:
(1) the specific objectives of the United States with
respect to the establishment of the Free Trade Area and
a suggested timetable for achieving those objectives;
(2) the benefits to both the United States and sub-
Saharan Africa with respect to the Free Trade Area;
(3) a mutually agreed-upon timetable for establishing
the Free Trade Area;
(4) the implications for and the role of regional and
sub-regional organizations in sub-Saharan Africa with
respect to the Free Trade Area;
(5) subject matter anticipated to be covered by the
Free Trade Area and U.S. laws, programs, and policies,
as well as the laws of participating eligible African
countries and existing bilateral and multilateral and
economic cooperation and trade agreements, that may be
affected by the agreement or agreements; and
(6) procedures to ensure adequate consultation with
Congress and the private sector, consultation with
Congress regarding all matters related to
implementation and approval, and adequate consultation
with the relevant African governments and African
regional and subregional intergovernmental
organizations during the negotiations of the agreement
or agreements.
Section 6(c) requires the President, not later than 12
months after the date of enactment, to prepare and transmit to
Congress a report on the plan developed.
Reason for change
By eliminating the barriers that presently exist to
developing stronger, mutually beneficial trade and investment
relations between the United States and sub-Saharan Africa, the
Committee believes that the establishment of a Free Trade Area,
or the negotiation of one or more free trade agreements, would
serve as an important catalyst in the economic development of
sub-Saharan Africa. After taking into account the provisions of
the treaty establishing the African Economic Community and the
willingness of the governments of eligible countries in sub-
Saharan Africa, the President is required to develop a plan for
the purpose of entering into one or more trade agreements with
sub-Saharan African countries. In the development of the plan,
the Committee believes that the President should seek to
complete the negotiations within a similar time frame agreed to
in other multilateral fora, such as the Asia-Pacific Economic
Cooperation (APEC) forum, or sooner if practicable.
Effective date
The provision is effective upon enactment.
G. Section 7: Eliminating Trade Barriers and Encouraging Exports
Present law
Certain textile and apparel products from Kenya and
Mauritius are subject to import quotas under bilateral
agreements negotiated on a product-category basis under
authority of section 204 of the Agriculture Act of 1956 and in
accordance with the WTO Agreement on Textiles and Clothing.
Explanation of provision
Section 7(a) contains findings of Congress that:
(1) The lack of competitiveness of sub-Saharan Africa
in the global market make it a limited threat to market
disruption and no threat to U.S. jobs.
(2) Annual textile and apparel exports to the United
States from sub-Saharan Africa represent less than 1
percent of all textile and apparel exports to the
United States, which totaled $54,001,863,000 in 1997.
(3) Sub-Saharan Africa has limited textile
manufacturing capacity. During 1999 and the succeeding
4 years, this limited capacity to manufacture textiles
and apparel is projected to grow at a modest rate.
Given this limited capacity to export textiles and
apparel, it will be very difficult for these exports
from sub-Saharan Africa, during 1999 and the succeeding
9 years, to exceed 3 percent annually of total imports
of textile and apparel to the United States. If these
exports from sub-Saharan Africa remain around 3 percent
of total imports, they will not represent a threat to
U.S. workers, consumers, or manufacturers.
Section 7(b) expresses the sense of Congress that:
(1) It would be to the mutual benefit of the
countries in sub-Saharan Africa and the United States
to ensure that the commitments of the World Trade
Organization are faithfully implemented in each of the
member countries;
(2) Reform of trade policies in sub-Saharan Africa
with the objective of removing structural impediments
to trade can assist the countries of the region in
achieving greater diversification of textile and
apparel export commodities and products and export
markets; and
(3) The President should support textile and apparel
trade reform in sub-Saharan Africa by providing
technical assistance and encouraging business-to-
business contacts with the region.
Section 7(c)(1) provides that, pursuant to the WTO
Agreement on Textiles and Clothing, the United States shall
eliminate the existing quotas on textile and apparel exports to
the United States from Kenya and Mauritius within 30 days after
these countries adopt an efficient visa system to guard against
unlawful transshipment of textile and apparel goods and the use
of counterfeit documents. The provision requires the Customs
Service to provide technical assistance to Kenya and Mauritius
in the development and implementation of visa systems.
Section 7(c)(2) requires the President to: (1) continue the
existing no quota policy for other countries in sub-Saharan
Africa; and (2) submit a report to the Congress by March 31 of
each year concerning the growth in textiles and apparel exports
to the United States from countries in sub-Saharan Africa in
order to protect United States consumers, workers, and textile
manufacturers from economic injury due to the no quota policy.
Section 7(d)(1) states that the President should ensure
that any sub-Saharan African country that intends to export
textile and apparel goods to the United States: (1) has in
place an effective visa system to guard against unlawful
transshipment of textile and apparel goods and the use of
counterfeit documents; and (2) will cooperate fully with the
United States to address and take action necessary to prevent
circumvention, as provided in Article 5 of the WTO Agreement on
Textiles and Clothing (see below).
Section 7(d)(2) increases penalties on exporters who have
been found to have engaged in illegal transshipment. If the
President determines, based on sufficient evidence, that an
exporter has willfully falsified information regarding the
country of origin, manufacture, processing, or assembly of a
textile or apparel article for which duty-free treatment under
the Generalized System of Preferences program is claimed, then
the President shall deny to such an exporter duty-free
treatment under this section for textile and apparel articles
for a period of two years.
Section 7(d)(3) underscores the fact that all provisions of
the laws, regulations, and procedures of the United States
relating to the denial of entry of articles or penalties
against individuals or entities for engaging in illegal
transshipment, fraud, or other violations of the customs laws
shall apply to imports from sub-Saharan countries.
In order to facilitate close monitoring by the
Administration and expanded oversight by the Committee, Section
7(d)(4) requires that the Customs Service submit to the
Congress, by not later than March 31 of each year, a report on
the effectiveness of visa systems required of Kenya and
Mauritius and other countries that intend to export textiles
and apparel products to the United States, and on measures
taken by countries in sub-Saharan Africa to prevent
circumvention as described in Article 5 of the WTO Agreement on
Textiles and Clothing.
Pursuant to Article 5 of the WTO Agreement on Textiles and
Clothing, countries agree that circumvention by transshipment,
re-routing, false declaration concerning country or place of
origin, and falsification of official documents undermines the
effectiveness of trade restraints on textile and apparel
products. Therefore WTO countries have agreed to establish the
necessary legal provisions and/or administrative procedures to
address and take action, consistent with their domestic laws
andprocedures, against such circumvention.
Article 5 obligates countries to cooperate fully to
establish the relevant facts in places of import, export, and
transshipment. The Agreement establishes that such cooperation
will include: (1) an investigation of circumvention practices
which increase exports to the WTO Member maintaining quotas;
(2) exchange of documents, correspondence and other relevant
information to the extent available; and, (3) facilitation of
plant visits and contacts. Under the WTO, the U.S. maintains
full authority to immediately deny entry of any goods suspected
of being transshipped, and to appropriately adjust charges to
quota levels in order to reflect the true country or place of
origin, provided that the WTO is adequately notified of the
charges, including a full justification.
Reason for change
In developing countries around the world, the textile and
apparel industry has served as a primary sector for economic
development and job creation. Given the limited manufacturing
capacity that exists in sub-Saharan Africa now and for the
foreseeable future, the Committee believes that the existing
quotas for Kenya and Mauritius should be eliminated. Further,
the Committee believes that the existing policy of not imposing
quotas on textile and apparel imports from the region should
remain in place. In order to ensure that textile and apparel
products shipped to the United States are manufactured in the
region, the section envisages that countries which intend to
export textiles and apparel to the United States will have in
place an effective visa system to guard against unlawful
transshipments and the use the counterfeit documents and will
cooperate fully with the United States in preventing
transshipments.
