"The trade of conflict diamonds is a serious problem," Grassley said. "Funds from the sale of these diamonds add fuel to civil conflicts in several African countries and elsewhere. Millions of people end up suffering. These countries and their people deserve our support. Passing this bill is the right thing to do."
The Finance Committee today unanimously passed the Clean Diamond Trade Act (S. 760), which Grassley introduced last night with strong bipartisan support, as modified during committee consideration (please see below for a full description). The legislation will implement the United States' participation in the Kimberley Process Certification Scheme for trade in rough diamonds. The Kimberley plan is an international agreement establishing minimal acceptable international standards for national certification relating to cross-border trade in rough diamonds. It represents more than two years of negotiations among more than 50 countries, human rights advocacy groups, the diamond industry, and non-governmental organizations.
Grassley has heard from dozens ? and possibly hundreds ? of Iowans, urging him to stop the trade of conflict diamonds. The Iowans wrote to Grassley on behalf of the Campaign to Eliminate Conflict Diamonds, an umbrella group of human rights organizations including Amnesty International, Oxfam America, World Vision, and Catholic Relief Services. Today, Catholic Relief Services put out a news release supporting today's legislative effort.
"The United States played a leadership role in crafting the Kimberley Process Certification Scheme," Grassley said. "It's important that we continue our leadership role on this important issue."
Grassley said conflict diamonds are mined and used by rebel movements in many African nations as a source of revenue to fuel armed conflict and the activities of rebel movements aimed at undermining or overthrowing legitimate governments in African countries. "Millions of people have been driven from their homes by wars over control of these diamonds," Grassley said. "Families and entire countries have been torn apart."
Grassley said the Clean Diamond Trade Act is a compromise bill that he worked on with bipartisan supporters of efforts to stop trade in conflict diamonds. Grassley said prior attempts to move similar bills stalled in both the House and the Senate, so he worked to put together a bill that implements a certification process that meets the United States' international responsibilities, that can pass the House and the Senate, and most importantly, that works.
Grassley said he hopes the Senate and House will adopt the Clean Diamond Trade Act before the next plenary session of the Kimberley Process Certification Scheme, which is scheduled to convene in Johannesburg, South Africa, from April 28 to April 30, 2003. The timing is important to ensure that the United States retains its leadership in the Kimberley process and does everything possible to stop the trade of conflict diamonds as soon as possible, Grassley said.
"This is a trade issue, a consumer issue, and most of all, a human rights issue," Grassley said. "Legitimate trade can elevate the standard of living for people all over. And the benefits of trade in valuable natural resources like diamonds should accrue to the peace-loving majority instead of the violent rebel minority."
The Clean Diamond Trade Act implements the United States' obligations as a participant in the Kimberley Process Certification Scheme (KPCS). The KPCS was developed by the United States and other nations to remove conflict diamonds from the legitimate diamond trade. Conflict diamonds are so named because fighting over diamond mines fuels and sometimes funds civil conflicts in some African countries. The KPCS represents the culmination of many years of work by President Bush and prior administrations to end trade in conflict diamonds. This legislation ensures that the United States will assume the specified responsibilities of participation, including that imported and exported rough diamonds be properly certified, and that the United States trade only with participating countries. Presently, the participating countries include: Algeria, Angola, Armenia, Australia, Belarus, Botswana, Brazil, Burkina Faso, Cameroon, Canada, Central African Republic, China (People's Republic of), Congo (Democratic Republic of) , Congo (Republic of), Cote D'lvoire, Cyprus, Czech Republic, European Community, Gabon, Ghana, Guinea, Guyana, Hungary, India, Israel, Japan, Korea (Democratic People's Republic of), Korea (Republic of), Laos, Lebanon, Lesotho, Malaysia, Mali, Malta, Mauritius, Mexico, Namibia, Norway, Philippines, Russian Federation, Sierra Leone, South Africa, Sri Lanka, Swaziland, Switzerland, Tanzania, Thailand, Togo, Turkey, Ukraine, United Arab Emirates, United States of America, Venezuela, Vietnam, and Zimbabwe. The trading entities of Taiwan, Penghu, Kinmen and Matsu are also recognized as participants.
The next plenary session of the Kimberly Process is scheduled to convene in Johannesburg from April 28th to the 30th, 2003. Implementation of the KPCS by the United States prior to April 28th, 2003 will ensure that the U.S. continues its leadership role in curtailing trade in conflict diamonds.
