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Washington Outlook Archive

Border Tax Bill Introduced In Senate

James A. Morrissey, Washington Correspondent

Sen. Lindsey Graham, R-S.C., has introduced legislation that would address long-standing problems US textile manufacturers have with the value added tax (VAT) systems used by a number of major US trading partners.

VATs are border-adjusted taxes that some countries rebate when their manufacturers export to the United States. In addition, those governments apply VATs to imports entering their countries. VATs are particularly costly because they are applied to all freight, insurance and tariff costs in addition to the actual value of the imported items.

The United States does not have a VAT system or any other border taxes. As a result, it does not have a mechanism of offset foreign border tax subsidies, which places US manufacturers at a competitive disadvantage.

Sen. Graham's legislation directs the US Trade Representative to negotiate fair border tax arrangements with other countries by Jan. 1, 2010.

At the annual meeting of the National Council of Textile Organizations last week, Rep. Michael Michaud, D-Maine, who is a co-founder of the 37-member House Trade Working Group, said VAT-offsetting legislation is one of that group's highest priorities.

May 19, 2009