PUBLIC LAW 106-519—NOV. 15, 2000 114 STAT. 2427 "(1) IN GENERAL.— Except as provided in subsection (c), a taxpayer shall be treated as having foreign trading gross receipts from any transaction only if economic processes with respect to such transaction take place outside the United States as required by paragraph (2). " (2) REQUIREMENT. — "(A) IN GENERAL. —The requirements of this paragraph are met with respect to the gross receipts of a taxpayer derived from any transaction if— "(i) such taxpayer (or any person acting under a contract with such taxpayer) has participated outside the United States in the solicitation (other than advertising), the negotiation, or the making of the contract relating to such transaction, and "(ii) the foreign direct costs incurred by the taxpayer attributable to the transaction equal or exceed 50 percent of the total direct costs attributable to the transaction. "(B) ALTERNATIVE 85-PERCENT TEST.—^A taxpayer shall be treated as satisfying the requirements of subparagraph (A)(ii) with respect to any transaction if, with respect to each of at least two subparagraphs of paragraph (3), the foreign direct costs incurred by such taxpayer attributable to activities described in such subparagraph equal or exceed 85 percent of the total direct costs attributable to activities described in such subparagraph. "(C) DEFINITIONS.— For purposes of this paragraph— "(i) TOTAL DIRECT COSTS. —The term 'total direct costs' means, with respect to any transaction, the total direct costs incurred by the taxpayer attributable to activities described in paragraph (3) performed at any location by the teixpayer or any person acting under a contract with such taxpayer. "(ii) FOREIGN DIRECT COSTS.— The term 'foreign direct costs' means, with respect to any transaction, the portion of the total direct costs which are attributable to activities performed outside the United States. "(3) ACTIVITIES RELATING TO QUALIFYING FOREIGN TRADE PROPERTY.— The activities described in this paragraph are any of the following with respect to qualifying foreign trade property— "(A) advertising and sales promotion, "(B) the processing of customer orders and the arranging for delivery, "(C) transportation outside the United States in connection with delivery to the customer, "(D) the determination and transmittal of a final invoice or statement of account or the receipt of payment, and "(E) the assumption of credit risk. " (4) ECONOMIC PROCESSES PERFORMED BY RELATED PER- SONS.—A taxpayer shall be treated as meeting the requirements of this subsection with respect to any sales transaction involving any property if any related person has met such requirements in such transaction or any other sales transaction involving such property.
�
