![](media/image1.jpeg){width="6.122916666666667in"
height="1.007638888888889in"}

# Legislative Bulletin.....................................................July 20, 2006

**Contents:**

**H.R. 5684**---United States-Oman Free Trade Agreement Implementation
Act

H.R. 5684---United States-Oman Free Trade Agreement Implementation Act
(Boehner, R-OH)

**[Order of Business]{.underline}**: The bill is scheduled to be
considered on Thursday, July 20^th^, subject to a closed rule. Under
Trade Promotion Authority (Public Law 107-210), bills implementing trade
agreements are not amendable (either in committee or on the House
floor).

**[Summary by Title]{.underline}**: H.R. 5684 would approve and
implement the United States-Oman Free Trade Agreement, finalized on
January 19, 2006, and submitted to Congress on June 26, 2006. Pending
compliance by Oman with certain measures in the Agreement, the Agreement
would take effect on or after January 1, 2007. The Agreement would
reduce and eventually eliminate (over ten years) virtually all barriers
to trade in goods and services and to investment. Goods originating from
Oman would have preferential tariff treatment in the United States and
vice versa. On the day this Agreement goes into effect, 100% of U.S.
consumer and industrial products and 87% of U.S. agricultural exports
could enter Oman duty-free.

According to the United States Trade Representative (USTR), U.S. exports
to Oman in 2004 totaled \$330 million (and were \$593 million in 2005,
according to the Congressional Research Service---CRS), consisting
mainly of machinery, automobiles and transport equipment, optic and
medical instruments, electrical machinery, vegetable oils, sugars,
sweeteners, and beverage bases. Our primary imports from Oman include
oil, natural gas, apparel, and miscellaneous manufactures (valued at
\$555 million in 2005). The oil and natural gas imports constitute 1% of
all U.S. oil and gas imports from the Middle East. Two-way trade, the
USTR reports, was roughly \$748 million in 2004 (0.04% of all U.S.
trade). U.S. foreign direct investment in Oman in 2003 was \$358
million. []{.mark}

[]{.mark}

As CRS indicates, Oman ranks 88^th^ among all U.S. trade partners. The
U.S., on the other hand, ranks fourth in importance among Oman's trading
partners, behind the United Arab Emirates, Japan, and the United Kingdom
(for 2004).

In 2005, the U.S. had a small trade surplus with Oman.

[]{.mark}

Highlights of H.R. 5684 are as follows:

[]{.mark}

***[Title I---Approval of, and General Provisions Relating to, the
Agreement]{.underline}***

[]{.mark}

-   Makes U.S. law paramount to any provision in the Agreement that
    conflicts with U.S. law. States that the Agreement would not modify
    or limit the authority under any U.S. law.

-   A state law that conflicts with any provision in the Agreement could
    only be declared invalid in an action brought by the United States
    Government.

-   Prevents private legal actions against any provision of the
    Agreement.

-   Provides for 15-day and 60-day layover procedures for certain
    actions made by presidential proclamation under the Agreement.

-   Authorizes "such sums" as may be necessary for the President to
    establish an office within the Department of Commerce to administer
    the Agreement.

-   Terminates the applicability of this implementing legislation (other
    than this provision) on the date on which the Agreement might
    terminate.

***[Title II---Customs Provisions]{.underline}***

[]{.mark}

-   Allows the President to modify any tariffs or tariff-free treatment
    in the Agreement and to create additional tariffs as necessary
    (subject to certain limitations).

-   Terminates Oman's status as a beneficiary developing country for
    trade purposes.

-   Defines in detail what an "originating good" is (originating from
    either the United States or from Oman) and what "originating
    materials" and "nonoriginating materials" are, as they relate to
    preferential tariff treatment under the Agreement.

-   Excludes packing materials and shipping containers when determining
    whether a good is an "originating good."

[]{.mark}

-   Originating goods would be disqualified as such if they undergo
    further production or any other operation (other than unloading,
    reloading, or essential preservation operations) outside Oman or the
    U.S.

-   Disregards "indirect materials" (materials used in the production,
    testing, inspection, maintenance, and operation of the good---but
    not physically incorporated into the good) for the purposes of
    determining an "originating good."

-   Allows for certain textiles or apparel goods to be considered an
    "originating good," as long as the total weight of all
    nonoriginating fibers in such a good does not exceed 7% of its total
    weight (10% of value for textile or apparel goods in sets for retail
    sale).

-   Authorizes the President to proclaim modifications to the Agreement
    (subject to layover and other requirements).

-   Exempts products covered by this trade agreement from customs user
    fees.

-   Authorizes the President to take certain actions while a
    verification of the originating status of a [textile or apparel
    good]{.underline} is taking place. Such actions include suspending
    preferential tariff treatment to the textile or apparel good for
    which a claim of origin has been made or, in a case where the
    request for verification was based on a reasonable suspicion of
    unlawful activity related to such goods, for textile or apparel
    goods exported or produced by the person subject to a verification.
    Other available actions include the detention of applicable goods or
    the denial of entry into the U.S. of such goods.

***[Title III---Relief from Imports]{.underline}***

[]{.mark}

-   Authorizes the filing (with the U.S. International Trade Commission)
    by an entity, including a trade association, firm, certified or
    recognized union, or group of representative workers, of a petition
    requesting adjustment to the obligations of the United States under
    the Agreement (and asking for provisional relief). The Commission
    would then have to investigate whether "a substantial cause of
    serious injury or threat thereof to \[a\] domestic industry" is
    occurring as a result of the U.S.-Oman Free Trade Agreement (subject
    to certain exceptions).

-   If the Commission finds injury or threat of injury, it would then
    have to recommend the amount of import relief necessary to correct
    or prevent harm. Further, the Commission would have to facilitate
    the efforts of the domestic industry to make a "positive adjustment
    to import competition."

-   The President would not *have* to provide the suggested import
    relief, if doing so would have greater economic and social costs
    than benefits.

[]{.mark}

-   Import relief could entail increasing duties or suspending their
    reductions and would have to occur progressively in intervals if the
    relief is to last more than one year.

-   Import relief could not last more than three years.

-   No import relief could be provided for a good that has been given
    duty-free treatment under the Agreement, and no import relief could
    be provided ten years after the Agreement enters into force (subject
    to exception).

-   Prohibits the President from releasing information that is submitted
    in an import relief proceeding and that the President considers to
    be confidential business information, unless the party submitting
    the confidential business information had notice at the time of
    submission that such information would be released, or such party
    subsequently consents to the release of the information. To the
    extent a party submits such confidential business information to the
    President, the party would have to submit a non-confidential version
    of the information in which the confidential business information is
    summarized or, if necessary, deleted.

-   Enacts similar provisions as above for import relief specifically
    for the [textile and apparel]{.underline} industries.

***[Title IV---Procurement]{.underline}***

[]{.mark}

-   Makes Omani products and services eligible for federal government
    procurement.

**[Supporting Documents]{.underline}**: To read a summary of the
U.S.-Oman Free Trade Agreement itself, which provides more details on
the Agreements benefits to the telecommunications industry, financial
services, and investors, as well as details on patents and property
rights, please visit this webpage:

<http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2005/asset_upload_file189_8115.pdf>.

[]{.mark}

To read the actual text of the Agreement, please visit this webpage:

<http://www.ustr.gov/Trade_Agreements/Bilateral/Oman_FTA/Final_Text/Section_Index.html>

[]{.mark}

For other supporting documents, please visit this webpage:

<http://www.ustr.gov/Trade_Agreements/Bilateral/Oman_FTA/Section_Index.html>.

**[Additional Background]{.underline}**: The Ways & Means Committee
reports that:

> Oman and the United States have been allies for over 170 years. In
> 1980,
>
> following the Iranian Islamic revolution, Oman was the first Persian
> Gulf state to allow U.S. access to Omani military facilities. Oman
> hosted over 3,500 U.S. personnel during recent U.S. operations in
> Afghanistan and Iraq, serving as a critical launch point for missions
> that helped protect U.S. servicemen.

[]{.mark}

Oman was the first Arab country to establish diplomatic contact with the
United States.

**[Key Issues]{.underline}**:

[]{.mark}

-   [Political Reform]{.underline}. Oman has enacted reforms to increase
    public participation in government, extending voting rights for its
    Consultative Council to all citizens over the age of 21, and
    appointing women to key positions in its government, including three
    Cabinet members and the first female Ambassador from an Arab country
    appointed to serve in the United States. On December 26, 1994, Oman
    became the first Gulf State to host an Israeli Prime Minister. RSC
    Bonus Fact: the chief lobbyist in Washington, DC, hired by Oman is a
    Jewish woman.

-   [Economic Freedom]{.underline}. The *Economic Freedom of the World
    2005* ranks Oman 17^th^ of the 127 countries on a scale of economic
    freedom, the second highest ranking among all countries in the
    proposed Middle East Free Trade Area (MEFTA).