The Committee understands that the Administration is
committed to closely monitoring the issue. Because of the
provisions for cooperation with sub-Saharan African countries
and the expanded penalties against violators contained in the
bill, the Committee believes that U.S. firms and workers will
be sufficiently protected against problems caused by illegal
transshipment and other Customs fraud.
The Committee also believes that the reports required of
the President and the Customs Service under this section will
be useful to the Committee in monitoring the effect of the
provision on the growth in textile and apparel exports to the
United States from countries in sub-Saharan Africa in order to
protect U.S. consumers, workers, and textile manufacturers from
economic injury due to the no quota policy.
In sum, it is the Committee's strong view that these
provisions provide a benefit to the sub-Saharan African
countries while having a negligible impact on the United
States.
Effective date
The provision is effective upon enactment.
H. Section 8: Generalized System of Preferences
Present law
Title V of the Trade Act of 1974, as amended, grants
authority to the President to provide duty-free treatment on
imports of eligible articles from beneficiary developing
countries (BDC). Under section 503(a)(1) the President may not
designate any article as GSP eligible within the following
categories:
(1) textiles and apparel articles which were not
eligible articles for purposes of this title on January
1, 1994;
(2) watches, except watches entered after June 30,
1989 that the President determines will not cause
material injury to watch or watch band, strap, or
bracelet manufacturing and assembly operations in the
United States or U.S. insular possessions;
(3) import-sensitive electronic articles;
(4) import-sensitive steel articles;
(5) footwear, handbags, luggage, flat goods, work
gloves, and leather wearing apparel which were not GSP
eligible articles on January 1, 1995;
(6) import-sensitive semimanufactured and
manufactured glass products; and,
(7) any other articles the President determines to be
import-sensitive in the context of GSP.
Under section 502(a)(2) the President is authorized to
designate any article that is the growth, product, or
manufacture of a least developed developing country (LDDC) as
an eligible article with respect to imports from LDDCs, if the
President determines such article is not import-sensitive in
the context of imports from LDDCs. This authority does not
apply to statutorily exempt articles listed under paragraphs
(1), (2) , and (5) above.
Under section 503(b)(3), no quantity of an agricultural
product subject to a tariff-rate quota that exceeds the in-
quota quantity is eligible for duty-free treatment.
Under section 503(c)(2)(D), whenever the President
determines that exports by any BDC to the United States of a
GSP eligible article--
(1) exceed a dollar limit of $80 million a year (a
number which increases by $5 million annually), or
(2) equal or exceed a 50 percent share of the total
value of U.S. imports of the article, then, not later
than July 1 of the next year, such country is not
treated as a BDC with respect to such article.
Under section 503(c)(2)(A), GSP duty-free treatment applies
to any eligible article which is the growth, product or
manufacture of a BDC if: (1) that article is imported directly
from a BDC into the U.S. customs territory; and, (2) the sum of
(a) the cost or value of the materials produced in the BDC or
member countries in an association which is treated as one BDC,
plus (b) the direct costs of processing operations performed in
such BDC or member countries is not less than 35 percent of the
value of the article.
Under section 505, no duty-free treatment shall remain in
effect after June 30, 1999.
Explanation of provision
In order to receive extended and enhanced GSP benefits
under the bill, sub-Saharan African countries must meet all of
the criteria in current law regarding designation of
beneficiary developing countries and also the eligibility
requirements set forth in section 4 of H.R. 434. The existing
statutory GSP designation criteria include internationally-
recognized worker rights, intellectual property rights,
compensation for property expropriation, and market access.
Section 8(a) of the bill amends section 503(a)(1) of the
Trade Act of 1974 to authorize the President to grant duty-free
GSP treatment for products from eligible African GSP
beneficiary countries that are currently excluded from the GSP
program, if, after receiving advice from the International
Trade Commission, he determines that imports of these products
are not import sensitive in the context of imports from sub-
Saharan African countries. Opportunities for public comment
would be provided in making this determination.
The bill does not change the rule of origin requirements
under current law for GSP duty-free treatment on any currently
eligible or any additional products, including textiles and
apparel. The rule of origin remains that articles must be the
growth, product, or manufacture of an eligible country and also
contain a minimum 35 percent local value. As under present law,
processes such as simple combining, packaging, or dilution
would not constitute substantial transformation to qualify an
article for trade benefits under this program. The article must
also be directly imported from a beneficiary country.
Textile and apparel products eligible for duty-free and
quota-free treatment must be substantially transformed in sub-
Saharan Africa as determined by the ``Breaux-Cardin'' rules of
origin enacted into law in 1994 (section 334 of P.L. 103-465).
With respect to the second required test of value content,
section 8(b) of the bill amends section 503(a)(2) of the Trade
Act of 1974 to allow up to 15 percent of the total value of the
article from U.S.-made materials to count toward the 35 percent
local value requirement for duty-free entry under the GSP
program. In order to encourage regional economic integration in
Africa, the bill provides that the minimum 35 percent local
value content may be cumulated in any eligible sub-Saharan
African country.
Section 8(c) amends section 503(c)(2)(D) of the Trade Act
of 1974 to stipulate that the competitive need limits do not
apply to imports from eligible countries in sub-Saharan Africa.
Section 8(d) amends section 505 of the Trade Act of 1974 to
extend the GSP program for ten years, until June 30, 2009, for
eligible countries in sub-Saharan Africa.
Section 8(f) establishes July 1, 1999 as the effective date
for the amendments made to the GSP program for sub-Saharan
Africa.
Reason for change
The GSP program, which provides duty-free access to the
U.S. market for eligible articles from BDCs, has proven to be
an effective program in the development of many countries
around the world. In recent years, however, the program has
undergone a series of short term extensions due to budgetary
constraints. For this reason, the Committee believes that it is
important to give the business community greater certainty
about the program's existence for sub-Saharan African countries
eligible to participate in the African Growth and Opportunity
Act, thereby encouraging long-term investment and development
in the region. At the same time, the Committee continues to
seek the renewal of the existing GSP program for BDCs worldwide
beyond the current expiration date of June 30, 1999.
Given the low utilization of the GSP program by exporters
in sub-Saharan Africa at present, the Committee believes that
these reforms are appropriate for beneficiaries in sub-Saharan
Africa that are eligible to participate in the benefits of this
Act.
Effective date
The bill establishes July 1, 1999 as the effective date for
the new sub-Saharan elements of the GSP program established by
this bill.
I. Section 10: Executive Branch Initiatives
Present law
No provision.
Explanation of provision
Section 10(a) expresses the sense of Congress that the
stated policy of the Executive Branch in 1997, the
``Partnership for Growth and Opportunity in Africa''
initiative, is a step toward the establishment of a
comprehensive trade and development policy for sub-Saharan
Africa. It is the sense of Congress that this Partnership is a
companion to the policy goals set forth in this Act.
