The U.S.-Bahrain Free Trade Agreement (FTA) is an agreement between the United States and Bahrain that allows both nations to strengthen and develop economic relations and to establish free trade between the two nations through the reduction and elimination of barriers to trade in goods and to investment; and to lay the foundation for further cooperation to expand and enhance the benefits of such agreement.
The U.S.-Bahrain FTA provides new market access for U.S. consumer and industrial products as well as agricultural products. All bilateral trade in consumer and industrial products became duty-free immediately upon entry into force of the Agreement. In addition, Bahrain provides immediate duty-free access for U.S. agricultural exports in 98% of agricultural tariff lines. Bahrain will phase out tariffs on all remaining products within ten years.
Bilateral trade in qualifying textiles and apparel goods became duty-free upon the date the Agreement entered into force, promoting new opportunities for U.S. and Bahraini fiber, yarn, fabric and apparel manufacturing. The Agreement requires most qualifying textiles and apparel to be made from either U.S. or Bahraini yarn and fabric and contains a temporary transitional allowance for textiles and apparel that do not meet these requirements (up to a specified limit), so that U.S. and Bahrain producers can develop and expand business contacts.
The U.S.-Bahrain FTA allows U.S. suppliers of goods to be more price-competitive in the Bahraini market simply due to duty reduction and elimination. A U.S. exporter whose goods qualify under the Agreement may afford its buyer considerable savings. U.S. exporters also have a competitive advantage in Bahrain against competing third country exporters that do not have the duty benefits provided under the FTA.
Through this Agreement, Bahrain opened its services market wider than any previous FTA partner. The sectors that appear to be best prospects for new business in Bahrain include:
Bahrain is a principal financial services hub in the Middle East. Legal, regulatory, and accounting systems in the financial sector (onshore and offshore) are transparent and consistent with international norms. International financial institutions operate in Bahrain, both internationally and domestically, without impediments. Bahrain's attraction as a financial center is based on its established offshore facilities, free foreign exchange movement, tax-free status, stable Bahraini Dinar-USD foreign exchange rate, established insurance sector, modern telecommunications systems, and prime geographical location among the Gulf Cooperation Council (GCC) countries. The financial sector has established itself as a key employment generator for Bahrain.
Education & Training Services
The establishment of new private universities, which is supported by the Government of Bahrain in order to promote higher education, is a primary driver in the recent growth in the education sector. The Crown Prince and the Bahrain Defense Force Commander-in-Chief launched a national reform initiative in 2004 that is aimed at creating a new economic, labor, education and training vision for the Kingdom. The Government of Bahrain is seeking to establish Bahrain as a regional center for human resource development. Bahrain has over 50 training institutes that offer training in a variety of areas such as hospitality, information technology, business studies, English language studies, and banking. The Ministry of Labor is actively encouraging international education and training organizations to set up bases in Bahrain. With a total investment of approximately $50 million, four new private universities have opened since late 2002.
Bahrain has a modern health system. All Bahrainis receive free state health care. Current plans for the health services sector include the construction of a third large public hospital, the King Hamad Hospital in Muharraq, where construction on the project has already started. The Royal College of Surgeons will use the medical facilities as a learning hospital. In the private sector, the Boston-based Joslin Diabetes Center (JDC) constructed its first facility outside the U.S. in Bahrain in 2003. Due to increased demand for diabetes treatment in Bahrain and the Gulf, in 2004, JDC announced plans to expand the existing facility with an additional building. In 2002, a $45 million private hospital, the Bahrain Specialist Hospital, contributed to the growth in the country’s private medical services with the establishment of the Ibn Al Nafees Hospital. Bahrain Ministry of Health officials have also announced that the government might start outsourcing certain jobs, including the management of both medical and non-medical services in the $80 million King Hamad Hospital, expected to complete in 2007.
Bahrain always has been a tourist favorite amongst regional and international visitors. The Bahrain Ministry of Information is working diligently to upgrade the tourism sector through granting licenses for projects that will expand family tourism. Part of these efforts is directed towards providing attractions and events that will increase tourists' length of stay. Longer term, investment opportunities exist for large-scale tourist attractions that appeal to the international tourist. Given the current composition of tourists to Bahrain (mainly visitors from the GCC), the demand by these tourists for secondary homes in Bahrain is also expected to increase. In addition, with the notable rise in shopping malls and complexes in Bahrain, there are increasing opportunities for international restaurant chains, theatres, and other entertainment activities. Tourism development is not limited to leisure tourists. Health tourism (fitness centers and spas, for example) and business tourism (fairs and exhibitions) also represent significant opportunities for investors.
Information & Communications Technology (ICT)
In the past five years, telecommunications liberalization has extended to mobile telecommunications services, paging services, very small aperture terminal (VSAT), public access mobile radio services, international telecommunications facilities, international telecommunications services, national fixed services, internet service provider (ISP) and value-added services license following the full liberalization of the sector on July 1, 2004.
