26 U.S.C. § 5000C: Imposition of tax on certain foreign procurement

There is hereby imposed on any foreign person that receives a specified Federal procurement payment a tax equal to 2 percent of the amount of such specified Federal procurement payment. the provision of goods, if such goods are manufactured or produced in any country which is not a party to an international procurement agreement with the United States, or the provision of services, if such services are provided in any country which is not a party to an international procurement agreement with the United States. For purposes of this section, the term “foreign person” means any person other than a United States person. The amount deducted and withheld under chapter 3 shall be increased by the amount of tax imposed by this section on such payment. For purposes of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A. The head of each executive agency shall take any and all measures necessary to ensure that no funds are disbursed to any foreign contractor in order to reimburse the tax imposed under section 5000C of the Internal Revenue Code of 1986. The Administrator for Federal Procurement Policy shall annually review the contracting activities of each executive agency to monitor compliance with the requirements of paragraph (1). For purposes of this subsection, the term ‘executive agency’ has the meaning given the term in section 4 of the Office of Federal Procurement Policy Act ([former] 41 U.S.C. 403 ) [see 41 U.S.C. 133 ].”