49–010 

Calendar No. 306 

109TH CONGRESS REPORT " ! SENATE 1st Session 109–199 

UNITED STATES-BAHRAIN FREE TRADE AGREEMENT 

IMPLEMENTATION ACT 

DECEMBER 8, 2005.—Ordered to be printed 

Filed under authority of the order of the Senate of November 18, 2005 

Mr. GRASSLEY, from the Committee on Finance, 

submitted the following 

R E P O R T 

[To accompany S. 2027] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Finance, to which was referred the bill (S. 

2027) to implement the United States-Bahrain Free Trade Agreement, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. 

CONTENTS 

Page 

I. Report and Other Materials of the Committee ........................................... 2 

A. Report of the Committee on Finance .............................................. 2 

B. Summary of Congressional Consideration of the United StatesBahrain Free Trade Agreement .................................................... 2 

1. Background ................................................................................ 2 

2. Trade Promotion Authority Procedures in General ................ 2 

3. Notification Prior to Negotiations ............................................ 3 

4. Notification of Intent to Enter Into an Agreement ................. 3 

5. Development of the Implementing Legislation ....................... 4 

6. Formal Submission of the Agreement and Implementing 

Legislation ................................................................................ 5 

7. Committee and Floor Consideration ........................................ 6 

C. Trade Relations with Bahrain ......................................................... 6 

1. United States-Bahrain Trade ................................................... 6 

2. Tariffs and Trade Agreements ................................................. 8 

3. U.S. International Trade Commission Study .......................... 10 

D. Overview of the United States-Bahrain Free Trade Agreement .. 10 

1. Overview of the Agreement ...................................................... 10 

2. USTR Summary of the Agreement .......................................... 11 

2 

E. General Description of the Bill to Implement the United StatesBahrain Free Trade Agreement .................................................... 31 

Title I—Approval of, and General Provisions Relating to, The 

Agreement ................................................................................ 32 

Title II—Customs Provisions ......................................................... 33 

Title III—Relief From Imports ...................................................... 36 

Title IV—Procurement ................................................................... 41 

F. Vote of the Committee in Reporting the Bill ................................. 41 

II. Budgetary Impact of the Bill ........................................................................ 42 

III. Regulatory Impact of the Bill and Other Matters ...................................... 43 

IV. Changes in Existing Law Made by the Bill, as Reported ........................... 44 

I. REPORT AND OTHER MATERIALS OF THE COMMITTEE 

A. REPORT OF THE COMMITTEE ON FINANCE

The Committee on Finance, to which was referred the bill (S. 

2027) to implement the United States-Bahrain Free Trade Agreement, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. 

B. SUMMARY OF CONGRESSIONAL CONSIDERATION OF THE UNITED

STATES-BAHRAIN FREE TRADE AGREEMENT

1. Background 

On May 21, 2003, the White House announced that the United 

States and the Kingdom of Bahrain would seek to negotiate a bilateral free trade agreement as one step toward achieving a Middle 

East free trade area proposed by President George W. Bush on 

May 9, 2003. The United States Trade Representative consulted 

with the relevant congressional committees, including the Senate 

Committee on Finance, with respect to the initiation of negotiations 

with Bahrain. The United States Trade Representative also attended a meeting of the Congressional Oversight Group on July 24, 

2003, to discuss the initiation of negotiations with Bahrain. On August 4, 2003, the United States Trade Representative formally notified Congress of the President’s intention to initiate negotiations 

with Bahrain and identified specific objectives for the negotiations, 

which were launched on January 26, 2004. On May 27, 2004, the 

United States Trade Representative announced that the United 

States and the Kingdom of Bahrain had successfully concluded the 

negotiations. By letter dated June 15, 2004, President George W. 

Bush notified Congress of his intent to enter into the United 

States-Bahrain Free Trade Agreement. Notice of the President’s 

notification was published in the Federal Register on June 18, 

2004. The text of the United States-Bahrain Free Trade Agreement 

was made available to the general public on June 22, 2004. On 

July 19, 2004, the United States Trade Representative received reports from 27 trade advisory groups commenting on the final text 

of the agreement with Bahrain. United States Trade Representative Robert B. Zoellick and Minister of Finance and National Economy Abdulla Hassan Saif of the Kingdom of Bahrain signed the 

United States-Bahrain Free Trade Agreement on September 14, 

2004. 

2. Trade Promotion Authority procedures in general 

Article I, section 8 of the Constitution of the United States vests 

Congress with the authority to regulate international trade. ConVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
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gress has periodically delegated a portion of this authority to the 

President, in order to advance the economic interests of the United 

States. This delegation represents a compact between Congress and 

the executive, by which Congress guarantees it will vote on a trade 

agreement entered into by the executive without amendment and 

the executive guarantees close consultation with Congress during 

the negotiation of the trade agreement in order to achieve objectives identified by Congress. Thorough and timely consultation by 

the executive with Congress is the essential bedrock upon which 

Congress’ delegation of constitutional authority rests. This longstanding compact, spanning decades, has resulted in the successful 

negotiation and implementation of numerous trade agreements 

that have contributed significantly to increased economic growth 

and prosperity in the United States. 

The most recent incarnation of this compact is found in the Bipartisan Trade Promotion Authority Act of 2002 (the Act), which 

was included in the Trade Act of 2002 (Pub. L. 107–210). The Act 

includes prerequisites for congressional consideration of a trade 

agreement under expedited procedures (known as Trade Promotion 

Authority (TPA) procedures), which are found in sections 2103 

through 2106 of the Act (19 U.S.C. §§3803–3806) and section 151 

of the Trade Act of 1974 (19 U.S.C. §2191). Section 2103 of the Act 

authorizes the President to enter into reciprocal trade agreements 

with foreign countries to reduce or eliminate tariff or nontariff barriers and other trade-distorting measures. Section 2102 of the Act 

outlines the negotiating objectives the President is to achieve if the 

President intends to use TPA procedures to implement a trade 

agreement. Section 151 of the Trade Act of 1974 sets out expedited 

procedures for congressional consideration of a trade agreement 

without amendment. The President’s authority under section 2103 

extends to trade agreements entered into on or before June 30, 

2007. 

3. Notification prior to negotiations 

Under section 2104(a)(1) of the Act, the President must provide 

written notice to Congress at least 90 calendar days before initiating negotiations. On August 4, 2003, the United States Trade 

Representative sent letters to The Honorable Ted Stevens, President Pro Tempore, United States Senate, and The Honorable J. 

Dennis Hastert, Speaker, United States House of Representatives, 

to notify Congress of the President’s intention to initiate negotiations with Bahrain. The negotiations were initiated on January 26, 

2004. Section 2104(a)(2) requires the President, before and after 

submission of the notice, to consult regarding the negotiations with 

the relevant congressional committees and the Congressional Oversight Group established under section 2107 of the Act. The Administration engaged in the requisite consultations, including appearances by the United States Trade Representative at meetings of 

the Congressional Oversight Group on July 24, 2003, and May 6, 

2004. 

4. Notification of intent to enter into an agreement 

Under section 2105(a)(1)(A) of the Act, the President is required, 

at least 90 days before entering into an agreement, to notify Congress of his intention to enter into the agreement. On June 15, 

4 

2004, President George W. Bush notified Congress of his intention 

to enter into the United States-Bahrain Free Trade Agreement. 

The Agreement was signed on September 14, 2004. 

5. Development of the implementing legislation 

Section 2105(a)(1)(B) of the Act requires the President, within 60 

days of signing an agreement, to submit to Congress a description 

of changes to existing laws that the President considers would be 

required to bring the United States into compliance with such 

agreement. On October 29, 2004, the United States Trade Representative transmitted to Congress on behalf of the President a 

description of changes to existing laws required to comply with the 

Agreement. 

Under TPA procedures, Congress and the Administration work 

together to produce the legislation to implement a free trade agreement. Draft legislation is developed in close consultation between 

the Administration and the committees with jurisdiction over the 

laws that must be enacted or amended to implement the agreement. The committees may then hold informal meetings to consider 

the draft legislation and to make non-binding recommendations to 

the Administration, if any. The Administration then finalizes implementing legislation for formal submission to Congress and referral to the committees of jurisdiction. These procedures are meant 

to ensure close cooperation between the executive and legislative 

branches of government to develop legislation that faithfully implements the agreement. The final legislation should include only 

those provisions that are necessary or appropriate to faithfully implement the agreement. 

The Senate Committee on Finance met in open executive session 

on November 9, 2005, to informally consider draft implementing 

legislation for the Agreement. One amendment was filed by Senators Conrad, Baucus, and Bunning, to add to the draft Statement 

of Administrative Action a provision on monitoring Bahrain’s commitment to dismantle its primary boycott of Israel. This amendment was dispensed with by Chairman Grassley, in consultation 

with Members of the Committee, through the introduction of a 

chairman’s modification to the draft Statement of Administrative 

Action, which added the following provision: 

‘‘The Administration welcomes the commitment made by 

the Minister of Finance of Bahrain, in a letter to Ambassador Portman dated September 5, 2005, regarding the efforts of the Kingdom of Bahrain to dismantle its primary 

boycott of Israel. As part of its annual National Trade Estimates Report, the Administration intends to monitor and 

report on the efforts of the Kingdom of Bahrain to dismantle its primary boycott of Israel.’’

Chairman Grassley also announced that it was his understanding that the Administration had agreed to include this provision in the formal Statement of Administrative Action that would 

be submitted to Congress to accompany formal implementing legislation. Absent a quorum, Chairman Grassley called the meeting 

into recess and reconvened the meeting later that day. Upon reconvening, the Committee approved the draft implementing legislation 

and draft Statement of Administrative Action, as modified, by reVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
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corded vote, 20 ayes, 0 nays, a quorum being present. Ayes: Grassley, Hatch, Lott, Snowe, Kyl, Thomas, Santorum, Frist, Smith, 

Bunning, Crapo, Baucus, Rockefeller, Conrad, Jeffords, Bingaman, 

Kerry, Lincoln, Wyden, Schumer (proxy). 

On November 10, 2005, Bahrain’s Minister of Finance, H.E. 

Sheikh Ahmed bin Mohammed Al Khalifa, wrote a letter to United 

States Trade Representative Rob Portman detailing the commitment of the Government of Bahrain to continued reform of its labor 

laws. By letter dated November 16, 2005, Ambassador Portman responded to confirm the shared understanding between the United 

States and the Kingdom of Bahrain that ‘‘the commitments set 

forth in {the} letter of November 10, 2005, constitute ‘a matter arising under [the Labor Chapter]’ pursuant to Article 15.6 of the U.S.- 

Bahrain Free Trade Agreement.’’ Ambassador Portman further 

stated his intent to update Congress periodically on the progress 

that Bahrain achieves in realizing those commitments. 

6. Formal submission of the agreement and implementing legislation 

When the President formally submits a trade agreement to Congress under section 2105 of the Act, the President must include in 

the submission the final legal text of the agreement, together with 

implementing legislation, a Statement of Administrative Action 

(describing regulatory and other changes that are necessary or appropriate to implement the agreement), a statement setting forth 

the reasons of the President regarding how and to what extent the 

agreement makes progress in achieving the applicable policies, purposes, priorities, and objectives set forth in the Act, and a statement setting forth the reasons of the President regarding how the 

agreement serves the interests of U.S. commerce. 

The implementing legislation is introduced in both Houses of 

Congress on the day it is submitted by the President and is referred to committees with jurisdiction over its provisions. President 

George W. Bush transmitted the final text of the United StatesBahrain Free Trade Agreement, along with implementing legislation, a Statement of Administrative Action, and other supporting 

information, as required under section 2105 of the Trade Act of 

2002, to Congress on November 16, 2005. The legislation was introduced that same day in both the House (H.R. 4340) and the Senate 

(S. 2027). The accompanying Statement of Administrative Action 

includes the provision added by the Committee in its informal consideration of the bill on November 9, 2005. 

To qualify for TPA Procedures, the implementing bill itself must 

contain provisions formally approving the agreement and the Statement of Administrative Action. Further, the implementing bill 

must contain only those provisions necessary or appropriate to implement the Agreement. The implementing bill reported here—

which approves the United States-Bahrain Free Trade Agreement 

and the accompanying Statement of Administrative Action and contains provisions necessary or appropriate to implement the Agreement into U.S. law—was referred to the Senate Committee on Finance. 

6 

7. Committee and floor consideration 

When the requirements of the Act are satisfied, implementing 

revenue bills, such as the United States-Bahrain Free Trade Agreement Implementation Act (Implementation Act), are subject to the 

legislative procedures of section 151 of the Trade Act of 1974. The 

following schedule for congressional consideration applies under 

these procedures: 

(i) House committees have up to 45 calendar days in session 

in which to report the bill; any committee which does not do 

so in that period will be automatically discharged from further 

consideration. 