Note: The bill adopted by the committee today includes a modified amendment introduced by Sen. Max Baucus, ranking member, that establishes a Kimberley Process Coordinating Committee to coordinate implementation of the Act. The coordinating committee is to be co-chaired by the Secretary of Treasury and the Secretary of State and composed of the Secretary of Commerce, the United States Trade Representative, the Secretary of Homeland Security, and a representative of any other agency the President deems appropriate. This provision will be incorporated into the bill in the appropriate section, to be determined.
Sec. 1. Short Title. This Act may be cited as the "Clean Diamond Trade Act."
Sec. 2. Findings. Enumerates congressional findings regarding the Act.
Sec. 3. Definitions. Defines terms utilized in the Act.
Sec. 4. Measures for the Importation and Exportation of Rough Diamonds. Sec. 4(a) Requires the President to prohibit the importation or exportation of rough diamonds that have not been controlled through the Kimberley Process Certification Scheme. Sec. 4(b) Authorizes the President to waive the prohibition for periods of not more than one year if the President determines and reports to Congress that a country is taking steps to implement the Kimberley Process or the President determines and reports to Congress that the wavier is in the national interest of the United States.
Sec. 5. Regulatory and Other Authority. Sec. 5(a) Authorizes the President to issue such proclamations, regulations, licenses, and orders, and conduct such investigations as necessary to carry out the legislation. Sec. 5(b) Requires any U.S. person importing rough diamonds into or exporting rough diamonds from the United States to keep a full record of any transaction covered by the legislation and authorizes the President to require the production of such records under oath. Sec. 5(c) Mandates the President to require the appropriate agency to conduct annual reviews of the procedures of any entity in the United States that issues Kimberley Process Certificates for exportation, to determine whether they are in accordance with the Kimberley Process.
Sec. 6. Importing and Exporting Authorities. Sec. 6(a) Provides that the importing authority shall be the U.S. Bureau of Customs and Border Protection and that the exporting authority shall be the U.S. Census Bureau. Sec. 6(b) Requires the Secretary of State to publish a list of all participants to the Kimberley Process and all exporting and importing authorities of those participants. Sec. 6(b) Also requires the Secretary to update the list of participants as necessary.
Sec. 7. Statement of Policy. Expresses congressional support for presidential efforts to facilitate the adoption of the KPCS by other countries.
Sec. 8. Enforcement. Provides for civil and criminal penalties for violations of the Act both under and in addition to existing law.
Sec. 9. Technical Assistance. Permits the President to direct federal agencies to provide technical assistance to countries trying to implement the Kimberley Process.
Sec. 10. Sense of Congress. Expresses the Sense of the Congress that: the Kimberley Process is an ongoing process and that the President should work to strengthen the KPCS through the adoption of measures on the sharing of statistics on rough diamond trade and for monitoring the effectiveness of the process; that the President should keep and publish statistics on the importation and exportation of rough diamonds, make these statistics available for analysis, and take a leadership role in negotiating a standardized methodology for reporting import and export statistics.
Sec. 11. Reports. Provides for annual and semiannual reports to be submitted by the President to Congress, including a report on whether there is statistical or other information that would indicate circumvention of the KPCS.
Sec. 12. GAO Report. Requires the Comptroller General to transmit a report to Congress no later than 24 months after the effective date of the Act on the effectiveness of the Act in preventing trade in conflict diamonds.
Sec. 13. Effective Date. Provides an effective date for the Act.
"It makes common sense for ethanol taxes to contribute just as much to building highways as traditional gasoline taxes," Grassley said. "It isn't logical for a smaller portion of ethanol taxes to contribute to highways than the taxes from traditional gasoline. All types of vehicle fuel taxes should contribute equally to highway construction and maintenance."
Grassley is chairman of the Senate's tax-writing Finance Committee. He included his ethanol proposal, co-sponsored by Sen. Max Baucus, ranking member of the Finance Committee, and committee members Sens. Tom Daschle, the Senate Democrat Leader, and Jim Jeffords, the ranking member of the Committee on Environment and Public Works, in his chairman's version of comprehensive energy tax legislation under consideration by the committee this morning.
