De cember 200 0
Trade Talk
Co un t ry Fo cus
C
AN EXECUTIVE BRIEFING FOR TREASURY PROFESSIONALS
ANADA
Ce rta i nl y U.S. eco n o m i c p e rfo r ma n ce in re ce n t yea rs has been re ma r ka ble – and the env y
o f m u ch of the rest o f the wo r ld.
Ye t in ma ny ways the Ca nad ian eco n o my has o u t- p e rformed tha t o f the United S ta tes. In
the U.S. st ro ng growth co m bined with low inflation has cu t un e m pl oy m e n t f rom 7.8 perce n t
in 1992 to just 4 perce n t cu r re n t l y and has turned a fe d e ra l d e f i ci t e q u i va le n t to 4 perce n t
o f g ross d o m est i c p ro d u c t i n to a risi ng su r pl us. Bu t d u r i ng tha t same period of t i m e ,
Ca nada cu t i t s un e m pl oy m e n t ra te by m o re than 5 perce n tage points – from a wo r r is o m e
p ea k o f 12.1 perce n t to just 6.8 perce n t cu r re n t l y – while ma ki ng an even bi gger fisca l
ad j ust m e n t as i t e rased a defici t e q u i va le n t to 7 perce n t o f G D P. More ove r, while there is
co n t i n u i ng co n cern over a U.S. trade defici t t ha t n ow exce e ds $200 billion, Ca nada is
re co rd i ng a cu r re n t a cco un t su r pl us !
The U. S. / Canadian Co n nec t i o n
Be ca use of Ca nada ’ s st ro ng eco n o m i c p e rfo r ma n ce, it has been one of our most vi b ra n t
ex p o rt ma r kets. Ca nada has l o ng been the U.S.’s si ng le bi ggest ove rs eas ma r ket, bu t last
yea r ’ s resul t s we re pa rt i cula r l y re ma r ka ble. Not o nl y did Ca nada acco un t for 24 perce n t o f
to ta l U.S. mercha n d ise ex p o rts, bu t t h ese pu rchas es exceeded those of the entire Eu ro p ea n
contin ued on page 2
contin ued from pa ge 1
Union – an eco n o m i c a rea with a population te n
t i m es the si ze of Ca nada – and we re three times
la rger than U.S. sa les to Japa n !
Of co u rse, trade is a two - way st reet, and the
st re ngth of the U.S. eco n o my, co m bined with a
l owe r i ng of t rade ba r r i e rs under the Nort h
A m e r i can Free Trade Agreement, has been a
ma jor fa c tor in Ca nada ’ s e co n o m i c su ccess. Last
year go o ds f rom the United S ta tes a cco un ted fo r
76 perce n t o f Ca nada ’ s to ta l i m p o rts, up from 72
p e rce n t t we n t y yea rs ago. The U.S. sha re of
Ca nad ian ex p o rt s was e ven la rge r, rea ch i ng 85
p e rce n t o f the to ta l. T h is p e rce n tage is co nsi d e ra bl y higher than the 68 perce n t s ha re ba ck in the
ea r l y 1980s.
Another fa c tor tha t may ha ve helped boost
Ca nad ian ex p o rt s to the U.S. has been an un d e rvalued excha nge ra te. The Ca nad ian dollar bega n
wea ke n i ng aga i nst the U.S. dollar in 1992, just
b e fo re the Ca nad ian gove r n m e n t b egan a serious
e f fo rt to re d u ce its bu d ge t d e f i ci t. The boost to
t rade from the depre cia t i ng excha nge ra te
helped offs e t the drag on the eco n o my f rom fisca l co ns ol i dation. Indeed, as the bu d ge t d e f i ci t
was e l i m i na ted in 1997, the Ba n k o f Ca nada si g-
Canada by the numbers
Gross Domestic Product: US$650 million in 1999
Population: 30.5 billion
Consumer Price Inflation: 2.7 percent ( S e p te m b e r )
U n e m pl oy m e n t Rate: 6.9 percent (October)
Wo r ld wide Exports: $240 billion
(37 percent of GDP)
Largest Exports: A u to m o t i ve
Ma ch i n e ry
Other Indust r ia l Goods
Wo r ld wide Imports: $220 billion
(34 percent of GDP)
Largest Imports: Machinery and Equipment
A u to m o t i ve
Other Indust r ia l Goods
Currency: Canadian dollar,
recently e q u i va le n t to US$0.68
page 2
na led tha t i t t h o u g h t t ha t m o n e ta ry co n d i t i o ns
we re too loose and tha t the eco n o my co uld grow
too st ro ng l y as gove r n m e n t cu tba cks came to an
end. Howe ve r, short l y t h e rea fte r, the Asian econ o m i c cr isis hit, wea ke n i ng ex p o rt s and drivi ng
d own prices for co m m o d i t i es t ha t st ill re p res e n t
an importa n t s e c tor of the Ca nad ian eco n o my. As
a resul t the Ca nad ian dollar to o k another leg
d ow nwa rd and it has o nl y b eg un a ha l t i ng re cove ry si n ce la te 199 8. It is est i ma ted tha t the cu rre n c y is st ill 10 to 15 perce n t un d e rvalued aga i nst
the U.S. dolla r.