Under the U.S.-Bahrain FTA, U.S. service providers receive substantial market access across Bahrain's entire services regime and receive the same treatment as that provided to Bahraini companies in almost all areas. The very few exceptions are specifically provided for under the FTA through the use of the so-called "negative list" approach. Under the FTA, the Government of Bahrain is required to lift existing restrictions for U.S. service suppliers on the following service sectors: accounting, architecture, engineering, advertising, construction, tourist services, consultancy and management, and publishing. Additionally, Bahrain will remove market access barriers for U.S. telecommunications suppliers. U.S.-based financial services providers were granted full rights to establish subsidiaries, joint ventures, or branches for banks and insurance companies. U.S. insurance providers are able to supply insurance on a cross-border basis, including reinsurance; reinsurance brokerage; marine, aviation, and transport insurance; and other insurance services. Along with opening markets to U.S. service provides, under this FTA there is to be more regulatory transparency, including commitments regarding the maintenance of open and transparent administrative procedures, consultations with interested parties before issuing regulations, and the provision of advance notice and comment periods for proposed rules and regulations.
Generally, to qualify for preferential tariff treatment under the U.S.-Bahrain FTA, a product must qualify as an “originating” good under the terms of the Agreement. This means that the product must have sufficient U.S. or Bahraini content or processing to meet the criteria of the Agreement. If goods contain only U.S. or Bahraini inputs (if you purchase inputs from a U.S. or Bahraini supplier you will need to confirm with the supplier that those goods qualify under the FTA), they qualify. If they contain some inputs from other countries, they still might qualify if they meet specific criteria set out in the FTA’s Rules of Origin. For most products, a good will qualify even if it contains inputs from other countries provided it is both (a) produced in Bahrain or the United States, and (b) when added together, the value of U.S. or Bahrain inputs and the direct cost of manufacturing in the United States and Bahrain equals at least 35 percent of the value of the goods. For textiles and apparel and a few other products (all of which are prepared food items), the 35 percent test is not applicable, and the rule instead is based on the tariff classification of the product. For these few products, there are product-specific rules that require the non-U.S./Bahraini inputs undergo a specified transformation through processing in the United States or Bahrain, the so-called tariff shift method. See the Rules of Origin section for more information.
On the day that the U.S.-Bahrain FTA entered into force, 100 percent of consumer and industrial products became duty free. Under the FTA, Bahrain is required to open its services market wider than any previous FTA partner, streamline digital trade, protect intellectual property, facilitate government procurement, and provide for effective enforcement of labor and environmental laws.
There is a two-step process to finding out the duties your products will be charged: 1) obtain the appropriate Harmonized System number (HS number) for your product and 2) use the HS number to check the Bahrain tariff schedule to find out how and when Bahrain’s tariff on the product will be eliminated.
Each line item of the Bahrain FTA tariff schedule is assigned a letter code that indicates the staging by which the current tariff for each item is reduced and ultimately eliminated. The schedule also notes the base rate of customs duty, which is used to determine the starting point and interim rate at each stage of reduction for an item.
While Bahrain is essentially tax-free, some products, like gasoline, face indirect taxes.
The U.S.-Bahrain FTA calls for the importer to make a claim of preferential treatment. This Agreement does not require that the importer provide a declaration of origin or other documentation in support of a claim of preferential treatment unless requested by the customs authority. However, an importer claiming preferential treatment is considered to have certified that the good qualifies for preferential tariff treatment. Additionally, importers claiming a preference for a good must be prepared to submit, upon request by the customs authority, information supporting a claim for preferential treatment.
The importer may therefore ask the exporter for such supporting information. The exporter may give confirmation, in an un-prescribed format, of why the goods qualify as "originating," which the importer may use to validate its claim. It is advisable to work with your importer and provide your importer with a written statement of origin upon request.
No. This Agreement does not require any additional paperwork for shipments to Bahrain unless the parties to a transaction desire to take advantage of the benefits available under the Agreement. In those instances, the exporter/producer may need to provide documentation to support a claim for preferential treatment, including an explanation as how the product meets the relevant origin criterion of the Agreement.
There are very few non-tariff controls on U.S. goods entering Bahrain. The following are a few examples of such controls. Bahrain enforces shelf-life standards for a variety of food products. Pharmaceutical products must be imported directly from a manufacturer that has a research department and that is licensed in at least two other countries of the Gulf Cooperation Council (GCC), one of which must be Saudi Arabia.
It can, provided it does not undergo processing in the third country. According to the U.S.-Bahrain FTA, a good that undergoes subsequent production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the good to the territory of a Party, can no longer qualify for preferential treatment under the FTA.
U.S. industry supports the IPR provisions of the Agreement noting that it maintains many of the key characteristics of the IPR chapter of the U.S.-Morocco FTA, which the U.S. industry considers a benchmark for all FTAs.
This Agreement provides for tough penalties for piracy and counterfeiting by requiring each government to criminalize end-user piracy. Additionally, each government commits to having and maintaining authority to seize, forfeit, and destroy counterfeit and pirated goods and the equipment used to produce them. Moreover, IPR laws will be enforced against goods-in-transit, to deter violators from using U.S. or Bahraini ports or free-trade zones to traffic in pirated products. Finally, the Agreement mandates both statutory and actual damages under Bahraini law for IPR violations, which will further deter piracy.
All core obligations, including core labor and environmental provisions, are subject to the dispute settlement provisions of the Agreement. These provisions establish a high standard of openness and transparency through open public hearings, public release of legal submissions by each government, and opportunities for interested non-governmental organizations to submit views.
Prepared by the Trade Information Center
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