Word: exporters
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Would large corporations export without the tax break? Well, yes. "Boeing's not going to stop the sale of a 747 just because there's no FSC," Englert opines. "Exports would go on just like they have throughout history...
...maintain their records, open a bank account, conduct that annual board meeting and provide an offshore postal address. "FSCs are transparent companies," says a longtime agent on St. Thomas. "They don't really exist." To comply with the law, companies send their already processed sales invoices, brochures and other export literature in boxes to St. Thomas for mailing. Perhaps 50 islanders, mostly low-salaried clerical help, work in the FSC field...
...company Sittig oversees on St. Thomas, Export Assist Virgin Islands, is one of the islands' largest FSC managers. It employs seven people. Joseph G. Englert, president of its parent, Export Assist, Inc., San Francisco, disputes the notion that FSC management companies are just paper-shuffling operations. "We help [clients] with sales," he says. "We help them with transportation. We do what they call those economic processes, and we do a fair amount, [as] documented by real money being spent in our offices... So things really are going...
Nevertheless, U.S. corporations have staunchly defended FSCs, saying they encourage exports and make American companies more competitive with foreign producers. Jeremy Preiss, chief international trade counsel for United Technologies Corp., testified before Congress last July that FSCs are "necessary to help level the playing field on which U.S. and foreign exporters compete." Further, say advocates of subsidizing exports, the U.S. is merely doing what other nations do through a range of helpful export measures. True enough. But European companies traditionally shoulder higher taxes than American companies and help sustain elaborate social-welfare systems of the sort the U.S. has never...
Furthermore, since the U.S. is a member of the World Trade Organization, it is obligated to resolve any subsidy issue before that body. That's exactly what the European Union attempted to do last November, when it filed a complaint with the WTO charging that FSCs are export subsidies and thus prohibited by world trading rules. The WTO has since appointed a dispute panel to hear the charge and make a recommendation...