Low u ne m pl oy m e nt, bu d g e t su rpl us,
& t a x c uts
Cu r re n t e co n o m i c t re n ds in Ca nada point to a
r isi ng excha nge ra te. Above - t rend growth has
b ro u g h t d own un e m pl oy m e n t and turned the
bu d ge t i n to su r pl us. Indeed, the gove r n m e n t i n
Ca nada has fo und room to ena c t a mul t i -year cu t
in ta xes t ha t s h o uld give a fu rther boost to both
co nsumer and co r p o ra te sp e n d i ng in co m i ng
yea rs. And of co u rse, the continued U.S. econ o m i c ex pa nsion co n t i n u es to fu e l Ca nad ia n
ex p o rt g rowth and a hea l t hy and risi ng Ca nad ia n
t rade su r pl us .
The Ba n k o f Ca nada, like the U.S. Fe d e ra l
Res e rve, has been ra isi ng inte rest ra tes to mode ra te growth now tha t d e mand is bu m p i ng
aga i nst ca pa ci t y limits. More tighte n i ng may b e
n e cessa ry. Moneta ry co n d i t i o ns in Ca nada are
n o t as t i g h t as in the United S ta tes. Inte rest ra tes
in infla t i o n -ad j usted te r m s a re about the sa m e ,
bu t the Ca nad ian excha nge ra te is m u ch wea ke r
t han its U.S. co un te r pa rt in trad e - we i g h te d
terms. Of co u rse there are si g ns t ha t U.S. econ o m i c g rowth is b eg i n n i ng to sl ow. And wi t h
Ca nad ian ex p o rt s to the U.S. equiva le n t to
a l m ost a third of Ca nad ian na t i o na l o u t put, a
U.S. sl ow d own will ha ve a nega t i ve impa c t o n
Ca nada. More ove r, if i nvesto rs s e nse tha t U . S .
i n te rest ra tes will r ise no fu rt h e r, this may lead to
a st re ngt h e n i ng of the Ca nad ian dolla r. T h es e
t wo fa c to rs may be su f f i ci e n t to all ow the Ba n k o f
Ca nada to lea ve its i n te rest ra tes stead y, ke e p i ng
in step with the U.S. Fe d e ra l Res e rve .
Ch a se ’ s nea r
term eco n o m i c
f oreca st – su n ny
a nd pl ea sa nt f or
Ca n a d a
O ve ra ll, we are
fo re cast i ng
Ca nad ian growth in
2000 4.5 perce n t ,
the same grow t h
ra te as re co rded in
1999, and just a bi t
b e l ow tha t o f t h e
U n i ted S ta tes .
Higher inte rest
ra tes a re beg i n n i ng
to cu t i n to activi t y,
bu t Ca nada should
st ill e n joy g row t h
o f 3 .5 perce n t n ex t
yea r, as we ll as a
fu rther decline in
un e m pl oy m e n t ,
st ill l ow infla t i o n
and a co n t i n u e d
cu r re n t a cco un t su r pl us .
