EU Imposes Sanctions While Senate Debates FSC Repeal

The European Union (EU) began imposing sanctions on March 1 on selected U.S. products, including certain meat, dairy and sugar products, cereals, perfumes and cosmetics and soap products. The EU action is part of a EU-US dispute before the World Trade Organization (WTO), where the WTO found the U.S. Foreign Sales Corporation/ Extraterritorial Income Exclusion Act (FSC/ETI) tax regime illegal. The additional duties start at 5 percent and then increase an additional one percent each month thereafter until the penalties reach 17 percent.

The EU will remove the sanctions as soon as Congress passes legislation to fix the FSC/ETI regime. In October, the Senate Finance Committee passed S. 1637, the JOBS Act, which repeals the FSC/ETI and replaces it with a 3 point tax rate cut on income from US-based manufacturing. Now on the Senate floor, it is uncertain when a vote on the legislation will occur.