(ii) A vote on final passage by the House must occur on or 

before the 15th calendar day in session after the committees 

report the bill or are discharged from further consideration. 

(iii) Senate committees must act within 15 calendar days in 

session of receiving the implementing revenue bill from the 

House or within 45 calendar days in session of Senate introduction of the implementing bill, whichever is later, or they 

will be discharged automatically. 

(iv) The full Senate then must vote within 15 calendar days 

in session on the implementing bill. 

Thus, Congress has a maximum of 90 calendar days in session 

to complete action on the bill. Once the implementing bill has been 

formally submitted by the President and introduced, no amendments to the bill are in order in either House of Congress. Floor 

debate in each House is limited to no more than 20 hours, to be 

equally divided between those favoring the bill and those opposing 

the bill. 

The Committee on Finance met in open executive session on November 18, 2005, to consider favorably reporting S. 2027. Rule 2(a) 

of the Rules of Procedure adopted by the Committee on Finance on 

January 25, 2005, provides that Members will be notified of committee meetings at least 48 hours in advance. By unanimous consent, the Committee waived this provision of Rule 2(a). At the 

meeting, the Committee favorably reported S. 2027 by recorded 

vote, 20 ayes, 0 nays, a quorum being present. Ayes: Grassley, 

Hatch, Lott, Snowe, Kyl, Thomas, Santorum, Frist, Smith, 

Bunning, Crapo, Baucus, Rockefeller, Conrad, Jeffords, Bingaman, 

Kerry (proxy), Lincoln, Wyden, Schumer (proxy). 

C. TRADE RELATIONS WITH BAHRAIN

1. United States-Bahrain trade 

Bahrain is a small country, with a gross domestic product (GDP) 

that is less than 1 percent of U.S. GDP, and a population that is 

about 0.2 percent of U.S. population. Trade between the United 

States and Bahrain is currently concentrated in very few products. 

Based on 2003 data, U.S. imports of apparel account for 43 percent 

of total imports from Bahrain, and U.S. exports of airplanes and 

parts account for 49 percent of total exports to Bahrain. Two products account for 95 percent of U.S. apparel imports from Bahrain, 

i.e. women’s or girls’ woven cotton pants and men’s or boys’ woven 

cotton pants. In 2003, U.S. merchandise exports to Bahrain were 

valued at $497 million, while U.S. imports for consumption from 

Bahrain were valued at $378 million. Based on 2002 data, the 

7 

United States accounts for 4.5 percent of Bahrain’s exports and 

11.7 percent of Bahrain’s imports. Based on 2003 data, Bahrain 

ranked as the 64th largest market for U.S. exports and the 86th 

largest source of imports into the United States. 

The following tables summarize the top U.S. merchandise exports to Bahrain and the top U.S. merchandise imports from Bahrain during the past 6 years. 

U.S. EXPORTS TO BAHRAIN, 1999–2004 

[In thousands of U.S. dollars] 

Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004 

84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof ..................................... 81,012 44,598 43,257 54,235 44,448 64,493 

98 Special classification provisions, not elsewhere 

specified or otherwise included ................................... 65,164 50,145 64,555 92,778 72,398 61,415 

87 Vehicles, other than railway or tramway rolling 

stock, and parts and accessories thereof ................... 18,492 26,292 31,601 29,077 31,505 31,871 

88 Aircraft, spacecraft, and parts thereof ................... 38,252 221,797 79,288 74,539 242,801 27,733 

90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories 

thereof .......................................................................... 7,940 8,974 17,189 8,781 14,453 13,820 

85 Electrical machinery and equipment and parts 

thereof; sound recorders and reproducers, television 

recorders and reproducers, parts and accessories ..... 12,286 15,757 16,142 10,345 17,837 13,545 

21 Miscellaneous edible preparations .......................... 2,716 3,057 5,212 3,355 4,078 4,772 

94 Furniture; bedding, cushions etc.; lamps and 

lighting fittings not elsewhere specified or otherwise 

included; illuminated signs, nameplates and the 

like; prefabricated buildings ....................................... 6,451 4,876 5,702 5,349 9,202 4,484 

89 Ships, boats and floating structures ...................... 482 1,964 33,168 8,141 3,665 4,434 

27 Mineral fuels, mineral oils and products of their 

distillation; bituminous substances; mineral waxes ... 3,439 13,276 18,560 5,104 1,957 4,017 

73 Articles of iron or steel ............................................ 1,358 977 4,113 2,891 3,638 3,750 

52 Cotton, including yarns and woven fabrics thereof 762 343 6,073 10,133 1,357 3,710 

24 Tobacco and manufactured tobacco substitutes .... 8,187 6,753 5,985 3,868 4,650 3,279 

39 Plastics and articles thereof ................................... 3,866 4,025 3,257 3,088 2,772 2,944 

49 Printed books, newspapers, pictures and other 

printed products; manuscripts, typescripts and plans 1,660 1,388 1,424 2,228 2,031 2,142 

Subtotal for top 15 products .................................. 252,067 404,222 335,526 313,912 456,790 246,407 

Subtotal for all other U.S. exports .......................... 83,114 35,674 62,185 93,541 40,340 31,294 

Total U.S. exports from Bahrain .................... 335,181 439,896 397,711 407,453 497,130 277,701 

Source: U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of Commerce. 

Note.—HTS is the Harmonized Tariff Schedule of the United States. 

U.S. IMPORTS FROM BAHRAIN, 1999–2004 

[In thousands of U.S. dollars] 

Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004 

62 Articles of apparel and clothing accessories, not 

knitted or crocheted ..................................................... 79,489 133,252 164,644 165,693 160,105 155,160 

27 Mineral fuels, mineral oils and products of their 

distillation; bituminous substances; mineral waxes ... 6,985 11,218 19,538 0 5,077 72,805 

98 Special classification provisions, not elsewhere 

specified or otherwise included ................................... 15,668 18,951 78,784 85,355 84,581 40,762 

63 Made-up textile articles not elsewhere specified or 

otherwise included; needlecraft sets; worn clothing 

and worn textile articles; rags .................................... 0 66 956 589 9,579 40,450 

76 Aluminum and articles thereof ................................ 80,741 82,766 46,592 63,972 36,859 35,809 

29 Organic chemicals ................................................... 7,797 18,206 20,955 16,632 32,422 26,738 

31 Fertilizers .................................................................. 11,813 30,368 46,166 24,788 28,404 20,688 

52 Cotton, including yarns and woven fabrics thereof 2,218 17,488 16,698 21,199 14,116 8,086 

8 

U.S. IMPORTS FROM BAHRAIN, 1999–2004—Continued 

[In thousands of U.S. dollars] 

Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004 

84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof ..................................... 43 523 197 41 259 1,012 

99 Special import reporting provisions, not elsewhere 

specified or otherwise included ................................... 466 619 822 841 818 817 

61 Articles of apparel and clothing accessories, knitted or crocheted ........................................................... 17,887 21,924 25,163 12,653 3,569 700 

71 Natural or cultured pearls, precious or 

semiprecious stones, precious metals; precious metal 

clad metals, articles thereof; imitation jewelry; coin 132 192 2,636 87 345 569 

39 Plastics and articles thereof ................................... 23 80 94 338 715 562 

94 Furniture; bedding, cushions etc.; lamps and 

lighting fittings not elsewhere specified or otherwise 

included; illuminated signs, nameplates and the 

like; prefabricated buildings ....................................... 0 28 4 0 19 387 

68 Articles of stone, plaster, cement, asbestos, mica 

or similar materials ..................................................... 49 20 65 105 205 187 

Subtotal for top 15 products .................................. 223,310 335,700 423,314 392,292 377,073 404,733 

Subtotal for all other U.S. imports ......................... 3,257 1,909 427 2,798 1,254 850 

Total U.S. imports from Bahrain .................... 226,567 337,609 423,740 395,090 378,327 405,583 

Source.—U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of Commerce. Note.—HTS is the Harmonized Tariff Schedule of the United States. 

2. Tariffs and trade agreements 

Bahrain is a member of the World Trade Organization (WTO), 

and has bound its tariffs at rates ranging from zero to 125 percent 

ad valorem. Approximately 17 percent of shipments from Bahrain 

entered the United States free of duty in 2003 under the U.S. Generalized System of Preferences (GSP) program. In total, about 48 

percent of shipments from Bahrain entered the United States free 

of duty in 2003 on a normal trade relations (most-favored-nation) 

(NTR (MFN)) basis or under GSP or other U.S. provisions. U.S. exports to Bahrain are generally subject to a uniform tariff of 5 percent; exceptions include aircraft (which enter Bahrain free of duty), 

alcoholic beverages (which are subject to a 125 percent ad valorem 

duty), tobacco and tobacco products (which are subject to a 100 percent ad valorem duty), and miscellaneous items such as distilled 

water, and some medical items, paper products, and aluminum 

products (which are each subject to a 20 percent ad valorem duty). 

In 2000, Bahrain’s average bound tariff was about 35.6 percent ad 

valorem, while its average applied tariff was about 7.7 percent. 

Since the late 1990s, Bahrain has taken steps to liberalize its 

trade and investment regime. In 1999, the United States and Bahrain negotiated a comprehensive bilateral investment treaty (BIT), 

i.e. the Treaty Between the Government of the United States of 

America and the Government of the State of Bahrain Concerning 

the Encouragement and Reciprocal Protection of Investment. The 

BIT was based on the standard U.S. prototype for investment 

agreements. Because the BIT provides a full range of investment 

disciplines, the United States and Bahrain did not include an investment chapter in the Agreement. However, the market access, 

domestic regulation, and transparency provisions of Chapter 10 of 

the Agreement (Cross-Border Trade in Services) govern the treatment of investors and investments in services sectors. The BIT: (1) 

applies to all forms of U.S. investment in Bahrain; (2) requires that 

9 

covered U.S. investments receive the better of national treatment 

or most-favored-nation treatment provided by Bahrain; (3) prohibits the imposition of performance requirements on covered U.S. 

investments by Bahrain; (4) allows expropriation of U.S. investments by Bahrain only in accordance with customary international 

law; and (5) allows U.S. investors to bring disputes with the Government of Bahrain to binding international arbitration, among 

other provisions. In 2002, Bahrain concluded a bilateral Trade and 

Investment Framework Agreement (TIFA) with the United States. 

Over the past several years, Bahrain has pursued economic liberalization and deeper commercial ties with the United States. The 

government liberalized foreign property ownership and tightened 

anti-money-laundering laws. Though oil revenues generated 63 percent of total government revenue in 2002, Bahrain remains committed to diversifying its economy. Diversification efforts have focused on financial services, and the government is working to develop other service industries, including information technology, 

healthcare, and education. 

In addition to the United States-Bahrain Free Trade Agreement, 

the Government of Bahrain has signed bilateral trade agreements 

with Egypt, Tunisia, Yemen, Bangladesh, China, Singapore, 

France, Greece, the Philippines, Thailand, Malaysia, Syria, Jordan, 

Morocco, Turkey, South Korea, India, United Kingdom, Australia, 

Russia, and Algeria. In addition, Bahrain is a member of the Arab 

free trade area (in force since 1998), which also includes Egypt, 

Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, the Palestinian Authority, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the 

United Arab Emirates, and Yemen. Bahrain is also a member of 

the Gulf Cooperation Council (founded in 1981), which in addition 

to Bahrain includes Kuwait, Oman, Qatar, Saudi Arabia, and the 

United Arab Emirates. The Gulf Cooperation Council launched a 

customs union in 2003, with plans to establish a monetary union 

in 2005, a common market in 2007, and a single currency by 2010. 

In addition, the Gulf Cooperation Council is engaged in ongoing negotiations with the European Union to conclude a free trade agreement. 

Bilateral trade data alone fail to capture the full importance of 

Bahrain as a trading partner of the United States. In May 2003, 

President Bush proposed a plan of graduated steps for Middle 

Eastern nations to increase trade and investment with the United 

States and others in the world economy, culminating with the establishment of a Middle East Free Trade Area (MEFTA) by the 

year 2013. On July 22, 2004, the report of the 9/11 Commission 

(Final Report of the National Commission on Terrorist Attacks 

Upon the United States) was released; that report contains, as one 

of its key recommendations, that a ‘‘comprehensive U.S. strategy to 

counter terrorism should include economic policies that encourage 

development, more open societies, and opportunities for people to 

improve the lives of their families and to enhance prospects for 

their children’s future.’’ The Agreement with Bahrain is an important achievement in that effort, and joins previously concluded bilateral trade agreements between the United States and Israel, 

Jordan, and Morocco, as a sound model for other nations in the 

Middle East to become full participants in the rules-based system 

of global trade. The Agreement with Bahrain is therefore an imporVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
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tant part of a broader effort to encourage development, more open 

societies, and opportunities for people to improve the lives of their 

families and to enhance prospects for their children’s future, 

throughout the Middle East. 