The pol i t i cal sce ne
The Libera l Pa rt y gove r n m e n t o f Prime Ministe r
J ean Chretien has had some rough times re ce n tl y bu t st ill a pp ea rs we ll p ositioned to be re - e le c ted to a third co ns e cu t i ve term. Pa r l ia m e n t ’ s te r m
can run through June 2002, bu t e le c t i o ns a re
ex p e c ted to be ca lled a year ea r l y to ta ke ad va ntage of the fa vo ra ble eco n o my and newly e na c ted ta x cuts. Re ce n t p olls s h ow the Libera ls a re
cu r re n t l y su pp o rted by 44 perce n t o f the ele cto ra te bu t fa ce a fra c tu red opp osition. The new
Ca nad ian All ia n ce, headed by S to ckwe ll D ay, has
fa iled to un i fy the right and finds i t s p oll ra t i ngs
l i m i ted to just 21 perce n t and co n ce n t ra ted in the
west. The old Co ns e rva t i ve Pa rt y has seen its
su pp o rt slip to just 12 perce n t and is b e l ow the
14 perce n t o f the le ft ist New De m o crats. And of
co u rse the sepa ra t ist s in Queb e c ha ve a si g n i f ica n t p o cke t o f su pp o rt. The Libera l Pa rt y cu r re n t-
l y h olds 155 of the 301 sea t s in the Lower Hous e
o f Pa r l ia m e n t and it is l i ke l y to ex pand its ma jo ri t y in the nex t e le c t i o ns .
The issue of Q u eb e c i n d e p e n d e n ce re ma i ns a
t h rea t to Ca nad ian pol i t i ca l sta bil i t y. A re fe re ndum in su pp o rt o f s e pa ration was ve ry na r row l y
d e fea ted in 1992. The Pa rti Queb e co is st ill r ules
the provi n ce, ha vi ng won ele c t i o ns h e ld in 199 8 ,
and pro m is es to hold another re fe rendum befo re
i t s term is co m ple ted in 2003. Howe ve r, su pp o rt
for independence has d ro pped and in Queb e c
t h e re app ea rs to be little inte rest in hold i ng
another re fe rendum. Bu t one of the reas o ns s e pa ra t ist fe rvor co oled may ha ve been the auste r i t y
e na c ted as the Queb e c gove r n m e n t b ro u g h t i t s
p rovi n cia l bu d ge t i n to ba la n ce. Now it, to o, is i n
a position to cu t l o ca l ta xes, which may l i ft i t s
p o pula r i t y. The st ro nger fina n cia l p osition of
Q u eb e c may a lso lift one of the concerns t ha t i n
the past a rgued aga i nst i n d e p e n d e n ce.
pag e 3
T R A D E
A L E RT
FOREIGN SALES CORPORATIONS
A C a su a l t y o f W a r ?
In a farce so improbable it could have been
written by Peter Sellers, if not the Monty Python
troupe, a tariff dispute between the U.S. and the
Eu ro p ean Union (EU) is threa te n i ng to boil over
into a serious trade war. A trade war over beef,
ba na nas and cashmere!
This dispute has turned nasty and co m pl i ca ted. Although trade disputes are ha rd l y ever big
media news, this one has been completely overshadowed by coverage of election year politicking, and has re ce i ved almost no media attention.
How se ri o us is the conflict?
The early casualty of this trade war are the
Foreign Sales Corporation (FSC) provisions of the
I n te r na l Revenue Code – Sections 921-927 of the
1986
Code.
Re ce n t l y
the
House
of
Repres e n ta t i ves passed a measure (H.R. 4986)
to abolish from the Internal Revenue Code this
l o ngsta n d i ng ta x b e n e f i t t ha t s e rved as a n
export i n ce n t i ve for many U.S. ma n u fa c tu re rs .
The measure may or may not be passed – nevertheless, if the U. S. Co ng ress is moved to abol is h
a cherished tax break, this trade dispute must be
serious!
Since 1984 the FSC provisions have provided
U.S exporters with an incentive in the form of
reduced fe d e ra l income tax l ia bility on income
earned from ex p o rt sa les. Both beloved and
maligned in equal measure, and at times si m pl y
baffling, the Foreign Sales Corporation provisions in the U.S. tax laws were found to be an
“illegal export subsidy” by none other than the
Wo r ld Trade Orga n i zation (WTO). The U.S.
