~9513] SELECTING AN FSC MANAGEMENT COMPANY
By Robert Feinschreiber, Attorney (New York and Florida), Partner: ExportDISC Management Company, Key Biscayne, Florida.
A foreign sales corporation
(FSC) almost always needs an offshore trust or management company,
since it probably can't operate offshore on its own. The management
company functions as the FSC's agent, ensuring that it meets the
requirements of the Internal Revenue Code, and performing other
business-related services. This analysis examines 10 fundamental
criteria for an exporter to consider in selecting an FSC management
--" For the gross receipts of the FSC (unless it is a small FSC) to qualify as foreign trading gross receipts under the Code, the FSC must satisfy both a foreign management test and a foreign economic processes test. The foreign management test is satisfied if:
The foreign economic processes
test is satisfied for gross receipts from certain
categories of activities relating to export property if the FSC participates outside the United States in solicitation, negotiation, or making of the contract for the transaction, and either
The activities relating to export property are as follows:4
These and other FSC requirements can be overseen and handled by the FSC management company.
(2) Business Experience
A management company to an FSC must offer many different services to exporters with diverse business practices and financial needs. So when selecting a management company, the exporter should strongly weigh the breadth and depth of the management company's business and financial experience.
Historically, management companies often were established as trust companies by international financial institutions, and many still are such trust companies. But recently, more management companies have been formed by private individuals who don't meet the requirements of the financial institutions. Because these ...
Footnote references start at the end of this analysis.
II @ 1985 P-H Inc.-U.S. Taxation of International Operations: Tax Ideas ~9S13