3. U.S. International Trade Commission study 

In October 2004, the U.S. International Trade Commission (ITC) 

released the results of its investigation (Investigation No. TA–

2104–15) into the probable economic effect of a United States-Bahrain Free Trade Agreement (USITC Pub. 3726). In prior investigations of free trade agreements, the ITC prepared estimates of the 

overall change in U.S. economic welfare attributable to full implementation of those trade agreements. With respect to Bahrain, 

however, the ITC was unable to prepare such an estimate because 

the data available to the ITC were not specific to Bahrain, but instead were aggregated with other data for the Middle East region. 

In lieu of such an overall estimate of the impact on net U.S. welfare attributable to the United States-Bahrain Free Trade Agreement, the ITC focused on the apparel sector because approximate 

data were available and because U.S. imports subject to the elimination of import restraints under the Agreement are concentrated 

in the apparel sector (i.e. apparel accounts for 91 percent of the duties collected on U.S. imports from Bahrain). The ITC concluded 

that the net welfare gain to the United States attributable to the 

elimination of tariffs on all imports from Bahrain falling under 

chapters 61 and 62 of the Harmonized Tariff Schedule of the 

United States is estimated to be $19.4 million. This estimate does 

not, however, account for the elimination of textile quotas under 

the WTO Agreement on Textiles and Clothing effective January 1, 

2005, nor does it account for the 10-year tariff preference level 

(TPL) provided for under the Agreement. 

The ITC found that U.S. imports of apparel from Bahrain are 

likely to be substantially higher than they would be in the absence 

of the Agreement. However, because higher apparel imports from 

Bahrain would be largely offset by lower imports from the rest of 

the world, and because imports from Bahrain are such a small portion of total U.S. imports of apparel, the ITC concluded that total 

apparel imports into the United States are likely to increase by 

only a small amount. Consequently, the ITC found that the Agreement is likely to have little or no adverse effect on the U.S. apparel 

industry. 

With respect to services, the ITC concluded that the Agreement 

is not expected to lead to measurable changes in U.S. exports or 

imports of services. The ITC further found, however, that U.S.- 

based service providers likely will benefit from improved market 

access conditions in some service industries (e.g., providers of insurance and asset management services), and increased regulatory 

transparency. 

D. OVERVIEW OF THE UNITED STATES-BAHRAIN FREE TRADE

AGREEMENT

1. Overview of the Agreement 

The United States-Bahrain Free Trade Agreement establishes a 

bilateral free trade area that eliminates tariffs on most merchanVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
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dise trade between the United States and Bahrain. The Agreement 

liberalizes trade in services, and contains provisions that cover 

telecommunications, electronic commerce, intellectual property 

rights, labor, environment, and government procurement. The 

Agreement also contains a mechanism for settling disputes that 

arise under the Agreement. Throughout the Agreement there are 

important provisions that promote bilateral consultation and cooperation, procedural and substantive due process, administrative 

and judicial review, transparency, and the rule of law. 

2. USTR Summary of the Agreement 

The Office of the United States Trade Representative (USTR) 

prepared a summary of the United States-Bahrain Free Trade 

Agreement which was included among the documents transmitted 

to Congress on November 16, 2005. This summary was distributed 

to Members of the Committee to aid in their consideration of the 

implementing legislation, and is reprinted below: 

UNITED STATES-BAHRAIN FREE TRADE AGREEMENT 

SUMMARY OF THE AGREEMENT

This summary briefly describes key provisions of the United 

States-Bahrain Free Trade Agreement (‘‘FTA’’ or ‘‘Agreement’’). 

Preamble and Chapter One: Establishment of a free trade area and 

definitions 

The Preamble to the Agreement provides the Parties’ underlying 

objectives in entering into the Agreement and provides context to 

the provisions that follow. Chapter One sets out provisions establishing a free trade area. The Parties affirm their existing rights 

and obligations under the Marrakesh Agreement Establishing the 

World Trade Organization (‘‘WTO’’) and other agreements to which 

both the United States and Bahrain are party. Chapter One also 

includes definitions of certain terms that recur in various chapters 

of the Agreement. 

Chapter Two: National treatment and market access for goods 

Chapter Two sets out the Agreement’s principal rules governing 

trade in goods. It requires each Party to treat goods from the other 

Party in a non-discriminatory manner, provides for the phase-out 

of tariffs on ‘‘originating goods’’ (as defined in Chapter Four (Rules 

of Origin)) traded between the two Parties, and requires the elimination of a wide variety of non-tariff barriers that restrict or distort 

trade flows. 

Tariff Elimination. Chapter Two provides rules for the elimination of customs duties on originating goods traded between the 

Parties no later than 10 years after the Agreement enters into 

force. The Agreement is comprehensive, containing U.S. and Bahraini elimination commitments on all tariffs. For example, 100 percent of bilateral trade in consumer and industrial goods (including 

textile and apparel goods) will become duty-free immediately upon 

the Agreement’s entry into force. In addition, Bahrain will provide 

immediate duty-free access for U.S. agricultural exports in 98 percent of agricultural tariff lines. Certain sensitive agricultural goods 

in Bahrain and the United States will have longer periods for duty 

12 

elimination (up to 10 years) or will be subject to other provisions, 

including, in some cases, the application of transitional preferential 

tariff-rate quotas (‘‘TRQs’’) by the United States. Annex 2–B of the 

Agreement includes detailed provisions on staging of tariff reductions and application of TRQs for certain agricultural goods. Chapter Two also provides that the Parties may agree to speed up tariff 

phase-outs on a product-by-product basis after the Agreement takes 

effect. 

Temporary Admission. Chapter Two requires the Parties to provide duty-free temporary admission for certain goods without the 

usual bonding requirement that applies to imports. Such items include professional equipment, goods for display or demonstration, 

and commercial samples. 

Import/Export Restrictions, Fees, and Formalities. The Agreement incorporates the prohibition on import and export restrictions 

set out in Article XI of the General Agreement on Tariffs and 

Trade (‘‘GATT’’) 1994 and specifies that these include: (1) export 

and import price requirements (except under antidumping and 

countervailing duty orders); (2) import licensing conditioned on the 

fulfillment of a performance requirement; and (3) voluntary export 

restraints inconsistent with Article VI of GATT 1994. In addition, 

a Party must limit fees and charges imposed on or in connection 

with importation or exportation to the approximate cost of services 

rendered, in accordance with Article VIII of GATT 1994. Finally, 

the United States has also agreed not to apply its merchandise 

processing fee on imports of originating goods from Bahrain. 

Agricultural Export Subsidies. Chapter Two provides that the 

Parties will work together in WTO agriculture negotiations to 

eliminate all forms of agricultural export subsidies. The Chapter 

further provides that each Party will eliminate export subsidies on 

agricultural goods destined for the other country. According to Article 2.11, neither Party may introduce or maintain a subsidy on agricultural goods destined for the other Party unless the exporting 

Party believes that a third country is subsidizing its exports to the 

other Party. In such a case, the exporting Party may initiate consultations with the importing Party to develop measures the importing Party may adopt to counteract such subsidies. If the importing Party agrees to such measures, the exporting Party must 

refrain from applying export subsidies to its exports of the good to 

the importing Party. 

Chapter Three: Textiles and apparel 

Chapter Three sets out provisions addressing trade in textile and 

apparel goods, including an ‘‘emergency action’’ provision, special 

rules of origin, and customs cooperation provisions aimed at preventing circumvention. 

Emergency Actions. To deal with emergency conditions resulting 

from the elimination or reduction of customs duties, the Agreement 

includes an ‘‘emergency action’’ provision that permits the importing country temporarily to re-impose normal trade relations (mostfavored-nation) (‘‘NTR’’ (‘‘MFN’’)) duty rates on imports of textile or 

apparel goods that cause or threaten serious damage to a domestic 

industry. Emergency measures may be applied for a maximum aggregate period of three years, and a Party may not apply an emerVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
13 

gency measure on a good beyond 10 years after the Party must 

eliminate duties on that good under the Agreement. 

A Party applying an emergency action must provide the other 

Party with mutually agreed compensation in the form of trade concessions that are substantially equivalent to the increased duties. 

If the Parties cannot agree on compensation, the exporting Party 

may raise duties up to NTR (MFN) levels on any goods from the 

importing Party to achieve trade effects substantially equivalent to 

the emergency action. 

Rules of Origin and Related Matters. Chapter Three includes 

special rules for determining whether a textile or apparel good is 

an ‘‘originating good,’’ including a de minimis exception for nonoriginating yarns or fibers, a rule for treatment of sets, and consultation provisions. The de minimis rule applies to goods that ordinarily would not be considered originating goods because certain 

of their fibers or yarns do not undergo an applicable change in tariff classification. Under the rule, the Parties will consider a good 

to be originating if such fibers or yarns constitute seven percent or 

less of the total weight of the component of the good that determines the tariff classification. This special rule does not apply to 

elastomeric yarns. 

Chapter Three also calls for the United States and Bahrain to 

provide tariff preference levels (‘‘TPLs’’) for a limited quantity of 

specific fabric and apparel goods from non-Party sources. TPL 

goods will be accorded preferential tariff treatment as if they were 

originating goods. For the specified fabric, apparel, and made-up 

goods, TPL status will apply to a maximum of 65 million square 

meter equivalents for each of the first 10 years after the Agreement’s entry into force. After 10 years, TPL status will not be 

available for such goods. 

The Annex to Chapter Three includes specific rules of origin for 

textile and apparel goods. A textile or apparel good will generally 

qualify as an ‘‘originating good’’ only if all processing after fiber formation (i.e., yarn-spinning, fabric production, cutting, and assembly) takes place in the territory of one or both of the Parties, or if 

there is an applicable change in tariff classification under Annex 

3–A. 

Customs Cooperation. Chapter Three also includes a customs cooperation article that sets out detailed commitments designed to 

prevent circumvention of the Agreement’s rules governing textiles 

and apparel. The Parties will cooperate in enforcing relevant laws, 

in ensuring the accuracy of claims of origin, and in preventing circumvention of relevant international agreements. A Party may conduct site visits under certain conditions to verify that circumvention is not occurring, and the other Party must provide information 

necessary for the visits. An importing Party may respond to circumvention and actions that impede it from detecting circumvention, including by denying preferential tariff treatment under the 

Agreement to imports of specific textile or apparel goods or to all 

imports of textile or apparel goods from particular enterprises. Either Party may convene bilateral consultations to resolve technical 

or interpretive issues that arise under the Chapter’s customs cooperation article. 

14 

Chapter Four: Rules of origin 

To benefit from various trade preferences provided under the 

Agreement, including reduced duties, a good must qualify as an 

‘‘originating good’’ under the rules of origin set out in Chapters 

Three (Textiles and Apparel) and Four and Annexes 3–A and 4–A. 

These rules ensure that the tariff and other benefits of the Agreement accrue primarily to firms that produce or manufacture goods 

in the two Parties’ territories. They are similar in approach to 

those included in the United States-Morocco, United States-Jordan, 

and United States-Israel free trade agreements. 

Key Concepts. Chapter Four provides general criteria under 

which a good that has been imported directly from one Party into 

the other Party may qualify as an ‘‘originating good:’’ • When the good is wholly grown, produced, or manufactured in one or both of the Parties (e.g., crops grown or minerals extracted in the United States); • When the good: (1) is not covered by the rules in Annex 

3–A or Annex 4–A; (2) is a ‘‘new or different article of commerce’’ that has been grown, produced, or manufactured in the 

territory of one or both of the Parties; and (3) the sum of (a) 

the value of materials produced in the territory of one or both 

of the Parties and (b) the ‘‘direct costs of processing operations’’ performed in the territory of one or both of the Parties is at 

least 35 percent of the appraised value of the good at the time 

it is imported into the territory of a Party; or • When the good is covered by the rules in Annex 3–A or 

Annex 4–A and meets the requirements of the applicable 

Annex. (Annex 3–A contains specific rules of origin for textile 

and apparel goods. Annex 4–A contains specific rules of origin 

on goods such as citrus juices; dairy products; sugar; sweetened 

cocoa powder; plastics; ignition wiring sets; and motor vehicle 

parts.) 

Chapter Four defines ‘‘new or different article of commerce’’ as ‘‘a good that has been substantially transformed from a good or material that is not wholly the growth, product, or manufacture of one 

or both of the Parties and that has a new name, character, or use 

distinct from the good or material from which it was transformed.’’ It defines ‘‘direct costs of processing operations’’ as ‘‘those costs either directly incurred in, or that can be reasonably allocated to, the 

growth, production, or manufacture of the good.’’ Such costs typically include labor costs, depreciation on machinery or equipment, 

research and development, inspection costs, and packaging costs, 

among others. They typically do not include profit and general 

business expenses, such as salaries, insurance, and advertising. 

Chapter Four clarifies that a good will not be considered a ‘‘new 

or different article of commerce’’ merely by virtue of simple combining or packaging operations or mere dilution with water or another substance that does not change the characteristics of the 

good. 

Declarations of Origin. Under the Chapter, importers who wish 

to claim preferential tariff treatment for particular goods must submit, on the request of the importing Party’s customs authorities, a 

‘‘declaration’’ providing all pertinent information concerning the 

production of the good. The Agreement provides that a Party 

should request a declaration only when it has reason to question 

15 

the accuracy of a claim of origin or when the Party is conducting 

a random verification. A Party may only deny preferential treatment in writing and must provide legal and factual findings. 

Consultations. Chapter Four calls for the Parties to work together to ensure the effective and uniform application of the Chapter. The Chapter permits the creation of ad hoc working groups or 

a subcommittee of the Joint Committee to discuss necessary 

amendments or revisions. In addition, Article 4.13 provides that, at 

an appropriate time, the United States and Bahrain ‘‘shall enter 

into discussions with a view to deciding the extent to which materials that are products of countries in the Middle East or North Africa region may be counted for purposes of satisfying the origin requirement under this Agreement as a step toward achieving regional integration.’’ Finally, in a separate agreement set out in a side letter regarding Chapter Four, the Parties provide that, for purposes of determining whether a good is a ‘‘new or different article of commerce 

that has been grown, produced, or manufactured’’ for purposes of 

Chapter Four, each country is to be guided by the rules of origin 

set forth in section 102.20 of the United States Customs Regulations (19 CFR 102.20). 

Chapter Five: Customs administration 

Chapter Five establishes rules designed to facilitate trade 

through increased transparency, predictability, and efficiency in 

each Party’s customs procedures. It also provides for cooperation 

between the Parties on customs matters. 

General Principles. The United States and Bahrain will observe 

certain transparency requirements. The Parties must promptly 

publish their customs measures on the Internet and, where possible, solicit public comments before introducing or amending their 

customs regulations. Each Party also must provide written advance 

rulings, upon request, to its importers and to exporters of the other 

Party regarding whether a good qualifies as an ‘‘originating good’’

under the Agreement, as well as on other customs matters. The 

Agreement allows Bahrain up to two years to comply with the provisions relating to advance rulings. In addition, each Party must 

guarantee importers access to both administrative and judicial review of customs decisions. The Parties also must release goods from 

customs promptly and expeditiously clear express shipments. 

Cooperation. Chapter Five also is designed to enhance customs 

cooperation. It encourages the Parties to give each other advance 

notice of customs developments likely to affect the Agreement. The 

Chapter calls for the Parties to cooperate in securing compliance 

with each other’s customs measures related to the Agreement and 

to import and export restrictions. It includes specific provisions requiring the Parties to share customs information where a Party 

has a reasonable suspicion of unlawful activity in connection with 

goods traded between the two countries. 

Chapter Six: Sanitary and phytosanitary measures 

Chapter Six defines the Parties’ obligations to one another regarding sanitary and phytosanitary (‘‘SPS’’) measures. SPS measures are laws or regulations that protect human, animal, or plant 

life or health from certain risks, including plant- and animal-borne 

16 

pests and diseases, additives, contaminants, toxins, or diseasecausing organisms in food and beverages. 

Under Chapter Six, the Parties affirm their rights and obligations with respect to each other under the WTO Agreement on the 

Application of Sanitary and Phytosanitary Measures. They also affirm their desire to create a forum through the Joint Committee on 

SPS matters. However, neither Party may invoke the FTA’s dispute settlement procedures for a matter arising under the Chapter. 

Instead, any SPS dispute between the Parties must be resolved 

under the applicable WTO agreement(s) and rules. 

Chapter Seven: Technical barriers to trade 

Under Chapter Seven, the Parties will build on WTO rules to 

promote transparency, accountability, and cooperation between the 

Parties on standards issues. 

Key Concepts. The term ‘‘technical barriers to trade’’ (‘‘TBT’’) refers to barriers that may arise in preparing, adopting, or applying 

voluntary product standards, mandatory product standards (‘‘technical regulations’’), and procedures used to determine whether a 

particular good meets such standards (‘‘conformity assessment’’ procedures). 

International Standards. The principles articulated in the WTO 

TBT Committee Decision on Principles for the Development of 

International Standards, Guides and Recommendations emphasize 

the need for openness and consensus in the development of international standards. Chapter Seven requires the Parties to apply 

these principles. 

Cooperation. Chapter Seven sets out multiple means for cooperation between the Parties to reduce barriers and improve market access. The Chapter specifies that the Office of the United States 

Trade Representative and Bahrain’s Ministry of Commerce will 

serve as TBT Chapter Coordinators responsible for facilitating this 

cooperation. 

Conformity Assessment. Chapter Seven provides for a dialogue 

between the Parties on ways to facilitate the acceptance of conformity assessment (i.e., testing to determine whether a product or 

service meets applicable standards) results. Chapter Seven further 

provides that, where a Party recognizes conformity assessment bodies in its own territory, it should recognize bodies in the territory 

of the other Party on the same terms. 

Transparency. Chapter Seven contains various transparency obligations, including obligations to: (1) permit persons of the other 

Party to participate in the development of technical regulations, 

standards, and conformity assessment procedures on a non-discriminatory basis; (2) transmit regulatory proposals notified under 

the TBT Agreement directly to the other Party; (3) describe in writing the objectives of and reasons for regulatory proposals; and (4) 

accept and respond in writing to comments on regulatory proposals. 

These provisions become effective no later than five years after the 

Agreement enters into force. 

Chapter Eight: Safeguards 

Chapter Eight establishes a bilateral safeguard mechanism that 

will be available to aid domestic industries that sustain or are 

threatened with serious injury due to increased imports resulting 

17 

from tariff reductions or elimination under the Agreement. The 

Chapter does not affect either government’s rights or obligations 

under the WTO’s safeguard provisions (global safeguards) or under 

other WTO trade remedy rules. 

Chapter Eight authorizes each Party to impose temporary duties 

on a good imported from the other Party if, as a result of the reduction or elimination of a duty under the Agreement, the good is 

being imported in such increased quantities and under such conditions as to constitute a substantial cause of serious injury, or 

threat of serious injury, to a domestic industry producing a ‘‘like’’ or ‘‘directly competitive’’ good. 

Absent agreement by the other Party, a Party may only apply a 

safeguard measure to a good during the first 10 years that the FTA 

is in force. A safeguard measure may take one of two forms—a 

temporary increase in duties to NTR (MFN) levels or a temporary 

suspension of duty reductions called for under the Agreement. A 

safeguard measure may last for a maximum aggregate period of 

three years. If a measure lasts more than one year, the Party must 

liberalize it at regular intervals. Chapter Eight incorporates by reference certain procedural and substantive investigation requirements of the WTO Agreement on Safeguards. 

If a Party imposes a bilateral safeguard measure, Chapter Eight 

requires it to provide the other Party offsetting trade compensation. If the Parties cannot agree on the amount or nature of the 

compensation, the Party entitled to compensation may suspend 

‘‘substantially equivalent’’ trade concessions that it has made to the 

other Party. A Party may not impose a safeguard measure under 

Chapter Eight more than once on any good. Special safeguard provisions are set out for textile and apparel goods in Chapter Three 

(Textiles and Apparel). 

Global Safeguards. Chapter Eight maintains each Party’s right to 

take action under Article XIX of GATT 1994 and the WTO Agreement on Safeguards against imports from all sources. 

Chapter Nine: Government procurement 

Chapter Nine provides comprehensive obligations requiring each 

Party to apply fair and transparent procurement procedures and 

rules and prohibiting each government and its procuring entities 

from discriminating in purchasing practices against goods, services, 

and suppliers from the other country. The rules of Chapter Nine 

are broadly based on WTO procurement rules. (Bahrain is not a 

party to the WTO Agreement on Government Procurement.) 

General Principles. Chapter Nine establishes a basic rule of ‘‘national treatment,’’ meaning that each Party’s procurement rules 

and the entities applying those rules must treat goods, services, 

and suppliers of such goods and services from the other Party in 

a manner that is ‘‘no less favorable’’ than the treatment their domestic counterparts receive. The Chapter similarly bars discrimination against locally established suppliers on the basis of foreign affiliation or ownership. Chapter Nine also provides rules aimed at 

ensuring a fair and transparent procurement process. 

Coverage and Thresholds. Chapter Nine applies to purchases and 

other means of obtaining goods and services valued above certain 

monetary thresholds by those government departments, agencies, 

and enterprises listed in each Party’s schedule. Specifically, the 

18 

1These thresholds are subject to adjustment every two years according to a ‘‘Threshold Adjustment Formula’’ set out in the Annex to Chapter Nine. In addition, as stated in that Annex, there 

are specific required threshold amounts during the first two years of the Agreement’s effectiveness. 

Chapter applies to procurements by listed ‘‘central’’ (i.e., Bahraini 

or U.S. federal) government agencies of goods and services valued 

at $175,000 or more and construction services valued at $7,611,532 

or more.1 The equivalent thresholds for purchases by ‘‘other entities’’ are $250,000 for goods and services and $9,368,478 for construction services. All thresholds, except the $250,000 threshold, 

are subject to adjustment for inflation. 

Transparency. Chapter Nine establishes rules designed to ensure 

transparency in procurement procedures. Each Party must publish 

its laws, regulations, and other measures governing procurement, 

along with any changes to those measures, and must, upon request, 

provide an explanation regarding any such measure to the other 

Party. Procuring entities must publish notices of procurement opportunities in advance. The Chapter also lists minimum information that such notices must include. 

Tendering Rules. Chapter Nine provides rules for setting deadlines on ‘‘tendering’’ (bidding on government contracts). It requires 

procuring entities to give suppliers all the information they need 

to prepare tenders, including the criteria that procuring entities 

will use to evaluate tenders. 

Entities must also, where appropriate, base their technical specifications (i.e., detailed descriptions of the goods or services to be 

procured) on performance-oriented criteria and international standards. Chapter Nine provides that procuring entities may not write 

technical specifications to favor a particular supplier, good, or service. It also sets out rules that procuring entities must follow when 

they use limited tendering, i.e., when they limit the set of suppliers 

that may bid on a contract. 

Award Rules. Chapter Nine requires all tenders for a contract 

must be considered, unless submitted by an otherwise disqualified 

supplier. The tender must meet the criteria set out in the tender 

documentation, and procuring entities must base their award of 

contracts on those criteria. Procuring entities must publish information on awards, including the name of the supplier, a description 

of the goods or services procured, and the value of the contract. 

Chapter Nine also calls for each Party to ensure that suppliers may 

bring challenges against procurement decisions before independent 

reviewers. 

Additional Provisions. Chapter Nine is designed to promote integrity in each Party’s procurement practices, including by requiring the Parties to adopt and maintain procedures that disqualify 

suppliers that a Party has determined to have engaged in fraudulent or illegal action in relation to procurement. It establishes procedures under which a Party may change the extent to which the 

Chapter applies to its government entities, such as when a Party 

privatizes an entity whose purchases are covered under the Chapter. It also provides that Parties may adopt or maintain measures 

necessary to protect: (1) public morals, order, or safety; (2) human, 

animal, or plant life or health; or (3) intellectual property. Parties 

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ices of handicapped persons, philanthropic institutions, or prison 

labor. 

Chapter Ten: Cross-border trade in services 

Chapter Ten governs measures affecting cross-border trade in 

services between the United States and Bahrain. Chapter provisions are drawn in part from the services provisions of the NAFTA 

and the WTO General Agreement on Trade in Services (‘‘GATS’’), 

as well as priorities that have emerged since those agreements. 

Key Concepts. Under the Agreement, cross-border trade in services covers the supply of a service: • from the territory of one Party into the territory of the 

other (e.g., electronic delivery of services from the United 

States to Bahrain); • in the territory of a Party by a person of that Party to a 

person of the other Party (e.g., a Bahraini company provides 

services to U.S. visitors in Bahrain); and • by a national of a Party in the territory of the other Party 

(e.g., a U.S. lawyer provides legal services in Bahrain). 

General Principles. Among Chapter Ten’s core obligations are requirements to provide national treatment and MFN treatment to 

service suppliers of the other Party. Thus, each Party must treat 

service suppliers of the other Party no less favorably than its own 

suppliers or those of any other country. This commitment applies 

to state and local governments as well as the federal government. 

The Chapter’s provisions relate to the rights of existing service suppliers as well as those who seek to supply services, subject to any 

reservations by either Party. The Chapter also includes a provision 

prohibiting the Parties from requiring firms to establish a local 

presence as a condition for supplying a service on a cross-border 

basis. In addition, certain types of market access restrictions to the 

supply of services (e.g., rules that limit the number of firms that 

may offer a particular service or that restrict or require specific 

types of legal structures or joint ventures with local companies in 

order to supply a service) are also barred. The Chapter’s market access rules apply both to services supplied on a cross-border basis 

and through local investments pursuant to the Parties’ bilateral investment treaty, discussed below. 