Government’s a pp ea l of the WTO’s decision was
re ce n t l y rejected as well. The WTO re je c ted the
U.S. Gove r n m e n t ’ s un d e r l yi ng arg u m e n t t ha t
these FSC incentives were co m pa ra ble to the
European Union’s rebate of Value Added Taxes
(VAT) on export sales. For some reason fathpage 4
o ma ble only by i n te r na t i o na l law ye rs, rebates of
consumption-based taxes are a legal export subsidy, but a reduction of i n co m e - based taxes is an
illegal export subsidy.
Although the roots of the Eu ro p ean Union’s
objections to the FSC provisions go way back to
1976 – to the FSC’s p re d e cessors in the Internal
Revenue Code, the Domestic I n te r na t i o na l Sales
Corporation (DISC) – the heat was really turned
up after the U.S. won trade disputes with the
Eu ro p ean Union over their tariffs and restrictions
on imports of ba na nas and beef. The U.S. won
the right, again at the WTO, to levy re ta l ia to ry
tariffs on a range of goods imported from the EU.
The U.S. has drawn up a list, modifying it along
the way (cashmere was d ro pped from that list, at
Britain’s request), but has yet to actually i m p os e
the sanctions.
Some cyn i ca l observers have claimed the EU’s
actions in pushing the case against FSCs had little to do with beef, ba na nas or cashmere. They
would argue it was rea ll y just old fashioned protectionism at the behest of well connected, large
Eu ro p ean ma n u fa c tu re rs of aircraft and other
equipment – co m p e t i to rs to Boeing, Ca te r p illar,
G e n e ra l E le c t r i c and other U.S. companies who
b e n e f i t f rom the FSC i n ce n t i ves. Other, eve n
more cynical observers point out t ha t FSCs existed for 15 years before being challenged by the
Eu ro p ean Union, and it was o nl y after FSC i n ce ntives were extended to “exports” of s o ft wa re
t ha t the challenge arose. But o nl y a cynic would
believe either of these reasons were the motivation for the EU’s challenge to the FSCs.
W ha te ver the motivation, in September 1999,
the EU scored a vi c to ry in the FSC matter and, in
keeping with its role in the WTO, the U.S. ag re e d
to end the FSC incentives. In March of 2000, the
W TO ’ s Dispute S e t t le m e n t Body gave the U.S.
until October 1, 2000, to change the ena bl i ng
legislation, or face huge re ta l ia to ry tariffs. The
a m o un t of the “award” – pote n t ia ll y 100 percent
tariffs on some $4 billion of U.S. ex p o rt s to the
EU – dwarfs by a factor of at least ten the combined “awards” to the U.S. in the ba na nas and
beef disputes. Cha ng i ng U.S. tax law is n e ve r
easy, pa rt i cularly to remove a valuable tax incentive. And during an election year, it is even more
d i f f i cul t. Bu t fa ced with su ch huge co ns eq u e n ces, Co ng ress and the Administ ra t i o n
moved to re p ea l the FSC legislation from the
I n te r na l Revenue Code.
Since very few tax breaks ever rea ll y go away,
the legislation, as passed by the House, and
under consideration by the S e na te, doesn’t just
re p ea l the FSC provisions in the Inte r na l Re ve n u e
Code – it also promulgates a new regime of
i n ce n t i ves. T h is new regime is e n t i t led the
“ E x t ra te r r i to r ia l I n come Excl usion Act” which
provides a 5.25 percent reduction in taxes due
on “Extra te r r i to r ia l Income (EI).” Far from reducing the economic e f fe c t of the FSCs, the new
regime actu a ll y expands the tax break to more
goods and co m pa n i es. The FSC benefits only
applied to ex p o rt s of “qualified” goods manufa c tu red in the U. S. Certain goods, such as m il itary goods, were not qualified, nor were goods
ma n u fa c tu red outside the U.S. but whose sale
and income were included in the U. S. co m pa ny ’ s
tax f il i ngs. The EI covers those excluded products as well as income from goods ma n u fa c tu re d
ove rs eas by U.S. co m pa n i es and sold outside the
U.S., income which is to be known as “Qualified
Foreign Trade Income.” In addition, the FSC benefits were elective, while the EI regime app ea rs
not to be elective. Thus, while only about 6,000
U.S. co m pa n i es e le c ted to use the FSC benefits,
the number of co m pa n i es who will benefit f ro m
the EI will be much larger.