Section 10(b) directs the President, in addition to
continuing bilateral and multilateral economic and development
assistance, to target technical assistance toward:
(1) developing relationships between United States
firms and firms in sub-Saharan Africa through a variety
of business associations and networks;
(2) providing assistance to the governments of sub-
Saharan African countries to liberalize trade and
promote exports, bring their legal regimes into
compliance with the standards of the WTO in conjunction
with membership in that Organization, make financial
and fiscal reforms, and promote greater agribusiness
linkages;
(3) addressing such critical agricultural policy
issues as market liberalization, agricultural export
development, and agribusiness investment in processing
and transporting agricultural commodities;
(4) increasing the number of reverse trade missions
to growth-oriented countries in sub-Saharan Africa;
(5) increasing trade in services; and
(6) encouraging greater sub-Saharan participation in
future negotiations in the World Trade Organization on
services and making further commitments in their
schedules to the General Agreement on Trade in Services
in order to encourage the removal of tariff and
nontariff barriers.
Reason for change
The Committee believes that the President's ``Partnership
for Growth and Opportunity in Africa,'' which was announced in
1997, is a step toward the establishment of a comprehensive
U.S. trade and development policy toward countries in sub-
Saharan Africa and that the President's ``Partnership'' is a
companion to the policy goals of this legislation.
The Committee believes that the active participation of
sub-Saharan African countries in negotiations under the
auspices of the World Trade Organization is vital to achieving
the goals of this legislation. To this end, the Committee
supports the Administration's efforts to encourage sub-Saharan
African involvement in the WTO.
Effective date
The provision is effective upon enactment.
J. Section 13: Assistant United States Trade Representative for Sub-
Saharan Africa
Present law
Section 141 of the Trade Act of 1974 established the Office
of the United States Trade Representative within the Executive
Office of the President and directed the President to appoint a
person to head the office and to serve as United States Trade
Representative (USTR).
Explanation of provision
Section 13(a) expresses the sense of Congress that the
position of Assistant United States Trade Representative
(AUSTR) for African Affairs within USTR is integral to the U.S.
commitment to increasing United States-sub-Saharan African
trade and investment.
Section 13(b) requires the President to maintain a position
of AUSTR for African Affairs to direct and coordinate
interagency activities on United States-African trade policy
and investment matters and serve as a primary point of contact
in the executive branch for those persons engaged in trade
between the United States and sub-Saharan Africa and the chief
advisor to the USTR on issues of trade with Africa.
Section 13(c) requires the President to ensure that the
AUSTR for Africa has adequate funding and staff.
Reason for change
The combined population of sub-Saharan Africa represents a
potential market of nearly 700 million consumers for exports of
U.S. goods and services. Given the importance of exports to
future U.S. economic growth and job creation, the Committee
believes that a position of AUSTR for African Affairs should be
maintained within the Office of USTR to focus on trade issues
relating to sub-Saharan Africa. The Committee also believes
that the President should ensure that the AUSTR for Africa has
adequate funding and staff to carry out his or her
responsibilities consistent with the goals of this Act.
Effective date
The provision is effective upon enactment.
K. Section 15: Reporting Requirement
Present law
Section 134 of the Uruguay Round Agreements Act requires
the President to develop a comprehensive trade and development
policy for countries in Africa and submit five annual reports
to Congress on it.
Explanation of provision
The President shall submit to Congress not later than one
year after the date of enactment, and not later than the end of
each of the next six one-year periods thereafter, a
comprehensive report on the trade and investment policy of the
United States toward sub-Saharan Africa, and on the
implementation of this Act. The last report required by section
134 of the Uruguay Round Agreements Act shall be consolidated
and submitted with the first report required by this section.
Reason for change
The Committee requests that the President submit seven
annual reports to Congress on the trade and investment policy
of the United States toward sub-Saharan Africa, and on the
implementation of this Act, in order to assist the Committee in
its oversight responsibilities on trade between the United
States and the countries in sub- Saharan Africa.
Effective date
The provision is effective upon enactment.
L. Section 16: Sub-Saharan Africa Defined
Present law
No provision.
Explanation of provision
For purposes of this Act, the terms ``sub-Saharan Africa'',
``sub-Saharan African country'', ``country in sub-Saharan
Africa'', and ``countries in sub-Saharan Africa'' refer to the
following: Republic of Angola (Angola), Republic of Botswana
(Botswana), Republic of Burundi (Burundi), Republic of Cape
Verde (Cape Verde), Republic of Chad (Chad), Democratic
Republic of Congo, Republic of the Congo (Congo), Republic of
Djibouti (Djibouti), State of Eritrea (Eritrea), Gabonese
Republic (Gabon), Republic of Ghana (Ghana), Republic of
Guinea-Bissau (Guinea-Bissau), Kingdom of Lesotho (Lesotho),
Republic of Madagascar (Madagascar), Republic of Mali (Mali),
Republic of Mauritius (Mauritius), Republic of Namibia
(Namibia), Federal Republic of Nigeria (Nigeria), Democratic
Republic of Sao Tome and Principe (Sao Tome and Principe),
Republic of Sierra Leone (Sierra Leone), Somalia, Kingdom of
Swaziland (Swaziland), Republic of Togo (Togo), Republic of
Zimbabwe (Zimbabwe), Republic of Benin (Benin), Burkina Faso
(Burkina), Republic of Cameroon (Cameroon), Central African
Republic, Federal Islamic Republic of the Comoros (Comoros),
Republic of Cote d'Ivoire (Cote d'Ivoire), Republic of
Equatorial Guinea (Equatorial Guinea), Ethiopia, Republic of
the Gambia (Gambia), Republic of Guinea (Guinea), Republic of
Kenya (Kenya), Republic of Liberia (Liberia), Republic of
Malawi (Malawi), Islamic Republic of Mauritania (Mauritania),
Republic of Mozambique (Mozambique), Republic of Niger (Niger),
Republic of Rwanda (Rwanda), Republic of Senegal (Senegal),
Republic of Seychelles (Seychelles), Republic of South Africa
(South Africa), Republic of Sudan (Sudan), United Republic of
Tanzania (Tanzania), Republic of Uganda (Uganda), Republic of
Zambia (Zambia).
Reason for change
The section identifies the countries in sub-Saharan Africa
for the purposes of this Act.
Effective date
The provision is effective upon enactment.
M. Section 18: Limit Use of Non-Accrual Experience Method of Accounting
to Amounts To Be Received for the Performance of Qualified Personal
Services
Present law
An accrual method taxpayer generally must recognize income
when all the events have occurred that fix the right to receive
the income and the amount of the income can be determined with
reasonable accuracy. An accrual method taxpayer may deduct the
amount of any receivable that was previously included in income
that becomes worthless during the year.
Accrual method taxpayers are not required to include in
income amounts to be received for the performance of services
which, on the basis of experience, will not be collected (the
``non-accrual experience method''). The availability of this
method is conditioned on the taxpayer not charging interest or
a penalty for failure to timely pay the amount charged.
A cash method taxpayer is not required to include an amount
in income until it is received. A taxpayer may not use the cash
method if the purchase, production, or sale of merchandise is a
material income producing factor. Such taxpayers are generally
required to keep inventories and use the accrual method of
accounting. In addition, corporations (and partnerships with
corporate partners) generally may not use the cash method of
accounting if their average annual gross receipts exceed $5
million. An exception to this $5 million rule is provided for
qualified personal service corporations, which are corporations
(1) substantially all of whose activities involve the
performance of services in the fields of health, law,
engineering, architecture, accounting, actuarial science,
performing arts, or consulting and (2) substantially all of the
stock of which is owned by current or former employees
performing such services, their estates, or their heirs.
Qualified personal service corporations may use the cash method
without regard to whether their average annual gross receipts
exceed $5 million.
Explanation of provision
The bill provides that the non-accrual experience method
will be available only for amounts to be received for the
performance of qualified personal services. Amounts to be
received for the performance of all other services will be
subject to the general rule regarding inclusion in income.