Sectoral Coverage and Non-Conforming Measures. Chapter Ten 

applies across virtually all services sectors. The Chapter excludes 

most financial services and air transportation, although it does 

apply to specialty air services and aircraft repair and maintenance. 

Each Party has listed in Annexes those measures in particular sectors for which it negotiated exemptions from the Chapter’s core obligations. Any non-conforming aspects of all current U.S. state and 

local laws and regulations are exempted from these core obligations. A Party may liberalize a measure that it has exempted, but 

it may not make such measures more restrictive (though certain 

market access commitments are exempted from this obligation). 

Transparency and Domestic Regulation. Provisions on transparency and domestic regulation complement the core rules of 

Chapter Ten. The transparency rules apply to the development and 

application of regulations governing services. The Chapter’s rules 

on domestic regulation govern the operation of approval and licensing systems for service suppliers. Like the Chapter’s market access 

20 

rules, its provisions on transparency and domestic regulation cover 

services supplied both on a cross-border basis and through local investments under the Parties’ bilateral investment treaty, discussed 

below. 

Exclusions. Chapter Ten excludes any service supplied ‘‘in the exercise of governmental authority,’’ that is, a service that is provided 

on a non-commercial and non-competitive basis. Chapter Ten also 

does not generally apply to government subsidies, although the 

Parties have undertaken a commitment relating to cross-subsidization of express delivery services. The Parties have also negotiated 

an Annex regarding the regulation of professional services. Under 

Annex 10–B, the Parties will endeavor to develop mutually acceptable standards and criteria for licensing and certification of professional service suppliers. Such standards and criteria may be developed with regard, among other things, to: (1) accreditation of 

schools or academic programs; (2) qualifying examinations for licensing; (3) standards of professional conduct and the nature of disciplinary action for non-conformity with those standards; (4) requirements for knowledge of such matters as local laws, regulations, language, geography, or climate; and (5) consumer protection. 

Investment. In 1999, the United States and Bahrain negotiated 

a comprehensive bilateral investment treaty (‘‘BIT’’), the Treaty Between the Government of the United States of America and the 

Government of the State of Bahrain Concerning the Encouragement and Reciprocal Protection of Investment (1999). The BIT was 

based on the standard U.S. prototype for investment agreements. 

The BIT: (1) applies to all forms of U.S. investment in Bahrain; (2) 

requires that covered U.S. investments receive the better of national treatment or MFN treatment provided by Bahrain; (3) prohibits the imposition of performance requirements on covered U.S. 

investments by Bahrain; (4) allows expropriation of U.S. investments by Bahrain only in accordance with customary international 

law; and (5) allows U.S. investors to bring disputes with the Bahraini government to binding international arbitration, among other 

provisions. Because the BIT provides a full range of investment disciplines, the United States and Bahrain did not include an investment chapter in the FTA. However, as noted above, the market access, domestic regulation, and transparency provisions of Chapter 

Ten govern the treatment of investors and investments in services 

sectors pursuant to the BIT. 

Side Letters. Finally, in side letters to Chapter Ten that are part 

of the Agreement, the Parties clarify that: (1) Bahrain may prohibit 

gambling (and the provision of gambling services) and treat it as 

a criminal offense, consistent with WTO rules; and (2) no provision 

of the Agreement imposes obligations on the Parties with respect 

to immigration or—consistent with Chapter Fifteen—the right to 

secure employment in the territory of a Party. 

Chapter Eleven: Financial services 

Chapter Eleven provides rules governing each Party’s treatment 

of financial institutions of the other Party and cross-border trade 

in financial services. 

Key Concepts. The Chapter defines a ‘‘financial institution’’ as 

any financial intermediary or other institution authorized to do 

business and regulated or supervised as a financial institution 

21 

under the law of the Party where it is located. A ‘‘financial service’’ is any service of a financial nature, including, for example, insurance, banking, securities, asset management, financial information 

and data processing services, and financial advisory services. 

General Principles. Chapter Eleven’s core obligations parallel 

those in Chapter Ten (Cross-Border Trade in Services). Specifically, 

Chapter Eleven imposes rules requiring national treatment and 

MFN treatment, prohibits certain quantitative restrictions on market access, and bars restrictions on the nationality of senior management. These rules apply to measures affecting financial institutions, including pre-establishment, and to financial service suppliers that are currently supplying or seek to supply on a cross-border basis. 

Non-Conforming Measures. Similar to Chapter Ten, each Party 

has listed in an Annex to Chapter Eleven particular financial services measures for which it has negotiated exemptions from the 

Chapter’s core obligations. Any non-conforming aspects of all current U.S. state and local laws and regulations are exempted from 

these obligations. A Party may liberalize a measure that it has exempted, but it may not make such measures more restrictive 

(though certain market access commitments are exempted from 

this obligation). 

Other Provisions. Chapter Eleven includes provisions on transparency, as well as rules regarding ‘‘new’’ financial services, selfregulatory organizations (the Agreement allows Bahrain up to two 

years to comply with certain such provisions), and the expedited 

availability of insurance products. 

Relationship to Other Chapters/Agreements. The existing BIT 

provides U.S. investors in financial institutions in Bahrain with 

certain benefits not included in the FTA, such as compensation 

against expropriation, the right to free transfers, and a process for 

investor-state dispute settlement. Chapter Eleven also incorporates 

by reference certain provisions of Chapter Ten, such as those relating to denial of benefits and transfers and payments as they relate 

to cross-border trade. 

Side Letters. Finally, side letters to Chapter Eleven that are part 

of the Agreement contain additional obligations with respect to financial services. In particular, the Parties provide that: (1) in reviewing the regulation of its insurance sector, Bahrain will not fail 

to permit U.S. insurance suppliers to sell their products through 

independent agents; (2) a Party may impose registration and other 

administrative requirements on insurance companies of the other 

Party, to the extent such requirements are consistent with the 

Agreement; and (3) the Parties may agree to extend Bahrain’s sixmonth exemption from the obligations of Chapter Eleven (i.e., its 

non-conforming measure) regarding the market for non-life insurance financial services. 

Chapter Twelve: Telecommunications 

Chapter Twelve includes disciplines beyond those imposed under 

Chapter Ten (Cross-Border Trade in Services) and under the BIT 

on regulatory measures affecting telecommunications trade and investment. Chapter Twelve is designed to ensure that service suppliers of each Party have non-discriminatory access to public telecommunications services in the other country. In addition, the 

22 

Chapter requires each Party to regulate its dominant telecommunications suppliers in ways that will ensure a level playing field for 

new entrants from the other Party. Chapter Twelve also seeks to 

ensure that telecommunications regulations are set by independent 

regulators applying transparent procedures and is designed to encourage adherence to principles of deregulation and technological 

neutrality. 

Key Concepts. Under Chapter Twelve, a ‘‘public telecommunications service’’ is any telecommunications service that a Party requires to be offered to the public generally. The term includes voice 

and data transmission services. It does not include the offering of 

‘‘value-added services’’ (e.g., services that enable users to create, 

store, or process information over a network). 

Competition. Chapter Twelve establishes rules that reflect the 

common elements of the Parties’ laws promoting competition in 

telecommunications services. It also provides flexibility to account 

for changes that may occur through new legislation or regulatory 

decisions. The Chapter includes commitments by each Party to: 

• Ensure that all service suppliers of the other Party that 

seek to access or use a public telecommunications service in 

the Party’s territory can do so on reasonable and non-discriminatory terms (e.g., Bahrain must ensure that its public phone 

companies do not provide preferential access to Bahraini banks 

or Internet service providers, to the detriment of U.S. competitors); 

• Give the other Party’s telecommunications suppliers, in 

particular, the right to interconnect their networks with public 

networks in its territory at reasonable rates; 

• Ensure that telecommunications suppliers of the other 

Party that seek to build physical networks in the Party’s territory have access to key physical facilities of dominant carriers, 

such as buildings, where they can install equipment, thus facilitating cost-effective investment; 

• Ensure that telecommunications suppliers of the other 

Party enjoy the right to lease lines to supplement their own 

networks or, alternatively, purchase telecommunications services from dominant domestic suppliers and resell them in order 

to build a customer base; and 

Regulation. The Chapter also addresses key regulatory concerns 

that may create barriers to trade and investment in telecommunications services. In particular, the Parties: 

• Ensure that they will maintain open and transparent telecommunications regulatory regimes, including requirements to 

publish licensing requirements and criteria and other government measures relating to public telecommunications services; 

• Will require their telecommunications regulators to explain their rule-making decisions and provide foreign suppliers 

the right to challenge those decisions; 

• May elect to deregulate telecommunications services when 

competition exists and certain standards are met; and 

• May not prevent telecommunications service suppliers 

from choosing the technologies they consider appropriate for 

supplying their services, subject to legitimate public policy requirements. 

23 

Side Letters. Finally, side letters to Chapter Twelve that are part 

of the Agreement provide that: (1) the manner through which the 

Parties expect Bahrain will ensure cost-oriented interconnection 

levels for international services; and (2) Bahrain’s commitment to 

issue any additional commercial mobile services licenses in a technologically neutral manner. 

Chapter Thirteen: Electronic commerce 

Chapter Thirteen establishes rules designed to prohibit discriminatory regulation of electronic trade in digitally encoded products, 

such as computer programs, video, images, and sound recordings. 

The Chapter contains state-of-the-art provisions on electronic commerce, similar to those in recent U.S. free trade agreements with 

Chile, Singapore, Australia, and Morocco. 

Customs Duties. Chapter Thirteen provides that a Party may not 

impose customs duties on digital products of the other Party that 

are transmitted electronically. The Chapter does not preclude a 

Party from imposing duties on digital products of the other Party 

that are fixed on a carrier medium, provided that the duty is based 

on the cost or value of that medium alone, rather than the cost or 

value of the digital content stored on that medium. 

Non-Discrimination. Chapter Thirteen requires the Parties to 

apply the principles of national treatment and MFN treatment to 

trade in electronically transmitted digital products. In particular, a 

Party may not treat digital products less favorably because such 

digital products: (1) have undergone certain specific activities (e.g., 

creation, production, first sale) in the territory of the other Party; 

or (2) are associated with certain categories of persons of the other 

Party (e.g., authors, performers, producers). Nor may a Party treat 

digital products that have such a nexus to the other Party less favorably than it treats like digital products with such a nexus to a 

non-Party. These non-discrimination rules do not apply to actions 

taken in accordance with the non-conforming measures specifically 

exempted from the rules set out in Chapter Ten (Cross-Border 

Trade in Services) or Chapter Eleven (Financial Services). 

Chapter Fourteen: Intellectual property rights 

Chapter Fourteen complements and enhances existing international standards for the protection of intellectual property and 

the enforcement of intellectual property rights, consistent with U.S. 

law. 

General Provisions. Chapter Fourteen calls for the Parties to ratify or accede to certain agreements on intellectual property rights, 

including the International Convention for the Protection of New 

Varieties of Plants, the Trademark Law Treaty, the Brussels Convention Relating to the Distribution of Programme-Carrying Satellite Signals (the ‘‘Brussels Convention’’), the Protocol Relating to 

the Madrid Agreement Concerning the International Registration 

of Marks, the Budapest Treaty on the International Recognition of 

the Deposit of Microorganisms (the ‘‘Budapest Treaty’’), the Patent 

Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO 

Performances and Phonograms Treaty. The United States is already a party to these agreements. 

Chapter Fourteen also requires broad application of the principle 

of national treatment, with only limited exceptions. The general 

24 

provisions further clarify the coverage of existing subject matter 

and requirements for publication of all laws, regulations, and procedures relating to the protection and enforcement of intellectual 

property rights. 

Trademarks and Geographical Indications. Chapter Fourteen establishes rules concerning the protection of trademarks and geographical indications. For example, Parties must provide the owner 

of a registered trademark the exclusive right to prevent its use in 

the course of trade for related goods and services by any party not 

having the owner’s consent. The Chapter also sets out rules with 

respect to the registration of trademarks. Each Party must provide 

protection for trademarks, including protecting preexisting trademarks against infringement by later geographical indications. Furthermore, the Chapter requires that the Parties provide efficient 

and transparent procedures governing the application for protection of trademarks and geographical indications. The Chapter also 

provides for rules on domain name management that require a dispute resolution procedure to prevent trademark cyber-piracy. 

