A U.S. program, which allowed United States-based corporations to set up offshore shell companies to carry out export sales that provided substantial tax breaks. For various reasons the vast majority of such FSC’s were established in the Virgin Islands with the result that so many were established that it was estimated that there was one for every 28 members of the population. The FSC program and its successor the Extraterritorial Income Act were held to be illegal subsidies by the WTO repeatedly, which authorized the EU in 2004 to impose tariffs of up to $4 billion on U.S. exports.
The EU began in March 2004 to impose tariffs of 5 percent on various U.S. products, targeting goods manufactured in key electoral districts and provided that the rate would increase by one percentage point per month up to 17 percent; by October 1, 2004 the tariff rate was 12 percent. The American Jobs Creation Act of 2004, abolishing the illegal programs was enacted rapidly by the U.S. Congress (House passage October 7, 2004, Senate October 11) and signed by President George W. Bush on October 22, just in time for the November 2004 Presidential and Congressional election.