Qualified personal services are personal services in the fields
of health, law, engineering, architecture, accounting,
actuarial science, performing arts, or consulting. As under
present law, the availability of the method is conditioned on
the taxpayer not charging interest or a penalty for failure to
timely pay the amount.
Reasons for change
The Committee understands that the use of the non-accrual
experience method provides the equivalent of a bad debt
reserve, which generally is not available to taxpayers using
the accrual method of accounting. The Committee believes that
accrual method taxpayers should be treated similarly, unless
there is a strong indication that different treatment is
necessary to clearly reflect income or to address a particular
competitive situation.
The Committee understands that accrual basis providers of
qualified personal services (services in the fields of health,
law, engineering, architecture, accounting, actuarial science,
performing arts, or consulting) compete on a regular basis and
on an even footing with competitors using the cash method of
accounting. The Committee believes that this competitive
situation justifies the continued availability of the non-
accrual experience method with respect to amounts to be
received for the performance of qualified personal services.
The Committee believes that it is important to avoid the
disparity of treatment between competing cash and accrual
method providers of qualified personal services that could
result if the non-accrual experience method were eliminated
with regard to amounts to be received for such services.
Effective date
The provision is effective for taxable years ending after
the date of enactment. Any change in the taxpayer's method of
accounting necessitated as a result of the proposal will be
treated as a voluntary change initiated by the taxpayer with
the consent of the Secretary of the Treasury. Any required
section 481(a) adjustment is to be taken into account over a
period not to exceed four years under principles consistent
with those in Rev. Proc. 98-60.1
---------------------------------------------------------------------------
\1\ 1998-51 I.R.B. 16.
---------------------------------------------------------------------------
N. Section 19: Denial of Charitable Contribution Deduction for
Transfers Associated with Charitable Split-Dollar Insurance
Arrangements
Present law
Under present law, in computing taxable income, a taxpayer
who itemizes deductions generally is allowed to deduct
charitable contributions paid during the taxable year. The
amount of the deduction allowable for a taxable year with
respect to any charitable contribution depends on the type of
property contributed, the type of organization to which the
property is contributed, and the income of the taxpayer (secs.
170(b) and 170(e)). A charitable contribution is defined to
mean a contribution or gift to or for the use of a charitable
organization or certain other entities (sec. 170(c)). The term
``contribution or gift'' is not defined by statute, but
generally is interpreted to mean a voluntary transfer of money
or other property without receipt of adequate consideration and
with donative intent. If a taxpayer receives or expects to
receive a quid pro quo in exchange for a transfer to charity,
the taxpayer may be able to deduct the excess of the amount
transferred over the fair market value of any benefit received
in return, provided the excess payment is made with the
intention of making a gift.2
---------------------------------------------------------------------------
\2\ United States v. American Bar Endowment, 477 U.S. 105 (1986).
Treas. Reg. sec. 1.170A-1(h).
---------------------------------------------------------------------------
In general, no charitable contribution deduction is allowed
for a transfer to charity of less than the taxpayer's entire
interest (i.e., a partial interest) in any property (sec.
170(f)(3)). In addition, no deduction is allowed for any
contribution of $250 or more unless the taxpayer obtains a
contemporaneous written acknowledgment from the donee
organization that includes a description and good faith
estimate of the value of any goods or services provided by the
donee organization to the taxpayer in consideration, whole or
part, for the taxpayer's contribution (sec. 170(f)(8)).
Explanation of provision
Deduction denial
The provision 3 restates present law to provide
that no charitable contribution deduction is allowed for
purposes of Federal tax, for a transfer to or for the use of an
organization described in section 170(c) of the Internal
Revenue Code, if in connection with the transfer (1) the
organization directly or indirectly pays, or has previously
paid, any premium on any ``personal benefit contract'' with
respect to the transferor, or (2) there is an understanding or
expectation that any person will directly or indirectly pay any
premium on any ``personal benefit contract'' with respect to
the transferor. It is intended that an organization be
considered as indirectly paying premiums if, for example,
another person pays premiums on its behalf.
---------------------------------------------------------------------------
\3\ The provision is similar to H.R. 630, introduced by Mr. Archer
for himself and for Mr. Rangel (106th Cong., 1st Sess.).
---------------------------------------------------------------------------
A personal benefit contract with respect to the transferor
is any life insurance, annuity, or endowment contract, if any
direct or indirect beneficiary under the contract is the
transferor, any member of the transferor's family, or any other
person (other than a section 170(c) organization) designated by
the transferor. For example, such a beneficiary would include a
trust having a direct or indirect beneficiary who is the
transferor or any member of the transferor's family, and would
include an entity that is controlled by the transferor or any
member of the transferor's family. It is intended that a
beneficiary under the contract include any beneficiary under
any side agreement relating to the contract. If a transferor
contributes a life insurance contract to a section 170(c)
organization and designates one or more section 170(c)
organizations as the sole beneficiaries under the contract,
generally, it is not intended that the deduction denial rule
under the provision apply. If, however, there is an outstanding
loan under the contract upon the transfer of the contract, then
the transferor is considered as a beneficiary. The fact that a
contract also has other direct or indirect beneficiaries
(persons who are not the transferor or a family member, or
designated by the transferor) does not prevent it from being a
personal benefit contract. The provision is not intended to
affect situations in which an organization pays premiums under
a legitimate fringe benefit plan for employees.
It is intended that a person be considered as an indirect
beneficiary under a contract if, for example, the person
receives or will receive any economic benefit as a result of
amounts paid under or with respect to the contract. For this
purpose, as described below, an indirect beneficiary is not
intended to include a person that benefits exclusively under a
bona fide charitable gift annuity (within the meaning of sec.
501(m)).
In the case of a charitable gift annuity, if the charitable
organization purchases an annuity contract issued by an
insurance company to fund its obligation to pay the charitable
gift annuity, a person receiving payments under the charitable
gift annuity is not treated as an indirect beneficiary,
provided certain requirements are met. The requirements are
that (1) the charitable organization possess all of the
incidents of ownership (within the meaning of Treas. Reg. sec.
20.2042-1(c)) under the annuity contract purchased by the
charitable organization; (2) the charitable organization be
entitled to all the payments under the contract; and (3) the
timing and amount ofpayments under the contract be
substantially the same as the timing and amount of payments to each
person under the organization's obligation under the charitable gift
annuity (as in effect at the time of the transfer to the charitable
organization).
In the case of a charitable gift annuity obligation that is
issued under the laws of a State that requires, in order for
the charitable gift annuity to be exempt from insurance
regulation by that State, that each beneficiary under the
charitable gift annuity be named as a beneficiary under an
annuity contract issued by an insurance company authorized to
transact business in that State, then the foregoing
requirements (1) and (2) are treated as if they are met,
provided that certain additional requirements are met. The
additional requirements are that the State law requirement was
in effect on February 8, 1999, each beneficiary under the
charitable gift annuity is a bona fide resident of the State at
the time the charitable gift annuity was issued, the only
persons entitled to payments under the annuity contract issued
by the insurance company are persons entitled to payments under
the charitable gift annuity when it was issued, and (as
required by clause (iii) of subparagraph (D) of the provision)
the timing and amount of payments under the annuity contract to
each person are substantially the same as the timing and amount
of payments to the person under the charitable organization's
obligation under the charitable gift annuity (as in effect at
the time of the transfer to the charitable organization).
