B.4-Bahrain - Q&A Bahrain - Q&A
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.
How does the Agreement improve access for U.S. exports to Bahrain?
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.
What Benefits Can U.S. Companies Expect?
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.
How can my product qualify to take advantage of the U.S.-Bahrain Free Trade Agreement?
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.
What duties and taxes are levied on the goods I export to Bahrain?
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.
In order to be eligible for preferential duty rates, is it necessary to fill out a certificate of origin?
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.
Does the U.S.-Bahrain FTA require additional paperwork for all of my shipments to Bahrain?
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.
Are there any non-tariff controls that affect the importation of my product from the United States?
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.
What if my good is produced in the United States, but is transshipped through a third country on its way to Bahrain? Can it still qualify for preferential treatment?
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.
How Does The FTA Protect Intellectual Property Rights (IPR)?
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.
What provisions are maintained in the U.S.-Bahrain FTA to enforce compliance with the Agreement?
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 International Trade Administration. With its network of 108 offices across the United States and in more than 75 countries, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.