The new draft legislation aims at the major
contention of the EU’s claim, that the FSC was an
“ ex p o rt subsidy.” The EI will be an incentive for
U. S. co m pa n i es to sell goods abroad, whether
those goods are made here or ove rs eas. Not surprisi ng l y, the reaction of the Eu ro p ean Union
was less than enthusiastic. They claim the new
U.S. law does not co m pl y with the WTO ruling,
and have threatened re ta l iation. Rega rd less of
whether the legislation re p ea l i ng the FSC bene-
How a FSC Works
A United States based exporter co nt ra c ts with a
foreign buyer to export merch a nd i se to them.
The EXPORTER ships the merch a nd i se to the BUYER
and simultaneously books a “paper sale” to its
own Offshore Company – a Foreign Sales
Corporation(FSC). The FSC could be based in a
Ca ri bb ean tax haven such as Barbados, the
Bahamas or the Virgin Islands. The FSC completes
the sale by booking a “paper sale” to the BUYER.
By ro u t i ng the sa le through the FSC the EXPORT E R
a vo i ds ta x on the sa le. The FSC may either cha rge
i t s pa re n t – the EXPORTER – a co m m ission or si mpl y fo rwa rd the pay m e n t to them. By d o i ng this, up
to 32 perce n t o f the paper “profits” of the FSC sa le
a re excluded from U.S. co r p o ra te ta xes. When the
F S C pays a “dividend” to its pa re n t co r p o ra t i o n ,
none of the dividend is ta xed. The EXPORTER is
t h e re fo re able to re d u ce the income ta x owed on
the pro f i t s o f i t s sa les by 15 perce n t to 30 perce n t.
fits and esta bl is h i ng the EI regime meets the
WTO guidelines or not, it was not passed by the
S e na te before the October 1, 2000 deadline. The
U.S. asked for and received an ex te nsion until
November 1, 2000.
In fact, the U.S. S e na te passed the new
E x t ra te r r i to r ia l I n come Excl usion Ac t o n
November 1, 2000. The Senate then sent it back
to the House of Repres e n ta t i ves for passage
b e ca use the House version passed in S e p te m b e r
had been part of a larger tax bill which President
Clinton had threatened to veto if forwarded to
him. The stand-alone House bill was passed on
November 14th and was forwarded to President
Clinton for his si g na tu re, which is ex p e c te d .
Even though the legislation has passed and the
FSC is about to be re p ea led, the European Union
may still ask for re ta l ia to ry tariffs at the WTO
D ispu te S e t t le m e n t B o d y ’ s n ex t m e e t i ng in
Geneva.
co ntin ue d o n page 7
pa ge 5
U.S. Vietnam Trade Agreement
The United States and Vietnam signed a bilateral
trade agreement on July 13th, which, when approved,
will establish normal trade relations between these
two countries for the first time since April 1975. Some
sources estimate that imports from Vietnam into the
U.S. will increase by as much as US$800 million per
year. With Vietnam agreeing to reduce import quotas
and lower tariffs, it is hoped that the agreement will
provide U.S. investors an incentive to invest there. The
ag re e m e n t must be ratified by the United S ta tes
Congress and the Vietnamese National Assembly.
In Mexico
Mexican President-elect Vicente Fox said he plans to
offer a one-year income tax moratorium to encourage
more foreign investment but declined to say whether
the moratorium would be limited to particular sectors.
“DOT EU” Domain Name for Europe closer
to reality.
The Internet community has given strong support to
the European Union’s (EU) idea to create an “.eu”
domain name for websites.
The creation of the .eu domain is part of the eEurope
Action plan recently approved by the EU Council in
Feira, Portugal. Consultations will continue with relevant public and private sector participants and users’
associations in Europe to prepare the guidelines and
the legal framework for the registration policy of .eu.