In the case of a charitable remainder annuity trust or
charitable remainder unitrust (as defined in section 664(d))
that holds a life insurance, endowment or annuity contract
issued by an insurance company, a person is not treated as an
indirect beneficiary under the contract held by the trust,
solely by reason of being a recipient of an annuity or unitrust
amount paid by the trust, provided that the trust possesses all
of the incidents of ownership under the contract and is
entitled to all the payments under such contract. No inference
is intended as to the applicability of other provisions of the
Code with respect to the acquisition by the trust of a life
insurance, endowment or annuity contract, or the
appropriateness of such an investment by a charitable remainder
trust.
Nothing in the provision is intended to suggest that a life
insurance, endowment, or annuity contract would be a personal
benefit contract, solely because an individual who is a
recipient of an annuity or unitrust amount paid by a charitable
remainder annuity trust or charitable remainder unitrust uses
such a payment to purchase a life insurance, endowment or
annuity contract, and a beneficiary under the contract is the
recipient, a member of his or her family, or another person he
or she designates.
Excise tax
The provision imposes on any organization described in
section 170(c) of the Code an excise tax, equal to the amount
of the premiums paid by the organization on any life insurance,
annuity, or endowment contract, if the premiums are paid in
connection with a transfer for which a deduction is not
allowable under the deduction denial rule of the provision
(without regard to when the transfer to the charitable
organization was made). The excise tax does not apply if all of
the direct and indirect beneficiaries under the contract
(including any related side agreement) are organizations
described in section 170(c). Under the provision, payments are
treated as made by the organization, if they are made by any
other person pursuant to an understanding or expectation of
payment. The excise tax is to be applied taking into account
rules ordinarily applicable to excise taxes in chapter 41 or 42
of the Code (e.g., statute of limitation rules).
Reporting
The provision requires that the charitable organization
annually report the amount of premiums that is paid during the
year and that is subject to the excise tax imposed under the
provision, and the name and taxpayer identification number of
each beneficiary under the life insurance, annuity or endowment
contract to which the premiums relate, as well as other
information required by the Secretary of the Treasury. For this
purpose, it is intended that a beneficiary include any
beneficiary under any side agreement to which the section
170(c) organization is a party (or of which it is otherwise
aware). Penalties applicable to returns required under Code
section 6033 apply to returns under this reporting requirement.
Returns required under this provision are to be furnished at
such time and in such manner as the Secretary shall by forms or
regulations require.
Regulations
The provision provides for the promulgation of regulations
necessary or appropriate to carry out the purposes of the
provisions, including regulations to prevent the avoidance of
the purposes of the provision. For example, it is intended that
regulations prevent avoidance of the purposes of the provision
by inappropriate or improper reliance on the limited exceptions
provided for certain beneficiaries under bona fide charitable
gift annuities and for certain noncharitable recipients of an
annuity or unitrust amount paid by a charitable remainder
trust.
Reasons for change
The Committee is concerned about an abusive scheme
4 referred to as charitable split-dollar life
insurance, and the provision is designed to stop the spread of
this scheme. Under this scheme, taxpayers typically transfer
money to a charity, which the charity then uses to pay premiums
for cash value life insurance on the transferor or another
person. The beneficiaries under the life insurance contract
typically include members of the transferor's family (either
directly or through a family trust or family partnership).
Having passed the money through a charity, the transferor
claims a charitable contribution deduction for money that is
actually being used to benefit the transferor and his or her
family. If the transferor or the transferor's family paid the
premium directly, the payment would not be deductible. Although
the charity eventually may get some of the benefit under the
life insurance contract, it does not have unfettered use of the
transferred funds.
---------------------------------------------------------------------------
\4\ ``A Popular Tax Shelter for `Angry Affluent' Prompts Ire of
Others,'' Wall Street Journal, Jan. 22, 1999, p. A1; ``U.S. Treasury
Officials Investigating Charitable Split-Dollar Insurance Plan,'' Wall
Street Journal, Jan. 29, 1999, p. B5; ``Brilliant Deduction?,'' The
Chronicle of Philanthropy, Aug. 13, 1998, p. 24; ``Charitable Reverse
Split-Dollar: Bonanza or Booby Trap,'' Journal of Gift Planning, 2nd
quarter 1998.
---------------------------------------------------------------------------
The Committee is concerned that this type of transaction
represents an abuse of the charitable contribution deduction.
The Committee is also concerned that the charity often gets
relatively little benefit from this type of scheme, and serves
merely as a conduit or accommodation party, which the Committee
does not view as appropriate for an organization with tax-
exempt status. In substance, the charity receives a transfer of
a partial interest in an insurance policy, for which no
charitable contribution deduction is allowed. While there is no
basis under present law for allowing a charitable contribution
deduction in these circumstances, the Committee intends that
the provision stop the marketing of these transactions
immediately.
Therefore, the provision clarifies present law by
specifically denying a charitable contribution deduction for a
transfer to a charity if the charity directly or indirectly
pays or paid any premium on a life insurance, annuity or
endowment contract in connection with the transfer, and any
direct or indirect beneficiary under the contract is the
transferor, any member of the transferor's family, or any other
noncharitable person chosen by the transferor. In addition, the
provision clarifies present law by specifically denying the
deduction for a charitable contribution if, in connection with
a transfer to the charity, there is an understanding or
expectation that any person will directly or indirectly pay any
premium on any such contract.
The provision provides that certain persons are not treated
as indirect beneficiaries, in certain cases in which a
charitable organization purchases an annuity contract to fund
an obligation to pay a charitable gift annuity. The provision
also provides that a person is not treated as an indirect
beneficiary solely by reason of being a noncharitable recipient
of an annuity or unitrust amount paid by a charitable remainder
trust that holds a life insurance, annuity or endowment
contract. The rationale for these rules is that the amount of
the charitable contribution deduction is limited under present
law to the value of the charitable organization's interest.
Congress has previously enacted rules designed to prevent a
charitable contribution deduction for the value of any personal
benefit to the donor in these circumstances, and the Committee
expects that the personal benefit to the donor is appropriately
valued.
Further, the provision imposes an excise tax on the
charity, equal to the amount of the premiums paid by the
charity. Finally, the provision requires a charity to report
annually to the Internal Revenue Service the amount of premiums
subject to this excise tax and information about the
beneficiaries under the contract.
Effective date
The deduction denial provision applies to transfers after
February 8, 1999 (as provided in H.R. 630). The excise tax
provision applies to premiums paid after the date of enactment.
The reporting provision applies to premiums paid after February
8, 1999 (determined as if the excise tax imposed under the
provision applied to premiums paid after that date).
No inference is intended that a charitable contribution
deduction is allowed under present law with respect to a
charitable split-dollar insurance arrangement. The provision
does not change the rules with respect to fraud or criminal or
civil penalties under present law; thus, actions constituting
fraud or that are subject to penalties under present law would
still constitute fraud or be subject to the penalties after
enactment of the provision.
III. VOTE OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of the bill, H.R. 434, as amended.
Motion to Report the Bill
The bill, H.R. 434, was ordered favorably reported, by
voice vote on June 10, 1999, with a quorum present.
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d)(2) of rule XIII of the Rules
of the House of Representatives, the Committee agrees with cost
estimates furnished by the Congressional Budget Office (CBO) on
H.R. 434, as amended, set forth below.
B. Budget Authority and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that H.R.
434 does not include any new budget authority and reduces tax
expenditures by an amount equal to the revenue raised by the
provisions limiting the use of non-accrual experience method of
accounting and denying the charitable contribution deduction
for transfers associated with charitable split-dollar insurance
arrangements.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estiamte
prepared by the Congressional Budget Ofice (CBO), the following
statement by CBO is provided:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 15, 1999.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 434, the African
Growth and Opportunity Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Hester
Grippando.