Copyright and Related Rights. Chapter Fourteen provides for 

broad protection of copyright and related rights, affirming and 

building on rights set out in several international agreements. For 

instance, each Party must provide copyright protection for the life 

of the author plus 70 years (for works measured by a person’s life), 

or 70 years (for corporate works). The Chapter clarifies that the 

right to reproduce literary and artistic works, recordings, and performances encompasses temporary copies, an important principle in 

the digital realm. It also calls for each Party to provide a right of 

communication to the public, which will further ensure that right 

holders have the exclusive right to make their works available online. The Chapter specifically requires protection for the rights of 

performers and producers of phonograms. 

To curb copyright piracy, Chapter Fourteen requires the governments to use only legitimate computer software, setting an example 

for the private sector. The Chapter also includes provisions on anticircumvention, under which the Parties commit to prohibit tampering with technology used to protect copyrighted works. In addition, Chapter Fourteen sets out obligations with respect to the liability of Internet service providers in connection with copyright infringements that take place over their networks. Finally, recognizing the importance of satellite broadcasts, Chapter Fourteen ensures that each Party will protect encrypted program-carrying satellite signals. It obligates the Parties to extend protection to the 

signals themselves, as well as to the content contained in the signals. 

Patents. Chapter Fourteen also includes a variety of provisions 

for the protection of patents. The Parties may only exclude inventions from patentability to protect ordre public or morality, including to protect human, animal, or plant life or health or to avoid serious prejudice to the environment. The Parties also may exclude 

from patentability animals and diagnostic, therapeutic, and surgical procedures for the treatment of humans or animals. The Parties also confirm the availability of patents for new uses or methods of using a known product. To guard against arbitrary revocation of patents, each Party must limit the grounds for revoking a 

patent to the grounds that would have justified a refusal to grant 

25 

the patent. The Chapter requires the Parties to provide for patent 

term adjustments to compensate for unreasonable delays that occur 

while granting the patent, as well as for unreasonable curtailment 

of the effective patent term as a result of the marketing approval 

process for pharmaceutical products. 

Certain Regulated Products. Chapter Fourteen includes specific 

measures relating to certain regulated products, specifically pharmaceuticals and agricultural chemicals. Among other things, the 

Parties must protect test information regarding safety and efficacy 

submitted in seeking marketing approval for such products by precluding other firms from relying on the information. 

It provides specific periods for such protection—for example, five 

years for new pharmaceuticals and 10 years for new agricultural 

chemicals. It also requires the Parties to adopt measures to prevent 

the marketing of a pharmaceutical product during the term of a 

patent covering that product. 

Enforcement Provisions. Chapter Fourteen also creates obligations with respect to the enforcement of intellectual property 

rights. Among these, it requires the Parties, in determining damages, to take into account the value of the legitimate goods as well 

as the infringer’s profits. The Chapter also provides for award of 

damages based on a fixed range (i.e., ‘‘statutory damages’’), on the 

election of the right holder in cases involving infringement of copyright and related rights and trademark counterfeiting. 

Chapter Fourteen provides that the Parties’ law enforcement 

agencies must have authority to seize suspected pirated and counterfeit goods, the equipment used to make or transmit them, and 

documentary evidence. Each Party must give its courts authority to 

order the forfeiture and/or destruction of such items. Chapter Fourteen also requires each Party to empower its law enforcement 

agencies to take enforcement action at the border against pirated 

or counterfeit goods without waiting for a formal complaint. Chapter Fourteen provides that each Party must apply criminal penalties against counterfeiting and piracy, including end-user piracy. 

Transition Periods. All provisions of the Chapter take effect 

when the Agreement enters into force. However, Bahrain may take 

up to one year after the Agreement enters into force effect to ratify 

or accede to: (1) the Brussels Convention; and (2) the Budapest 

Treaty. 

Side Letters. Finally, two side letters to Chapter Fourteen that 

are part of the Agreement contain additional obligations on the 

part of Bahrain with respect to intellectual property rights. In particular, Bahrain will adopt further measures: (1) requiring effective 

written notice to Internet service providers with respect to materials that are claimed to be infringing a copyright; and (2) regarding the manufacture of optical discs, including provisions concerning licensure, registration, record keeping, and inspections, 

among others. 

Chapter Fifteen: Labor 

Chapter Fifteen sets out the Parties’ commitments regarding 

trade-related labor rights. As with other recent free trade agreements, this Chapter draws on, but does not replicate, the North 

American Agreement on Labor Cooperation (the supplemental 

26 

NAFTA labor agreement) and the labor provisions of the U.S. free 

trade agreements with Chile, Singapore, and Jordan. 

General Principles. Under Chapter Fifteen, the Parties reaffirm 

their obligations as members of the International Labor Organization (‘‘ILO’’) and their commitments under the 1998 ILO Declaration on Fundamental Principles and Rights at Work. Each Party 

must strive to ensure that its law recognizes and protects the fundamental labor principles spelled out in the ILO declaration and 

listed in the Chapter. Each Party also must strive to ensure it does 

not waive or otherwise derogate from its labor laws to encourage 

bilateral trade or investment. The Parties also commit to afford 

procedural guarantees that ensure workers and employers have access to fair, equitable, and transparent procedures for the enforcement of labor laws. 

Effective Enforcement. Each Party commits not to fail to effectively enforce its labor laws on a sustained or recurring basis in a 

manner affecting bilateral trade. The Chapter defines labor laws to 

include those related to: (1) the right of association; (2) the right 

to organize and bargain collectively; (3) a prohibition on the use of 

any form of forced or compulsory labor; (4) labor protections for 

children and young people, including a minimum age for the employment of children and elimination of the worst forms of child 

labor; and (5) acceptable conditions of work with respect to minimum wages, hours, and occupational safety and health. While 

committing each Party to effective labor law enforcement, the 

Chapter also recognizes each Party’s right to establish its own 

labor laws, exercise discretion in investigatory, regulatory, prosecutorial, and compliance matters, and allocate enforcement resources. 

The U.S. commitment includes federal statutes and regulations addressing these areas, but it does not cover state or local labor laws. 

Cooperation. Each Party may convene a national labor advisory 

committee, made up of members of its public, including representatives of labor and business organizations, to advise it on the implementation of the Chapter. Each Party also will designate a contact 

point for communications with the other Party and the public regarding operation of the Chapter. In addition, the Joint Committee 

(see Article 18.2) may establish a Subcommittee on Labor Affairs 

comprising the relevant officials from each Party’s labor ministry 

and other appropriate agencies to discuss the operation of Chapter 

Fifteen. Meetings of the Subcommittee will normally include a public session. 

Finally, the Parties will establish a Labor Cooperation Mechanism to address labor matters of common interest, such as: (1) promoting fundamental rights and their effective application; (2) developing unemployment assistance programs and other social safety net programs; (3) improving working conditions; (4) developing 

processes for regulating foreign workers; (5) creating alternative 

forms of labor-management collaboration; (6) eliminating gender 

discrimination in the employment arena; and (7) utilizing labor statistics. 

Consultations and Dispute Settlement. If a Party believes that 

the other Party is not complying with its obligations, Chapter Fifteen provides for consultations regarding any matter arising under 

the Chapter, including the opportunity to refer a matter to the 

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27 

cerns a Party’s compliance with the Chapter’s effective enforcement 

obligation, the complaining Party may choose to pursue consultations under Chapter Fifteen or Chapter Nineteen (Dispute Settlement). If a Party chooses to request consultations under Chapter 

Nineteen, consultations under Chapter Fifteen on the same matter 

cease. In addition, after 60 days of consultations under Chapter 

Fifteen, the Parties may agree to refer the matter concerning compliance with the effective enforcement obligation directly to the 

Joint Committee for resolution under Chapter Nineteen. 

Chapter Sixteen: Environment 

Chapter Sixteen sets out the Parties’ commitments regarding environmental protection. Chapter Sixteen draws on, but does not 

replicate, the North American Agreement on Environmental Cooperation (the supplemental NAFTA environmental agreement) 

and the environmental provisions included in U.S. free trade agreements with Chile, Singapore, and Jordan. 

General Principles. Each Party commits not to fail to effectively 

enforce its environmental laws on a sustained or recurring basis in 

a manner affecting bilateral trade. The Parties must ensure that 

their laws provide for high levels of environmental protection. Each 

Party also must strive not to weaken or reduce its environmental 

laws to encourage bilateral trade or investment. The Chapter also 

includes commitments to provide certain procedural guarantees 

that ensure fair, equitable, and transparent proceedings for the administration and enforcement of environmental laws. In addition, 

the Chapter calls on the Parties to encourage the development of 

voluntary measures and market-based mechanisms for achieving 

and maintaining high levels of environmental protection. The Parties also must ensure that opportunities exist for the public to provide input concerning the implementation of the Chapter. 

Cooperation. Chapter Sixteen includes commitments to enhance 

bilateral cooperation in environmental matters. In particular, the 

Parties agree to undertake activities pursuant to a United StatesBahrain Memorandum of Understanding on Environmental Cooperation. The Parties also commit to continue to seek means to 

enhance the mutual benefits of multilateral environmental agreements (‘‘MEAs’’) and trade agreements to which they are both 

party, and to consult regularly with respect to the WTO negotiations regarding MEAs. 

In addition, at the request of either Party, a Subcommittee on 

Environmental Affairs will be established to discuss the operation 

of Chapter Sixteen. The subcommittee will include the relevant officials from each Party’s trade and environmental agencies. Meetings of the subcommittee will normally include an open session, 

and any decisions or reports of the subcommittee concerning implementation of Chapter Sixteen will normally be made public. 

Effective Enforcement. The U.S. commitment on enforcement of 

environmental laws applies to federal environmental statutes and 

regulations enforceable by the federal government, but it does not 

cover state or local environmental laws. The Chapter also recognizes the right of each Party to: (1) establish its own environmental 

laws; (2) exercise discretion in regulatory, prosecutorial, and compliance matters; and (3) allocate enforcement resources. 

28 

Consultations and Dispute Settlement. If a Party believes that 

the other Party is not complying with its obligations under the 

Chapter, it may convene bilateral consultations and then may refer 

the matter to the Subcommittee on Environmental Affairs, if it has 

been established. If the matter concerns a Party’s compliance with 

the Chapter’s effective enforcement obligation, the complaining 

Party may choose to pursue consultations under Chapter Sixteen 

or Chapter Nineteen (Dispute Settlement). If a Party chooses to request consultations under Chapter Nineteen, consultations under 

Chapter Sixteen on the same matter cease. In addition, after 60 

days of consultations under Chapter Sixteen, the Parties may agree 

to refer the matter concerning compliance with the effective enforcement obligation directly to the Joint Committee for resolution 

under Chapter Nineteen. 

Chapter Seventeen: Transparency 

Chapter Seventeen sets out requirements designed to foster 

openness, transparency, and fairness in the adoption and application of administrative measures covered by the Agreement. For example, it requires that, to the extent possible, each Party must 

promptly publish all measures concerning subjects covered by the 

Agreement and give interested persons a reasonable opportunity to 

comment. Wherever possible, each Party must provide reasonable 

notice to the other Party’s nationals and enterprises that are directly affected by an administrative proceeding applying measures 

to particular persons, goods, or services of the other Party. A Party 

is to afford such persons a reasonable opportunity to present facts 

and arguments prior to any final administrative action when time, 

the nature of the process, and the public interest permit. Chapter 

Seventeen also provides for independent review and appeal of final 

administrative actions. Appeal rights must include a reasonable opportunity to present arguments and to obtain a decision based on 

evidence in the administrative record. 

In addition, Chapter Seventeen contains innovative provisions on 

combating bribery and corruption. Each country must adopt or 

maintain prohibitions on bribery in matters affecting international 

trade and investment, including bribery of foreign officials, and establish criminal penalties for such offenses. In addition, both countries will adopt or maintain appropriate measures to protect those 

who, in good faith, report acts of bribery and will work jointly to 

encourage and support appropriate regional and multilateral initiatives. 

Chapter Eighteen: Administration of the Agreement 

Chapter Eighteen requires that each Party designate a contact 

point to facilitate communication between the Parties on any matter relating to the Agreement. The Chapter also creates a Joint 

Committee to supervise the implementation and operation of the 

Agreement and to review the trade relationship between the Parties. Among others, its tasks will be to: (1) facilitate the avoidance 

and settlement of disputes arising under the Agreement; (2) consider and adopt any amendment or other modification to the Agreement; and (3) consider ways to further enhance trade relations between the Parties. The Joint Committee will convene at least once 

a year. 

29 

Chapter Nineteen: Dispute Settlement 

Chapter Nineteen sets out detailed procedures for the resolution 

of disputes between the Parties over compliance with the Agreement. Those procedures emphasize amicable settlements, relying 

wherever possible on bilateral cooperation and consultations. When 

disputes arise under provisions common to the Agreement and 

other agreements (e.g., the WTO Agreement), the complaining 

Party may choose the forum for resolving the matter. The selected 

forum is the exclusive venue for resolving that dispute. 

