Caterpillar Tractor Co.:
Another Look at
WHTC and FISC
Since the DISC provisions became law almost eight years ago, more than ten thousand DISCs have been formed, but no company has used DISCs more successfully than the Caterpillar Tractor Company. This article examines the company's strategy, its victory in the Court of Claims, and an updated approach for obtaining these benefits.
Caterpillar Tractor Co. used a DISC and a WHTC in tandem to obtain double benefits from the same transaction. The company sold its products to its WHTC when the goods had a Western Hemisphere destination and the WHTC received an arm's-length profit.. Then Caterpillar paid a commission on these sales to its DISC, and the profit to the DISC was based on the safe-haven intercompany pricing rules.
How the DISC-WHTC Combination
This tandem use of the DISC and WHTC was particularly beneficial because all of the substance was in the WHTC. Thus, the company was able to put a profit based on substance in the WHTC and a profit based on the safe-haven rules in the DISC. The following example illustrates the potential benefit of this device.