Sincerely,
Dan L. Crippen, Director.
Enclosure.
H.R. 434--African Growth and Opportunity Act
Summary
H.R. 434, the African Growth and Opportunity Act, would
authorize a new trade and investment policy for Sub-Saharan
Africa. The bill would extend and expand the Generalized System
of Preferences (GSP) with respect to sub-Saharan Africa beyond
its current expiration of June 30, 1999, through June 30, 2009.
The bill would also amend the Internal Revenue Code in order to
limit the use of the nonaccrual experience method of accounting
and deny charitable contributions deductions from transfers
associated with charitable split dollar insurance arrangements.
CBO and the Joint Committee on Taxation (JCT) estimate that the
bill would increase governmental receipts by $31 million over
the 1999-2004 period. Because the bill would affect receipts,
pay-as-you-go procedures would apply.
In addition, the bill could increase discretionary spending
by $3 million a year, assuming appropriation of the necessary
amounts. The bill would authorize annual high-level meetings
between officials of the United States government and their
counterparts in sub-Saharan countries eligible for benefits
under the bill. The bill would increase the number of foreign
commercial service employees stationed in Africa. The bill
would require the creation of advisory committees and expanded
reporting on trade and investment policy with sub-Saharan
Africa.
H.R. 434 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (URMA) and would not affect
the budgets of state, local, or tribal governments. The bill
would impose two new private-sector mandates by limiting the
use of the nonaccrual experience method of accounting and by
denying charitable contributions deductions fro transfers
associated with charitable split dollar insurance arrangements.
JCT estimates that the direct costs of the new mandates would
not exceed the statutory threshold ($100 million in 1996,
adjusted annually for inflation) established in UMRA in each of
fiscal years 1999 through 2004.
Estimated cost to the Federal Government
The annual estimated budgetary impact of H.R. 434 is shown
in the following table.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------
1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUESTrade Provisions
Extension of GSP................................ -8 -32 -33 -34 -36 -38
Expansion of GSP................................ 0 -8 -17 -17 -18 -18
-----------------------------------------------------------
Subtotal of Trade Provisions.................. -8 -40 -50 -51 -54 -56
Revenue Offset Provisions....................... 14 88 73 47 43 25
-----------------------------------------------------------
Net Effect on Revenues.......................... 6 48 23 -4 -11 -31 CHANGES IN SPENDING SUBJECT TO APPROPRIATIONEstiamted authorization............................. 0 3 3 3 3 3
Estimated Outlays............................... 0 2 3 3 3 3
----------------------------------------------------------------------------------------------------------------
Basis of estimate
Revenues
The estimate of extending the existing GSP program with
respect to sub-Saharan Africa was based on recent trade data on
imports for U.S. consumption of goods from eligible countries.
CBO assumed that GSP imports would remain a constant portion of
total imports. CBO estimates a trade diversion of half of a
percentage point from non-sub-Saharan African GSP beneficiaries
who will no longer receive duty-free GSP treatment after June
30, 1999. Losses of revenues from customs duties were projected
using a trade-weighted duty rate with respect to sub-Saharan
Africa adjusted for tariff reductions scheduled by the World
Trade Organization (WTO). Assuming a July 1, 1999, enactment
date, CBO estimates that extending the existing GSP program
with respect to sub-Saharan Africa would reduce governmental
receipts by $182 million over the 1999-2004 period.
The current GSP excludes articles determined by the U.S.
Trade Representative (USTR) to be import sensitive from
receiving duty-free GSP treatment. H.R. 434 would allow
countries of sub-Saharan Africa to ask the President to
redetermine import sensitivity of GSP-excluded imports in the
context of imports from sub-Saharan Africa. Based on
discussions with the International Trade Commission (ITC), CBO
identified products that are now importsensitive but are likely
not to be considered import sensitive with respect to sub-Saharan
Africa. USTR expects that the program to grant additional sub-Saharan
African imports duty-free GSP treatment will not be implemented until
eight months after the enactment of the law. Assuming a July 1, 1999,
enactment date, CBO does not expect that sub-Saharan Africa will
receive duty-free treatment for these articles prior to March 1, 2000.
Using trade-weighted duty rates adjusted for reductions scheduled by
the WTO, CBO estimates that this provision would reduce receipts by $41
million over the 1999-2004 period.
Current law also excludes from duty-free treatment a list
of specific products, including apparel, textiles, footwear,
leather goods, glass, certain electronic products, and watches.
H.R. 434 would extend duty-free treatment to these products if
the USTR determines that they are not import sensitive with
respect to Sub-Saharan Africa. CBO based its estimate of the
loss of duties that would result from granting these goods
duty-free GSP treatment on recent collections data. CBO assumed
that under existing law, imports of these products would grow
at the same rate as total non-petroleum imports. United States
imports of footwear, leather goods, glass, certain electronic
products, and watches from sub-Saharan Africa are insignificant
compared with United States imports of similar goods from other
countries. CBO assumes that the USTR will not rule these
products import sensitive. The bill would also authorize the
administration to grant textile and apparel products duty free
and quota free treatment. U.S. imports of textile and apparel
products from sub-Saharan Africa are also relatively
insignificant, accounting for less than 1 percent of total U.S.
imports of such products. Nonetheless, trade experts expect the
USTR to rule in favor of the textile industry in determining
the import sensitivity of many textile and apparel products.
CBO assumes that the USTR will determine 90 percent of eligible
imports to be import sensitive. Losses of duties for the
remaining 10 percent were projected using trade-weighted duty
rates adjusted for scheduled reductions under the WTO. Assuming
an implementation date of March 1, 2000, CBO projects that
granting these additional products duty-free GSP treatment
would reduce receipts by $37 million over the 1999-2004 period.
All other revenue provisions in H.R. 434 were estimated by
JCT.
Discretionary Spending
The bill could increase discretionary spending by $3
million a year, assuming appropriation of the necessary
amounts.
Section 5 would authorize the Secretaries of Commerce,
Treasury, and State and the U.S. Trade Representative to meet
with their counterparts from sub-Saharan African countries in
an annual trade and economic forum. It would require the United
States to host the first forum within 12 months of enactment.
Based on the cost of similar meetings, CBO estimates the
meetings would cost $2 million a year.
Section 12 would require the Overseas Private Investment
Corporation and the Export-Import Bank to create advisory
committees to assist in developing policies toward Africa. CBO
estimates the advisory committees would cost less than $25,000
each year based on the cost of similar committees. The bill
would require reports on trade and investment policy with sub-
Saharan Africa and on negotiating free trade agreements. The
U.S. Trade Representative currently reports on these issues,
and CBO estimates the expanded reporting requirement would
result in no significant increase in costs.
Section 14 would direct the International Trade
Administration (ITA) to increase from four to 10 the number of
countries in sub-Saharan Africa in which foreign commercial
service employees are stationed. Currently, the ITA has 24
employees stationed in four countries of sub-Saharan Africa. To
establish the six new posts, CBO expects that ITA will hire
three new employees and move three current employees to
additional countries in sub-Saharan Africa. Based on
information from the Department of Commerce, CBO estimates that
the cost for each new employee will be about $200,000 in 1999
dollars, which includes the high cost of locating employees in
foreign countries. CBO also estimates that there will be moving
costs for current employees, but such costs would be less than
$500,000 a year. CBO estimates that implementing this section
would cost less than $500,000 in 2000 and increase to about $1
million in 2001 and each subsequent year.