Consultations. Either Party may request consultations on any 

matter that it believes might affect the operation of the Agreement. 

After requesting or receiving a request for consultations, each 

Party must solicit the views of the public on the matter. If the Parties cannot resolve the matter through consultations within 60 

days, a Party may refer the matter to the Joint Committee, which 

will attempt to resolve the dispute. 

Panel Procedures. If the Joint Committee cannot resolve the dispute within 60 days after delivery of the request, the complaining 

Party may refer the matter to a panel comprising independent experts that the Parties select. In disputes related to a Party’s enforcement of its labor or environmental laws, panelists must have 

expertise or experience relevant to the subject matter that is under 

dispute. The Parties will set rules to protect confidential information, provide for open hearings and public release of submissions, 

and allow an opportunity for the panel to accept submissions from 

non-governmental entities in the Parties’ territories. 

Unless the Parties agree otherwise, a panel is to present its initial report within 180 days after the chair is selected. Once the 

panel presents its initial report containing findings of fact and a 

determination on whether a Party has met its obligations, the Parties will have the opportunity to provide written comments to the 

panel. When the panel receives these comments, it may reconsider 

its report and make any further examination that it considers appropriate. Within 45 days after it presents its initial report, the 

panel will submit its final report. The Parties will then seek to 

agree on how to resolve the dispute, normally in a way that conforms to the panel’s determinations and recommendations. Subject 

to protection of confidential information, the panel’s final report 

will be made available to the public 15 days after the Parties receive it. 

Suspension of Benefits. In disputes involving the Agreement’s ‘‘commercial’’ obligations (i.e., obligations other than enforcement of 

labor and environmental laws), if the Parties cannot resolve the 

dispute after they receive the panel’s final report, the Parties will 

seek to agree on acceptable trade compensation. If they cannot 

agree on compensation, or if the complaining Party believes the defending Party has failed to implement an agreed resolution, the 

complaining Party may provide notice that it intends to suspend 

trade benefits of equivalent effect. 

If the defending Party considers that the proposed level of benefits to be suspended is ‘‘manifestly excessive,’’ or believes that it 

has modified the disputed measure to make it conform to the 

Agreement, it may request the panel to reconvene and decide the 

matter. The panel must issue its determination no later than 90 

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30 

ing both the level of the proposed suspension and a modification of 

the measure). 

The complaining Party may suspend trade benefits up to the 

level that the panel sets or, if the panel has not been asked to determine the level, up to the amount that the complaining Party has 

proposed. The complaining Party cannot suspend benefits, however, 

if the defending Party provides notice that it will pay an annual 

monetary assessment to the other Party. The amount of the assessment will be established by agreement of the Parties or, failing 

that, will be set at 50 percent of the level of trade concessions the 

complaining Party was authorized to suspend. 

Labor and Environment Disputes. Equivalent compliance procedures apply to disputes over a Party’s conformity with the labor 

and environmental law enforcement provisions of the Agreement. If 

a panel determines that a Party has not met its enforcement obligations and the Parties cannot agree on how to resolve the dispute, 

or if the complaining Party believes that the defending Party has 

failed to implement an agreed resolution, the complaining Party 

may ask the panel to determine the amount of an annual monetary 

assessment to be imposed on the defending Party. The Panel will 

establish the amount of the assessment, subject to a $15 million 

annual cap, taking into account relevant trade- and non-trade-related factors. The assessment will be paid into a fund established 

by the Joint Committee for appropriate labor or environmental initiatives. If the defending Party fails to pay an assessment, the complaining Party may take other appropriate steps, which may include suspending tariff benefits, as necessary to collect the assessment, while bearing in mind the Agreement’s objective of eliminating barriers to bilateral trade and while seeking to avoid unduly 

affecting parties or interests not party to the dispute. 

Compliance Review Mechanism. If, at any time, the defending 

Party believes it has made changes in its laws or regulations sufficient to comply with its obligations under the Agreement, it may 

refer the matter to the panel. If the panel agrees, the dispute ends 

and the complaining Party must withdraw any offsetting measures 

it has put in place, and the defending country will be relieved of 

any obligation to pay a monetary assessment. 

The Parties will review the operation of the compliance procedures for both commercial and labor and environment disputes either five years after the entry into force of the Agreement or within 

six months after benefits have been suspended or assessments paid 

in five proceedings initiated under this Agreement, whichever occurs first. 

Chapter Twenty: Exceptions 

Chapter Twenty sets out exceptions that apply to the entire 

Agreement. Article XX of GATT 1994 and its interpretive notes are 

incorporated into and made part of the Agreement and apply to 

those Chapters related to treatment of goods. Likewise, for the purposes of Chapters Ten (Cross Border Trade in Services), Twelve 

(Telecommunications), and Thirteen (Electronic Commerce), GATS 

Article XIV (including its footnotes) is incorporated into and made 

part of the Agreement. For both goods and services, the Parties understand that these exceptions include certain environmental 

measures. 

31 

Essential Security. Chapter Twenty allows each Party to take actions it considers necessary to protect its essential security interests. 

Taxation. An exception for taxation limits the field of tax measures subject to the Agreement. For example, the exception generally provides that the Agreement does not affect either Party’s 

rights or obligations under any tax convention. The exception sets 

out certain circumstances under which tax measures are subject to 

the Agreement’s national treatment obligation for goods and national treatment and MFN obligations for services. 

Disclosure of Information. The Chapter also provides that a 

Party may withhold information from the other Party where such 

disclosure would impede domestic law enforcement or otherwise be 

contrary to the Party’s law protecting personal privacy or the financial affairs and accounts of individual customers of financial institutions. 

Chapter Twenty-One: Final provisions 

Chapter Twenty-One provides that the Parties may amend the 

Agreement subject to applicable domestic procedures. It also provides for consultations if any provision of the WTO Agreement that 

the Parties have incorporated into the Agreement is amended. 

Chapter Twenty-One establishes that any other country or group 

of countries may become a party to the Agreement on terms and 

conditions that are agreed upon between the country or countries 

and the Parties and that are approved according to each country’s 

domestic procedures. The Chapter also permits non-application of 

the agreement between a Party and a newly acceding country or 

group of countries. It also provides for the entry into force of the 

Agreement and for its termination 180 days after a Party provides 

written notice that it intends to withdraw. 

E. GENERAL DESCRIPTION OF THE BILL TO IMPLEMENT THE UNITED

STATES-BAHRAIN FREE TRADE AGREEMENT

Sec. 1. Short title; table of contents 

This section provides that the short title of the act implementing 

the United States-Bahrain Free Trade Agreement (the Agreement) 

is the ‘‘United States-Bahrain Free Trade Agreement Implementation Act’’ (Implementation Act). Section 1 also provides the table of 

contents for the Implementation Act. 

Sec. 2. Purposes 

This section provides that the purposes of the Implementation 

Act are to approve and implement the Agreement, to strengthen 

and develop economic relations between the United States and 

Bahrain, to establish free trade between the United States and 

Bahrain through the reduction and elimination of barriers to trade 

in goods and services, and to lay the foundation for further cooperation to expand and enhance the benefits the Agreement. 

Sec. 3. Definitions 

This section defines the terms ‘‘Agreement,’’ ‘‘HTS,’’ and ‘‘Textile 

or apparel good,’’ for purposes of the Implementation Act. 

32 

TITLE I—APPROVAL OF, AND GENERAL PROVISIONS 

RELATING TO, THE AGREEMENT 

Sec. 101. Approval and entry into force of the Agreement 

This section provides congressional approval for the Agreement 

and its accompanying Statement of Administration Action. Section 

101 also provides that, if the President determines that Bahrain 

has taken measures necessary to comply its obligations that take 

effect at the time the Agreement enters into force, the President is 

authorized to exchange notes with Bahrain to provide for the entry 

into force of the Agreement with respect to the United States on 

or after January 1, 2006. 

Sec. 102. Relationship of the Agreement to United States and state 

law 

This section establishes the relationship between the Agreement 

and U.S. law. Section 102 clarifies that no provision of the Agreement will be given effect under domestic law if it is inconsistent 

with federal law, including provisions of federal law enacted or 

amended by the Implementation Act. 

Section 102 provides that only the United States may bring an 

action in court if there is an unresolved conflict between a state 

law and the Agreement. This section also precludes any private 

right of action against the federal government, state or local governments, or against a private party, based on the provisions of the 

Agreement. 

Sec. 103. Implementing actions in anticipation of entry into force 

and initial regulations 

This section provides that, following the enactment of the Implementation Act, the President may proclaim such actions, and other 

appropriate officers of the federal government may issue such regulations, as may be necessary to ensure that provisions of the legislation that take effect on the date the Agreement enters into force 

are appropriately implemented on such date. Section 103 provides 

that, with respect to any action proclaimed by the President that 

is not subject to the consultation and layover provisions contained 

in section 104, such action may not take effect before the 15th day 

after the date on which the text of the proclamation is published 

in the Federal Register. The 15-day restriction is waived, however, 

to the extent that it would prevent an action from taking effect on 

the date the Agreement enters into force. Section 103 also provides 

that, to the maximum extent feasible, initial regulations necessary 

or appropriate to carry out the actions required by the Implementation Act or proposed in the Statement of Administrative Action 

shall be issued within 1 year of the date on which the Agreement 

enters into force. In accordance with the accompanying Statement 

of Administrative Action, any agency unable to issue a regulation 

within one year must report to the Committee, at least 30 days 

prior to the end of the 1-year period, the reasons for the delay and 

the expected date for issuance of the regulation. 

33 

Sec. 104. Consultation and layover provisions for, and effective date 

of, proclaimed actions 

This section sets forth consultation and layover steps that must 

precede the President’s implementation of any duty modification by 

proclamation. Under the consultation and layover provisions, the 

President is required to obtain advice regarding a proposed action 

from the appropriate advisory committees established under section 135 of the Trade Act of 1974 (19 U.S.C. § 2155) and the U.S. 

International Trade Commission. The President must also submit 

to the Senate Committee on Finance and the House Committee on 

Ways and Means a report setting forth the action proposed, the 

reasons for the proposed action, and the advice of the appropriate 

advisory committees and the U.S. International Trade Commission. 

Section 104 sets aside a 60-day period following the date of transmittal of the report for the President to consult with the Senate 

Committee on Finance and the House Committee on Ways and 

Means on the proposed action. 

Sec. 105. Administration of dispute settlement proceedings 

This section authorizes the President to establish or designate 

within the Department of Commerce an office responsible for providing administrative assistance to dispute settlement panels established under Chapter 19 of the Agreement. Section 105 also authorizes the appropriation of funds to support this office. 

Sec. 106. Effective dates; effect of termination 

This section provides that the provisions of the Implementation 

Act and the amendments made by it take effect on the date on 

which the Agreement enters into force, except for sections 1 

through 3 and Title I, which take effect on the date of enactment 

of the Implementation Act. Under section 106, the provisions of the 

Implementation Act and the amendments to other statutes made 

by it will cease to have effect on the date on which the Agreement 

terminates. 

TITLE II—CUSTOMS PROVISIONS 

Sec. 201. Tariff modifications 

Section 201(a) authorizes the President to implement by proclamation the modification, continuation, or imposition of duties, or 

the continuation of duty-free treatment, as the President determines to be necessary or appropriate to carry out or apply articles 

2.3, 2.5, 2.6, 3.2.8, and 3.2.9, and Annex 2–B (Tariff Elimination) 

of the Agreement. In addition, section 201(a) requires the President 

to terminate the designation of Bahrain as a beneficiary developing 

country for purposes of the U.S. Generalized System of Preferences 

on the date on which the Agreement enters into force. 

Section 201(b) authorizes the President, subject to the consultation and layover provisions of section 104, to proclaim the continuation, modification, or imposition of additional tariffs, or the continuation of duty-free treatment, as the President determines to be 

necessary or appropriate to maintain the general level of reciprocal 

and mutually advantageous concessions with respect to Bahrain 

provided for by the Agreement. 

34 

Section 201(c) authorizes the President, with respect to any good 

for which the base rate of duty in the Tariff Schedule of the United 

States to Annex 2–B (Tariff Elimination) of the Agreement is a specific or compound rate of duty, to substitute for the base rate an 

ad valorem rate that the President determines to be equivalent to 

the base rate. 

Sec. 202. Rules of origin 

Section 202 implements the general rules of origin set forth in 

Chapter 4 of the Agreement. These rules define the circumstances 

under which a good imported from Bahrain qualifies as an originating good and is thus eligible for preferential tariff treatment according to the terms of the Agreement. 

Under section 202(b), for a good entering the United States to 

qualify as an originating good, it must be imported directly from 

the territory of Bahrain. Further, section 202(b) provides that the 

good must be covered by one of three specified categories. First, a 

good is an originating good if it is wholly the growth, product, or 

manufacture of Bahrain or the United States, or both. 