This overall legislation ? the Energy Tax Incentives Act of 2003 ? contains a series of Grassley-sponsored pro-Iowa tax incentives encouraging alternative and traditional energy production and conservation and energy efficiency.
The bill includes extension of the wind-energy tax credit Grassley authored in 1992. The legislation also extends the tax credit for biomass production; provides an income tax credit and excise tax rate reduction for biodiesel fuel mixtures; helps smaller, cooperative ethanol producers; creates a production tax credit for electricity generated from swine and bovine waste; and, establishes a tax credit for the manufacture and use of super energy-efficient washing machines and refrigerators.
"We need to use the federal tax code to encourage the production and use of the kind of clean-burning alternative energy we make in Iowa," Grassley said.
The ethanol excise tax reform proposal under consideration today is significant because under the current gasoline excise tax system, the federal excise tax paid for gasoline is 18.4 cents per gallon. The full tax is deposited into the federal government's General Fund. The leaking underground storage tank transfer is deducted at .1 cents. The remainder is transferred to the Highway Trust Fund. After the 18.3 cent transfer of revenue from the General Fund, the Highway Trust Fund transfers 2.86 cents to the Mass Transit Account of the Highway Trust Fund.
Because of the partial excise tax exemption, ethanol-blended gasoline remits 13.2 cents to the General Fund. Of that 13.2 cents, .1 cents goes to the leaking underground storage tank transfer. Generally, 2.5 cents goes to the General Fund for deficit reduction. Thus, under current law, the Highway Trust Fund receives 10.3 cents from the excise tax on ethanol-blended gasoline. Of the 10.3 cents, 2.86 cents is transferred to the Mass Transit Account.
Under the current system, an estimated $2 billion a year is lost from the Highway Trust Fund.
Grassley's proposal would ensure that 18.4 cents a gallon tax would be paid into the Highway Trust Fund on every gallon of gasoline or gasoline/ethanol blends of fuel. His proposal also would eliminate the 2.5 cents currently withheld by the General Fund. This would ensure that all ethanol-blended fuels would make the same contribution to the improvement and maintenance of the nation's highway and bridge network as regular gasoline.
Grassley's proposal also would create a new ethanol tax credit in a new section of the tax code that allows blenders to take an excise tax credit on the gallons of ethanol blended with gasoline. This credit would be on the gallons of ethanol used and is based on the current 52 cents per gallon income tax incentive (which equates to 5.2 cents on a 10 percent blend of ethanol with 90 percent gasoline).
In addition, the Grassley proposal would allow for the elimination of "blend rate tiers" (i.e. 5.7 percent, 7.7 percent, and 10 percent) and all future credits will be based on the renewable fuel gallons blended. This would streamline the tax code and provide refiners with added flexibility to meet regional air quality needs.
"Our highway needs are great. Our dependence on imported fuel should decrease," Grassley said. "This restructuring of ethanol excise taxes contributes to both of those priorities. At the same time, it preserves all incentives to use the clean-burning, renewable, domestically produced ethanol, the fuel of the future."
Grassley has a long history of promoting expanded use of renewable sources of energy. In addition to sponsoring the first-ever wind energy production, in 1997, he led the successful effort to extend the ethanol tax credit for ten years. In February, Grassley introduced legislation with Sen. Blanche Lincoln, of Arkansas, to provide an income tax credit and excise tax rate reduction for biodiesel fuel mixtures.
"Renewable fuels like ethanol and biodiesel will improve air quality, strengthen national security, reduce the trade deficit, decrease dependence on Saddam Hussein for oil, and expand markets for agricultural products," Grassley said.
Grassley's ethanol excise tax proposal won the support of an historic coalition of highway and ethanol groups. The text of the coalition's letter follows.
April 1, 2003
Dear Chairman Grassley and Senator Baucus:
As Congress begins debate on energy policy legislation and reauthorization of the federal surface transportation programs, several modest revisions to the federal tax code could facilitate two critical objectives: promoting the use of alternative fuels and improving the nation's highway and bridge network. One of the ways in which the U.S. seeks to decrease its dependence on foreign oil is through the use of alternative fuels, such as gasohol (a blend of ethanol and gasoline). Meanwhile, highway capital improvements are financed primarily through the collection of highway user fees, including an excise tax on gasoline, diesel and alternative fuels. We strongly support the legislation you have developed that would allow Congress to meet both objectives in a constructive manner.