-   [Labor Reform]{.underline}. Oman enacted broad labor reforms in 2003
    and has since followed up with a specific commitment to implement
    worker protections consistent with international standards by
    October 31, 2006 (more stringent than the non-time-specific
    commitment from Bahrain before implementation of the U.S.-Bahrain
    FTA). In fact, Oman already acted on many of these worker
    protections through a Royal Decree issued on July 7, 2006.

-   [Immigration]{.underline}. This FTA would explicitly not affect U.S.
    immigration laws.

-   [Ports]{.underline}. This FTA would give Omani nationals no
    additional control, management, or operational oversight of U.S.
    ports. A basic obligation of free trade agreements to which the
    United States is a party is the obligation (subject to specified
    exceptions) to treat service suppliers and investors of other
    parties no less favorably at our ports than we treat our own service
    suppliers and investors (in such respects as cargo loading, ship
    cleaning, and dock maintenance), and this obligation is maintained
    in the Oman FTA.

-   [Israeli Boycott]{.underline}. Oman does not participate in the
    boycott of Israel in any way, as confirmed here:
    <http://waysandmeans.house.gov/media/pdf/trade/omanboycott.pdf>.
    Read more details here:
    <http://waysandmeans.house.gov/media/pdf/trade/omanboycottdoc.pdf>.
    Oman has also agreed to re-open its Israeli trade office.

-   [9-11 Commission]{.underline}. The 9-11 Commission specifically
    recommended that the U.S. implement free trade agreements with
    friendly nations in the Middle East, as a way to discourage
    terrorism in the region.

In the Middle East, the United States currently has bilateral free trade
agreements with Israel, Jordan, Morocco, and Bahrain. A bilateral FTA
with the United Arab Emirates is forthcoming, as is a regional Middle
East Free Trade Area. To check the status of these and other trade
agreements, please visit this website:
<http://www.ustr.gov/Trade_Agreements/Section_Index.html>.

**[Committee Action]{.underline}**: On May 10, 2006, the Ways and Means
Committee considered, in an informal markup session, draft legislation
to implement the Oman FTA and approved it by a recorded vote of 23 yeas
to 11 nays, with three Members voting present, without amendment
(amendments are not allowed under Trade Promotion Authority).

**[Administration Position]{.underline}**: Since the Administration
negotiated the Agreement, it is strongly supporting this implementing
legislation.

**[Cost to Taxpayers]{.underline}**: CBO reports that implementing the
U.S.-Oman Free Trade Agreement would reduce revenues by \$15 million in
FY2007, by \$111 million over the FY2007-2011 period, and by \$271
million over the FY2007-2016 period. H.R. 5684 also would increase
mandatory spending by \$1 million in FY2007, \$5 million over the
FY2007-2011 period, and \$10 million over the FY2007-2016 period.
Lastly, implementing the FTA would increase discretionary spending by
less than \$1 million per year (subject to appropriations).

[NOTE]{.underline}: The Budget Committee reports that H.R. 5684, like
the implementation bills for other recent FTAs, technically violates
section 302 of the Congressional Budget Act by a small amount (\$1
million each year) because it increases mandatory spending by an amount
expected to exceed the Ways & Means Committee's allocation in the budget
resolution (H.Con.Res. 376) for FY2007. Because this legislation is
being considered under Trade Promotion Authority ("fast-track"
procedures), the House does not have discretion to modify the
legislation to offset the spending. \[The increased spending is a result
of the provision exempting "originating goods" from U.S. customs user
fees. The fees are recorded as offsetting receipts---a credit against
mandatory spending---thus, when fees go down, mandatory spending scores
as going up.\]

[]{.mark}

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: No. This legislation would implement the
U.S.-Oman Free Trade Agreement, which would lower and eliminate tariffs
(and other barriers to trade) between the two countries, thereby
reducing government involvement in the free market.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: No.

**[Constitutional Authority]{.underline}**: The Ways & Means Committee,
in House Report 109-574, cites constitutional authority in Article I,
Section 8, Clause 1 (the congressional power to lay and collect taxes,
duties, imposts and excises).

**[Outside Organizations]{.underline}**: The U.S.-Oman FTA is being
publicly [supported]{.underline} by entities such as the Club for
Growth, the Heritage Foundation, the U.S. Chamber of Commerce, the
Business Roundtable, the National Association of Manufacturers, and the
American Farm Bureau.

The U.S.-Oman FTA is being publicly [opposed]{.underline} by entities
such as the AFL-CIO, Americans for Democratic Action, the Center for
Science in the Public Interest, the International Brotherhood of
Teamsters, Public Citizen's Global Trade Watch, and the Sierra Club.

**[RSC Staff Contact]{.underline}**: Paul S. Teller,
<paul.teller@mail.house.gov>, (202) 226-9718

\###