Chase garners five Euromoney awards
Chase has won five awards from Euromoney in the
maga zi n e ’ s a n n u a l “ A wa rds for Exce lle n ce.” T h e
awards were as follows:
#1 Most Improved Investment Bank
#1 Best at Global Syndicated Loans
#1 Best at Custody & Transaction Services
#1 Best Foreign Bank in Turkey
#1 Best Bond House in Mexico
page 6
China Gains Entry into the WTO
Bilateral negotiations concluded earlier this year,
and an agreement was reached allowing China to enter
the World Trade Organization. The agreement was completed a week before the U.S. Senate voted positively
on Permanent Normal Trade Relations for China, giving
the U.S. lawmakers some additional incentive to vote
for the measure.
The Agriculture Department estimates that China’s
WTO accession would result in $2 billion annually in
additional agricul tu re ex p o rt s by 2005. Moreover,
China makes significant, one-way market opening concessions including the following:
• China has agreed to reduce import tariffs to a new
range of around 8 percent to 10 percent, with the
average tariff falling from 18.6 percent to 10.9 percent.
• Foreign investment in telecommunications will be
allowed at 25 percent on accession, 35 percent after
one year and to 49 percent after three years.
• Insurance business will be opened to foreign companies two years sooner than foreseen in the Sino-U.S.
agreement, with foreign brokers able to operate in
China, free of any joint-venture requirement, five
years after accession.
Improved market access was also secured in the
ba n ki ng, legal services, accountancy, arch i te c tu re ,
to u r ism, co nstruction and dre d g i ng, and market
research sectors.
U.S. Ranked Fifth Freest Economy
The United States, the world’s largest economy, was
tied with Luxembourg as the fifth freest economy in an
annual survey conducted by The Heritage Foundation
and The World Street Journal. Hong Kong was rated the
world’s freest economy for the seventh straight year,
Singapore was rated second, Ireland third, and New
Zealand fourth.
The survey said that the rule of law, lack of trade barriers and low taxes kept Hong Kong on the top of the
list.
On the way to 24/7 ma r ke ts :
Ch ase Lau nch es Inte rn e t F X Tr a d i ng System
Chase recently launched its Internet-based FX trading module, CHASeFX, accessible via the Chase
website. CHASeFX provides execution of spot, forward, and FX swap transactions. Approved Chase
corporate or institutional clients can access the system, which was developed by the Global Trading
Division of Chase.
Via www.chase.com, customers get the ad va n tage of . . .
• fast and consistent real-time prices in any of the 80 cu r re n ci es
and re la ted pairs in which Chase makes markets
• the embedded chat box, which allows clients to initiate on-line
conversations with Chase’s cu r re n c y p ro fessi o na ls
• the ability to view and customize a log of all completed trades –
and dow nl oad it to Excel.
A sepa ra te module, Chase Netmatch, provides a u to ma ted online foreign exchange confirmation delivery
and matching. The pass wo rd - p ro te c ted application, also available on the Chase Foreign Exchange Website,
enables clients to confirm deals in real time and bypass the former bu rd e nsome process of phone, mail or
fa x- based co n f i r ma t i o ns .
For e i gn Sa l es Cor po r ati ons
contin ued f rom page 5
Your strategy
W ha t is an exporter to do? If you have an FSC?
If you don’t?
First of all, relax. The legislation abolishing the
FSC election provides for its use until De ce m b e r
31, 2001. If t ha t date falls in the middle of an
exporter’s fiscal year, it is likely they will be able
to use the FSC election for qualified export sales
made on or befo re De cember 31, 2001. T h e
E x t ra te r r i to r ia l Income Exclusion presu ma bl y will
take effect even sooner, when the Senate passes
its bill and it is re co n ciled with the House version. At this time the legislation does not provide for any sp e ci f i c e f fe c t i ve da te to beg i n
excluding “Extra te r r i to r ia l Income.”
Second, remain abreast of this situation by following developments in the news and through
specialized media. Your acco un ta n t or law ye r
may be able to keep you apprised of future
developments, and their impact on your company.
If your acco un ta n t or lawyer is un fa m il iar with
the FSC/EI issue, you may wish to refer to a specialized organization. For instance, one useful
s o u rce of i n fo r mation is the FSC/DISC Ta x
A ss o ciation in White Plains, NY. Their websi te :
w w w. fd ta - ci te .o rg is very i n fo r ma t i ve and up to
date. It is a good place to dive into the whole FSC
issue, and to return to as new developments
occur. Another useful website is t ha t of the U.S.