Under the gasoline excise tax system, the Federal Excise tax paid for gasoline is 18.4 cents per gallon. The tax is collected on a quarterly basis using the IRS excise tax Form 720. The full tax is deposited into the General Fund (GF). The leaking underground storage tank (LUST) transfer is deducted at .1 cents and the remainder is transferred to the Highway Trust Fund (HTF). After the 18.3 cent transfer of revenue from the GF, the HTF transfers 2.86 cents to the Mass Transit Account of the Highway Trust Fund.
Because of the partial excise tax exemption, ethanol blended gasoline remits 13.2 cents to the General Fund (18.4 ?5.2). Of that 13.2 cents, .1 cents goes to LUST and either 2.5 or 2.8 cents (depending on whether it was an "above" or "below" the rack blend) is withheld by the GF for deficit reduction purposes. Thus, under current law, the HTF receives 10.3 cents from the excise tax on ethanol-blended gasoline. Of the 10.3 cents, 2.86 cents is transferred to the Mass Transit Account.
Promoting the use of alternative fuels is clearly in the national interest, but the reduced gasohol excise tax and the portion of the gasohol excise retained in the GF have reduced revenues for highway improvements (mass transit currently receives 2.86 cents a gallon tax on every gallon of gasoline or gasoline/ethanol blends of fuel and is not affected by this proposal). Under current federal excise tax policy, it is anticipated that on average, approximately $2 billion per year would be foregone in HTF revenues (approximately 5.2 cents plus 2.5 cents per gallon for deficit reduction purposes).
We look forward to working with you in the U.S. Senate to incorporate your legislative proposal into law this year. Currently, the 5.2 cents deduction from the federal tax on gasoline is a gasohol excise tax exemption, a subparagraph of the gasoline excise tax in the Internal Revenue Code (IRC). Your proposal would eliminate the IRC subparagraph that allows the 5.2 cents exemption ? which means that 18.4 cents a gallon tax would be paid into the Highway Trust Fund on every gallon of gasoline or gasoline/ethanol blends of fuel. Your proposal would also eliminate the 2.5/2.8 cents currently withheld by the GF. This would ensure that all ethanol blended fuels would make the same contribution to the improvement and maintenance of the nation's highway and bridge network as regular gasoline.
Secondly, your proposal would create a new ethanol tax credit in a new section of the IRC that allows blenders to take an excise tax credit on the gallons of ethanol blended with gasoline. This credit would be on the gallons of ethanol used and is based on the current 52 cents per gallon income tax incentive (which equates to 5.2 cents on a 10 percent blend of ethanol with 90 percent gasoline).
In addition, the proposal would allow for the elimination of "blend rate tiers" (i.e. 5.7 percent, 7.7 percent, and 10 percent) and all future c redits will be based on the renewable fuel gallons blended. This would streamline the tax code and provide refiners with added flexibility to meet regional air quality needs.
The result of your proposal would allow all excise taxes collected to be deposited in the Highway Trust Fund and all credits accrued for the purchase of renewable fuels to be based on actual gallons purchased that displace fossil fuel. As such, two important national priorities would be achieved: ensuring all users of the nation's highway network contribute equally to its improvement; and decreasing U.S. dependence on imported fuel.
Again, we strongly support your proposal. And we will urge your colleagues in the Senate and House to do the same. Your longstanding leadership on transportation investment and renewable fuels policy continues to be greatly appreciated.
Sincerely,
Renewable Fuels Association
American Road & Transportation Builders Association
National Corn Growers Association
U.S. Chamber of Commerce
National Farmers Union
Associated General Contractors of America
American Soybean Association
American Association of State Highway & Transportation Officials
American Farm Bureau Federation
Laborers' International Union of North America
Clean Fuels Development Coalition
International Union of Operating Engineers
Soybean Producers of America
National Stone, Sand & Gravel Association
American Corn Growers Association
American Public Transportation Association
New Uses Council
National Association of Counties
National Asphalt Pavement Association
National Ready Mixed Concrete Association
American Highway Users Alliance
National League of Cities
Association of Equipment Manufacturers
American Traffic Safety Services Association
American Society of Civil Engineers
American Council of Engineering Companies
American Concrete Pavement Association
National Utility Contractors Association
Associated Equipment Distributors
Transportation Construction Coalition
Americans for Transportation Mobility Coalition