Sections 10 and 14 would authorize the executive branch to
use development assistance funds to provide technical
assistance to sub-Saharan governments to liberalize trade, to
bring their legal regimes into compliance with the World Trade
Organization, to promote democracy and good governance, and to
strengthen conflict resolution. CBO estimates that the cost of
those provisions would be minimal because other provisions of
law already provide similar authority.
Pay-as-you-go considerations
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts. The net changes in outlays and
governmental receipts that are subject to pay-as-you-go
procedures are shown in the following table. For the purpose of
enforcing pay-as-you-procedures, only the effects in the
current year, the budget year, and the succeeding four years
are counted.
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year in millions of dollars--
-----------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts........................................... 6 48 23 -4 -11 -31 -32 -34 -34 -36 -30
Changes in outlays............................................ 0 0 0 0 0 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated impact on State, local, and tribal governments
H.R. 434 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act and would not affect the
budgets of state, local, or tribal governments.
Estimated impact on the private sector
JCT has determined that H.R. 434 would impose two new
private-sector mandates by limiting the use of the nonaccrual
experience methods of accounting and by denying charitable
contributions deductions for transfers associated with
charitable split dollar insurance arrangements. JCT estimates
that the direct costs of the new mandates would not exceed the
statutory threshold ($100 million in 1996, adjusted annually
for inflation) established in UMRA in each of fiscal years 1999
through 2004.
Previous CBO estimate
On March 18, 1999, CBO prepared a cost estimate for H.R.
434, as reported by the House Committee on International
Relations. The current estimate of the bill differs from the
March 18 estimate because of two revenue provisions in the bill
added by the House Committee on Ways and Means. The new revenue
provisions would limit the use of the nonaccural experience
method of accounting and would deny charitable contributions
deductions for transfer associated with charitable split dollar
insurance arrangements.
Estimate prepared by
Federal Revenues: Hester Grippando.
Federal Spending: Joseph Whitehill and Mark Hadley.
Sunita D'Monte and John Righter.
Impact on State, local, and tribal governments: Leo Lex.
Impact on the private sector: Keith Mattrick.
Estimate approved by
G. Thomas Woodward, Assistant Director for Tax Analysis,
and Paul N. Van de Water, Assistant Director for Budget
Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee concludes that the
actions taken in this legislation are appropriate given its
oversight of international trade and tax matters.
B. Summary of Findings and Recommendations of the Committee on
Government Reform
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House ofRepresentatives (relating to oversight findings),
the Committee states that no oversight findings or recommendations have
been submitted to the Committee by the Committee on Government Reform
with respect to the provisions in H.R. 434.
C. Constitutional Authority Statement
With respect to clause 3(d)(1) of rule XIII of the Rules of
the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article 1 of the
Constitution, Section 8 (``The Congress shall have power to lay
and collect taxes, duties, imposts and excises, to pay the
debts and to provide for * * * the general Welfare of the
United States.'') and from the 16th Amendment to the
Constitution.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (P.L. 104-4). The
Committee has reviewed the provisions of the bill as approved
by the Committee on June 10, 1999. In accordance with the
requirements of Public Law 104-4, the Committee has determined
that the following provisions of the bill contain Federal
private sector mandates:
The use of the non-accrual experience method of
accounting is limited to amounts to be received for the
performance of qualified professional services.
A charitable contribution deduction is denied for
charitable split-dollar insurance.
The Committee has determined that it is necessary to
include these provisions in the bill to provide revenue offsets
for the trade initiatives approved by the Committee.
E. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``No bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase shall be considered as passed or agreed to unless
determined by a vote of not less than three-fifths of the
Members.'' The Committee has carefully reviewed the provisions
of the bill, and states that the provisions of the bill do not
involve any Federal income tax rate increase within the meaning
of the rule.
F. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
Joint Committee on Taxation (in consultation with the Internal
Revenue Service and the Department of the Treasury) to provide
a tax complexity analysis. The complexity analysis is required
for all legislation reported by the Senate Committee on
Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
(the ``Code'') and has widespread applicability to individuals
or small businesses.
The staff of the Joint Committee on Taxation has determined
that a complexity analysis is not required under section
4022(b) of the IRS Reform Act because the bill contains no
provisions that amend the Internal Revenue Code and that have
widespread applicability to individuals or small businesses.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE V OF THE TRADE ACT OF 1974
TITLE V--GENERALIZED SYSTEM OF PREFERENCES
* * * * * * *
SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.
(a) Eligible Articles.--
(1) Designation.--
(A) * * *
* * * * * * *
(C) Eligible countries in sub-saharan
africa.--The President may provide duty-free
treatment for any article set forth in
paragraph (1) of subsection (b) that is the
growth, product, or manufacture of an eligible
country in sub-Saharan Africa that is a
beneficiary developing country, if, after
receiving the advice of the International Trade
Commission in accordance with subsection (e),
the President determines that such article is
not import-sensitive in the context of imports
from eligible countries in sub-Saharan Africa.
This subparagraph shall not affect the
designation of eligible articles under
subparagraph (B).
[(C)] (D) Three-year rule.--If, after
receiving the advice of the International Trade
Commission under subsection (e), an article has
been formally considered for designation as an
eligible article under this title and denied
such designation, such article may not be
reconsidered for such designation for a period
of 3 years after such denial.
(2) Rule of origin.--
(A) * * *
* * * * * * *
(C) Eligible countries in sub-saharan
africa.--For purposes of determining the
percentage referred to in subparagraph (A) in
the case of an article of an eligible country
in sub-Saharan Africa that is a beneficiary
developing country--
(i) if the cost or value of materials
produced in the customs territory of
the United States is included with
respect to that article, an amount not
to exceed 15 percent of the appraised
value of the article at the time it is
entered that is attributed to such
United States cost or value may be
applied toward determining the
percentage referred to in subparagraph
(A); and
(ii) the cost or value of the
materials included with respect to that
article that are produced in any
beneficiary developing country that is
an eligible country in sub-Saharan
Africa shall be applied in determining
such percentage.
* * * * * * *
(c) Withdrawal, Suspension, or Limitation of Duty-Free
Treatment; Competitive Need Limitation.--
(1) * * *
(2) Competitive need limitation.--
(A) * * *
* * * * * * *
[(D) Least-developed beneficiary developing
countries.--Subparagraph (A) shall not apply to
any least-developed beneficiary developing
country.]
(D) Least-developed beneficiary developing
countries and eligible countries in sub-saharan
africa.--Subparagraph (A) shall not apply to
any least-developed beneficiary developing
country or any eligible country in sub-Saharan
Africa.
* * * * * * *
[SEC. 505. DATE OF TERMINATION.
[No duty-free treatment provided under this title shall
remain in effect after June 30, 1999.]
SEC. 505. DATE OF TERMINATION.
(a) Countries in Sub-Saharan Africa.--No duty-free treatment
provided under this title shall remain in effect after June 30,
2009, with respect to beneficiary developing countries that are
eligible countries in sub-Saharan Africa.
(b) Other Countries.--No duty-free treatment provided under
this title shall remain in effect after June 30, 1999, with
respect to beneficiary developing countries other than those
provided for in subsection (a).
* * * * * * *
SEC. 507. DEFINITIONS.
For purposes of this title:
(1) * * *
* * * * * * *
(6) Eligible country in sub-saharan africa.--The
terms ``eligible country in sub-Saharan Africa'' and
``eligible countries in sub-Saharan Africa'' mean a
country or countries that the President has determined
to be eligible under section 4 of the African Growth
and Opportunity Act.