Mission to the Eu ro p ean Union, www. us e u . b e ,
through which the U.S. negotiates with the EU on
trade ma t te rs.
Why bother to stay cu r re n t with such an obtuse
and confusing subject, pa rt i cularly when you
have a business to run? The convoluted politics,
not to mention the mind-numbing tax legislation, is of i n te rest to very few people. But, if
you’ve already made use of the FSC election, you
know the answer to that question: “there’s real
money involved.”
This article is i nt e nd ed as a brief look at a complicated, dynamic situation. It does not p u rp or t
to offer l eg al, tax or business advice. For l eg al or
tax advice related to FSCs or the new EI regime,
readers are urged to consult with their l aw ye r or
acco u nt a nt.
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Tr a d eTi p s
B o l e ro
The goal of the Bolero Online Trade System, generally known these days
as bolero.net, has been to create a secure network for the transmission of
trade documents.
In June, Chase Manhattan Bank became the latest of the global banks
to begin to offer online trade through bolero.net, being one of over 40 participants currently signed up.
One of the biggest challenges for bolero.net was to create a book of rules that address signature requirements, document validity and functional characteristics of trade documents.
The wor ld’s bus i est a i r ports
Can you name the wo r ld ’ s busiest a i r p o rt s in 1999 in
terms of passengers?
A t la n ta
Chicago
Los Angeles
London
Dallas - Fo rt Wo rt h
(77.9 million)
(72.6 million)
( 63 .9 million)
(62.3 million)
(60.0 million)
Can you name the wo r ld ’ s busiest a i r p o rt s in 1999 in
terms of ca rg o ?
Memphis
Hong Kong
Los Angeles
Tokyo
JFK, New York
(2.41 million metric tons in freight and ma il )
(1.99 million metric tons in freight and ma il )
(1.95 million metric tons in freight and ma il )
(1.84 million metric tons in freight and ma il )
(1.74 million metric tons in freight and mail)
Bill Repeals Foreign Sales Corporations
The U.S. House of Repres e n ta t i ves passed legislation to bring a $4 billion tax credit for American exporters
into co m pl ia n ce with global trade laws. By re p ea l i ng the Foreign Sales Corporation (FSC) program and
adopting a tax r ul i ng that relies on a diffe re n t legal footing to offer exporters ro u g hl y the same benefits,
the U.S. hopes to pre ve n t a trade war with the European Union (EU). U.S. officials and law ma ke rs are hoping that the changes will mollify the World Trade Organization, which considers the FSC tax credits an illegal subsidy for thousands of U.S. co m pa n i es. The benefits under existing FSC’s will continue to accrue
until December 31, 2001. (See acco m pa nying article page 4)
Ch a nges at Ch ase Te x as
E f fe c t i ve August 1st, Chase Bank of Texas
officia ll y became a branch of The Chase
Ma n ha t tan Bank. Due to regula to ry changes,
Chase was able to benefit by going to a
b ra n ch i ng arrangement in Texas. Chase’s
Letter of Credit De pa rt m e n t in Texas is now
further integ ra ted into the Chase Global
Network and is even better positioned to
offer leading letter of credit and trade
f i na n ce services to companies in Texas and
the Southwest.
You can contact the following for assistance in Texas.
The Chase Manhattan Bank
Trade Services Division
717 Travis Street, Third Floor
Mail Station 3 CBBS 300
Houston, Texas 77252
Attention: Bob Blades, SVP, Trade Finance/Trade Sales
Division at (713) 216-6341 or Sh e rr y Mama, VP and Trade
Services Division Ma n ag e r at (713) 216-5668
If you have any comments about this issue or any future issues of TRADE TALK or if you want to view future issues of TRADE
TALK via the Internet, please send your comments and E-Mail address to: Tradetalk@chase.com.
© Copyright 2001 Chase Manhattan Bank, 1166 Avenueof the Americas, NY, NY 10036.
Please dire c ta ny inquiries to Jackie Kaiko, Senior Vice President, (212) 899-1229.
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