* * * * * * *
----------
SECTION 233 OF THE FOREIGN ASSISTANCE ACT OF 1961
Sec. 233. Organization and Management.--(a) * * *
* * * * * * *
(e) Advisory Committee.--The Board shall take prompt measures
to increase the loan, guarantee, and insurance programs, and
financial commitments, of the Corporation in sub-Saharan
Africa, including through the use of an advisory committee to
assist the Board in developing and implementing policies,
programs, and financial instruments with respect to sub-Saharan
Africa. In addition, the advisory committee shall make
recommendations to the Board on how the Corporation can
facilitate greater support by the United States for trade and
investment with and in sub-Saharan Africa. The advisory
committee shall terminate 4 years after the date of the
enactment of this subsection.
----------
SECTION 2 OF THE EXPORT-IMPORT BANK ACT OF 1945
Sec. 2. (a) * * *
(b)(1) * * *
* * * * * * *
(13)(A) The Board of Directors of the Bank shall take prompt
measures, consistent with the credit standards otherwise
required by law, to promote the expansion of the Bank's
financial commitments in sub-Saharan Africa under the loan,
guarantee, and insurance programs of the Bank.
(B)(i) The Board of Directors shall establish and use an
advisory committee to advise the Board of Directors on the
development and implementation of policies and programs
designed to support the expansion described in subparagraph
(A).
(ii) The advisory committee shall make recommendations to the
Board of Directors on how the Bank can facilitate greater
support by United States commercial banks for trade with sub-
Saharan Africa.
(iii) The advisory committee shall terminate 4 years after
the date of the enactment of this subparagraph.
* * * * * * *
----------
INTERNAL REVENUE CODE OF 1986
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter B--Computation of Taxable Income
* * * * * * *
PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
* * * * * * *
SEC. 170. CHARITABLE, ETC., CONTRIBUTIONS AND GIFTS.
(a) * * *
* * * * * * *
(f) Disallowance of Deduction in Certain Cases and Special
Rules.--
(1) * * *
* * * * * * *
(10) Split-dollar life insurance, annuity, and
endowment contracts.--
(A) In general.--Nothing in this section or
in section 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522 shall be construed to allow
a deduction, and no deduction shall be allowed,
for any transfer to or for the use of an
organization described in subsection (c) if in
connection with such transfer--
(i) the organization directly or
indirectly pays, or has previously
paid, any premium on any personal
benefit contract with respect to the
transferor, or
(ii) there is an understanding or
expectation that any person will
directly or indirectly pay any premium
on any personal benefit contract with
respect to the transferor.
(B) Personal benefit contract.--For purposes
of subparagraph (A), the term ``personal
benefit contract'' means, with respect to the
transferor, any life insurance, annuity, or
endowment contract if any direct or indirect
beneficiary under such contract is the
transferor, any member of the transferor's
family, or any other person (other than an
organization described in subsection (c))
designated by the transferor.
(C) Application to charitable remainder
trusts.--In the case of a transfer to a trust
referred to in subparagraph (E), references in
subparagraphs (A) and (F) to an organization
described in subsection (c) shall be treated as
a reference to such trust.
(D) Exception for certain annuity
contracts.--If, in connection with a transfer
to or for the use of an organization described
in subsection (c), such organization incurs an
obligation to pay a charitable gift annuity (as
defined in section 501(m)) and such
organization purchases any annuity contract to
fund such obligation, persons receiving
payments under the charitable gift annuity
shall not be treated for purposes of
subparagraph (B) as indirect beneficiaries
under such contract if--
(i) such organization possesses all
of the incidents of ownership under
such contract,
(ii) such organization is entitled to
all the payments under such contract,
and
(iii) the timing and amount of
payments under such contract are
substantially the same as the timing
and amount of payments to each such
person under such obligation (as such
obligation is in effect at the time of
such transfer).
(E) Exception for certain contracts held by
charitable remainder trusts.--A person shall
not be treated for purposes of subparagraph (B)
as an indirect beneficiary under any life
insurance, annuity, or endowment contract held
by a charitable remainder annuity trust or a
charitable remainder unitrust (as defined in
section 664(d)) solely by reason of being
entitled to any payment referred to in
paragraph (1)(A) or (2)(A) of section 664(d)
if--
(i) such trust possesses all of the
incidents of ownership under such
contract, and
(ii) such trust is entitled to all
the payments under such contract.
(F) Excise tax on premiums paid.--
(i) In general.--There is hereby
imposed on any organization described
in subsection (c) an excise tax equal
to the premiums paid by such
organization on any life insurance,
annuity, or endowment contract if the
payment of premiums on such contract is
in connection with a transfer for which
a deduction is not allowable under
subparagraph (A), determined without
regard to when such transfer is made.
(ii) Payments by other persons.--For
purposes of clause (i), payments made
by any other person pursuant to an
understanding or expectation referred
to in subparagraph (A) shall be treated
as made by the organization.
(iii) Reporting.--Any organization on
which tax is imposed by clause (i) with
respect to any premium shall file an
annual return which includes--
(I) the amount of such
premiums paid during the year
and the name and TIN of each
beneficiary under the contract
to which the premium relates,
and
(II) such other information
as the Secretary may require.
The penalties applicable to returns
required under section 6033 shall apply
to returns required under this clause.
Returns required under this clause
shall be furnished at such time and in
such manner as the Secretary shall by
forms or regulations require.
(iv) Certain rules to apply.--The tax
imposed by this subparagraph shall be
treated as imposed by chapter 42 for
purposes of this title other than
subchapter B of chapter 42.
(G) Special rule where state requires
specification of charitable gift annuitant in
contract.--In the case of an obligation to pay
a charitable gift annuity referred to in
subparagraph (D) which is entered into under
the laws of a State which requires, in order
for the charitable gift annuity to be exempt
from insurance regulation by such State, that
each beneficiary under the charitable gift
annuity be named as a beneficiary under an
annuity contract issued by an insurance company
authorized to transact business in such State,
the requirements of clauses (i) and (ii) of
subparagraph (D) shall be treated as met if--
(i) such State law requirement was in
effect on February 8, 1999,
(ii) each such beneficiary under the
charitable gift annuity is a bona fide
resident of such State at the time the
obligation to pay a charitable gift
annuity is entered into, and
(iii) the only persons entitled to
payments under such contract are
persons entitled to payments as
beneficiaries under such obligation on
the date such obligation is entered
into.
(H) Regulations.--The Secretary shall
prescribe such regulations as may be necessary
or appropriate to carry out the purposes of
this paragraph, including regulations to
prevent the avoidance of such purposes.
* * * * * * *
Subchapter E--Accounting Periods and Methods of Accounting
* * * * * * *
PART II--METHODS OF ACCOUNTING
* * * * * * *
Subpart A--Methods of Accounting in General
* * * * * * *
SEC. 448. LIMITATION ON USE OF CASH METHOD OF ACCOUNTING.
(a) * * *
* * * * * * *
(d) Definition and Special Rules.--For purposes of this
section--
(1) * * *
* * * * * * *
(5) Special rule for certain personal services.--In
the case of any person using an accrual method of
accounting with respect to amounts to be received for
the performance of services by such person in fields
described in paragraph (2)(A), such person shall not be
required to accrue any portion of such amounts which
(on the basis of experience) will not be collected.
This paragraph shall not apply to any amount if
interest is required to be paid on such amount or there
is any penalty for failure to timely pay such amount.
* * * * * * *