Second, a good is an originating good if it is a new or different 

article of commerce that has been grown, produced, or manufactured in Bahrain or the United States, or both, i.e. the good has 

undergone a ‘‘substantial transformation.’’ Additionally, the sum of 

the value of each material produced in Bahrain or the United 

States, or both, and the direct costs of processing operations performed in Bahrain or the United States, or both, must be at least 

35 percent of the appraised value of the good at the time the good 

is entered into the United States. This ‘‘substantial transformation’’ rule of origin is akin to rules of origin provided for in the United 

States-Israel Free Trade Area Implementation Act, the United 

States-Jordan Free Trade Area Implementation Act, and the 

United States-Morocco Free Trade Agreement Implementation Act. 

Third, a good is an originating good if it meets the product-specific rules set out in Annex 3–A (Rules of Origin for Textile or Apparel Goods for Chapters 42, 50 Through 63, 70, and 94) or Annex 

4–A (Certain Product-Specific Rules of Origin) of the Agreement 

and satisfies all other applicable requirements of section 202. Moreover, each of the non-originating materials used in the production 

of the good must have undergone an applicable change in tariff 

classification specified in Annex 3–A or Annex 4–A as a result of 

production occurring entirely in the territory Bahrain or the United 

States, or both, or the good must otherwise satisfy the requirements specified in Annex 3–A or Annex 4–A. 

Section 202(c) provides a rule of cumulation for an originating 

good or material produced in the territory of Bahrain or the United 

States, or both, that is incorporated into a good in the territory of 

the other country. Section 202(d) provides rules for valuing a material produced in the territory of Bahrain or the United States, or 

both. Section 202(e) addresses the treatment of packaging and 

packing materials and containers for retail sale and for shipment 

in determining whether a good qualifies as an originating good. 

Section 202(f) addresses the treatment of indirect materials in determining whether a good qualifies as an originating good. Section 

202(g) addresses the issue of transit and transshipment in determining the origin of a good. 

35 

Section 202(h) provides certain specific rules of origin for textile 

and apparel goods, including a de minimis rule. Section 

202(h)(1)(A) provides that a textile or apparel good that is not an 

originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff 

classification set out in Annex 3–A of the Agreement shall be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than 7 percent of the 

total weight of that component. An exception to section 202(h)(1)(A) 

is provided, however, at section 202(h)(1)(B), which states that a 

textile or apparel good containing elastomeric yarns in the component of the good that determines the tariff classification of the good 

shall be considered to be an originating good only if such yarns are 

wholly formed in the territory of Bahrain or the United States. 

Section 202(i) provides definitions of the following terms applicable to the rules of origin: (1) ‘‘direct costs of processing operations,’’ (2) ‘‘good,’’ (3) ‘‘good wholly the growth, product, or manufacture of 

Bahrain or the United States, or both,’’ (4) ‘‘indirect material,’’ (5) ‘‘material,’’ (6) ‘‘material produced in the territory of Bahrain or the 

United States, or both,’’ (7) ‘‘new or different article of commerce,’’ (8) ‘‘recovered goods,’’ (9) ‘‘remanufactured good,’’ (10) ‘‘simple combining or packaging operations,’’ and (11) ‘‘substantially transformed.’’ Section 202(j) authorizes the President to proclaim, as part of the 

Harmonized Tariff Schedule of the United States, the provisions 

set forth in Annex 3–A (Rules of Origin for Textile or Apparel 

Goods for Chapters 42, 50 Through 63, 70, and 94) and Annex 4– A (Certain Product-Specific Rules of Origin) of the Agreement, and 

to modify certain of the Agreement’s rules of origin by proclamation 

subject to the consultation and layover provisions of section 104. 

Sec. 203. Customs user fees 

This section provides for the immediate elimination of the merchandise processing fee for goods qualifying as originating goods 

under the Agreement. Processing of goods qualifying as originating 

goods will be financed from the general fund of the Treasury. 

Sec. 204. Enforcement relating to trade in textile and apparel goods 

This section authorizes the President to apply anti-circumvention 

provisions concerning trade in textile and apparel goods. Pursuant 

to article 3.3 of the Agreement, the Secretary of the Treasury may 

request that the Government of Bahrain conduct a verification to 

determine the compliance of exporters and producers with applicable customs laws, regulations, and procedures affecting trade in 

textile or apparel goods, and to determine the accuracy of a claim 

of origin for a textile or apparel good. Section 204(a) provides that 

the President may direct the Secretary of the Treasury to take ‘‘appropriate action’’ while such a verification is being conducted. 

Under section 204(b), such appropriate action includes the suspension of liquidation of the entry of any textile or apparel good exported or produced by the person subject to a verification, and the 

suspension of liquidation of the entry of a textile or apparel good 

for which a claim has been made that is the subject of a 

verification. 

36 

Section 204(c) provides that, if the Secretary of the Treasury is 

unable to confirm within 12 months of making a verification request that a Bahraini exporter or producer is complying with applicable customs laws, regulations, and procedures regarding trade in 

textile or apparel goods, or that a claim of origin for a textile or 

apparel good is accurate, the President may determine what additional ‘‘appropriate action’’ to take. Under section 204(d), such additional appropriate action includes: the publication of the name and 

address of the person subject to the verification; the denial of preferential tariff treatment under the Agreement to (1) any textile or 

apparel good exported or produced by the person subject to the 

verification or (2) a textile or apparel good for which a claim has 

been made that is the subject of the verification; and, the denial 

of entry into the United States of (1) any textile or apparel good 

exported or produced by the person subject to the verification or (2) 

a textile or apparel good for which a claim has been made that is 

the subject of the verification. Section 204(c) also provides that 

such additional appropriate action may remain in effect until such 

time as the Secretary of the Treasury receives information sufficient to make a determination that an exporter or producer in Bahrain is complying with applicable customs laws, regulations, and 

procedures affecting trade in textile or apparel goods, or a determination that a claim of origin for a textile or apparel good under 

the Agreement is accurate. However, section 204(c) further provides that such additional appropriate action may remain in effect 

until such earlier date as the President may direct. 

Sec. 205. Regulations 

Section 205 authorizes the Secretary of the Treasury to prescribe 

regulations necessary to carry out the rules of origin and customs 

user fee provisions in the Implementation Act, as well as with respect to the President’s proclamation authority under section 

202(j). 

TITLE III—RELIEF FROM IMPORTS 

Sec. 301. Definitions 

This section defines the terms ‘‘Bahraini article,’’ ‘‘Bahraini textile or apparel article,’’ and ‘‘Commission,’’ for purposes of the general bilateral safeguard provision contained in Chapter 8 of the 

Agreement and the textile and apparel bilateral safeguard provision contained in Chapter 3 of the Agreement. The term ‘‘Bahraini 

article’’ is defined as an article that qualifies as an originating good 

under section 202(b) of the Implementation Act or receives preferential tariff treatment under paragraphs 8 through 11 of article 

3.2 of the Agreement. The term ‘‘Bahraini textile or apparel article’’

is defined as a Bahraini article that is listed in the Annex to the 

Agreement on Textiles and Clothing referred to in section 101(d)(4) 

of the Uruguay Round Agreements Act (19 U.S.C. § 3511(d)(4)). The 

term ‘‘Commission’’ is defined as the United States International 

Trade Commission. 

37 

SUBTITLE A. RELIEF FROM IMPORTS BENEFITING FROM THE

AGREEMENT

Sec. 311. Commencing of action for relief 

This section requires the filing of a petition with the Commission 

by an entity, including a trade association, firm, certified or recognized union, or group of workers, that is representative of an industry, in order to commence a bilateral safeguard investigation. 

Section 311(b) provides that, upon the filing of a petition, the 

Commission shall promptly initiate an investigation to determine 

whether, as a result of the reduction or elimination of a duty provided for under the Agreement, a Bahraini article is being imported into the United States in such increased quantities and 

under such conditions that imports of the Bahraini article constitute a substantial cause of serious injury, or threat of serious injury, to the domestic industry producing an article that is like, or 

directly competitive with, the imported article. 

Section 311(c) extends certain provisions (both substantive and 

procedural) contained in subsections (b), (c), and (i) of section 202 

of the Trade Act of 1974 (19 U.S.C. § 2252(b), (c), and (i)) that apply 

to global safeguard investigations, to any bilateral safeguard initiated under the Agreement. These provisions include, inter alia, the 

requirement that the Commission publish notice of the commencement of an investigation; the requirement that the Commission 

hold a public hearing at which interested parties and consumers 

have the right to be present and to present evidence; the factors 

to be taken into account by the Commission in making its determinations; and, authorization for the Commission to promulgate 

regulations to provide access to confidential business information 

under protective order to authorized representatives of interested 

parties in an investigation. 

Section 311(d) precludes the initiation of a bilateral safeguard investigation with respect to any Bahraini article for which import 

relief has already been provided under this bilateral safeguard provision. 

Sec. 312. Commission action on petition 

This section establishes deadlines for Commission action following the initiation of a bilateral safeguard investigation. Section 

312(b) applies certain statutory provisions that address an equally 

divided vote by the Commission in a global safeguard investigation 

under section 202 of the Trade Act of 1974 (19 U.S.C. § 2252) to 

Commission determinations and findings under this section. If the 

Commission renders an affirmative injury determination, or a determination that the President may consider to be an affirmative 

determination in the event of an equally divided vote by the Commission, section 312(c) requires that the Commission also find and 

recommend to the President the amount of import relief that is 

necessary to remedy or prevent the injury found by the Commission and to facilitate the efforts of the domestic industry to make 

a positive adjustment to import competition. Section 312(d) specifies the information to be included by the Commission in a report 

to the President regarding its determination. Upon submitting the 

requisite report to the President, section 312(e) requires the ComVerDate Aug 31 2005 01:06 Dec 13, 2005 Jkt 049010 PO 00000 Frm 00037 Fmt 6659 Sfmt 6602 E:\HR\OC\SR199.XXX SR199
38 

mission to promptly make public a summary of such report, except 

for any confidential information contained in the report. 

Sec. 313. Provision of relief 

This section directs the President, not later than 30 days after 

receiving the report from the Commission, to provide relief from 

imports of the article subject to an affirmative determination by 

the Commission, or a determination that the President considers to 

be an affirmative determination in the event of an equally divided 

vote by the Commission, to the extent that the President determines necessary to remedy or prevent the injury and to facilitate 

the efforts of the domestic industry to make a positive adjustment 

to import competition. Under section 313(b), the President is not 

required to provide import relief if the President determines that 

the provision of the import relief will not provide greater economic 

and social benefits than costs. 

Section 313(c) specifies the nature of the import relief that the 

President may impose, to include: the suspension of any further reduction in duty provided for under Annex 2–B of the Agreement; 

and, an increase in the rate of duty imposed on such article to a 

level that does not exceed the lesser of: (1) the normal trade relations (most-favored-nation) (NTR (MFN)) duty rate imposed on like 

articles at the time the import relief is provided, or (2) the NTR 

(MFN) duty rate imposed on like articles on the day before the date 

on which the Agreement enters into force. Section 313(c) also requires that, if the period for which import relief is provided exceeds 

one year, the President shall provide for the progressive liberalization of such relief at regular intervals during the period of its application. 

Section 313(d) provides that any import relief that the President 

imposes in a bilateral safeguard action may not, in the aggregate, 

be in effect for more than 3 years. If the initial period of import 

relief is less than 3 years, the President may extend the effective 

period of such import relief to a total of no more than 3 years; however, the Commission must first report an affirmative determination to the President that import relief continues to be necessary 

to remedy or prevent serious injury and that there is evidence that 

the domestic industry is making a positive adjustment to import 

competition (or a determination that the President considers to be 

an affirmative determination in the event of an equally divided 

vote by the Commission). The President may then extend the effective period of import relief to a total of no more than 3 years if the 

President determines that import relief continues to be necessary 

to remedy or prevent serious injury and to facilitate adjustment by 

the domestic industry to import competition, and that there is evidence that the domestic industry is making a positive adjustment 

to import competition. 

Section 313(e) provides that upon termination of import relief 

with respect to an article under the bilateral safeguard provision, 

the rate of duty to be applied to imports of that article shall be the 

rate that would have been in effect, but for the provision of such 

relief, on the date on which the relief terminates. 

Section 313(f) precludes the application of import relief pursuant 

to the bilateral safeguard provision with respect to any Bahraini 

article for which import relief has already been provided under the 

39 

bilateral safeguard provision after the date on which the Agreement enters into force. 

Sec. 314. Termination of relief authority 

This section provides that the President’s authority to impose import relief under the bilateral safeguard provision ends after the 

date that is 10 years after the date on which the Agreement enters 

into force; however, import relief may continue to be provided beyond such date with respect to an article subject to such import relief pursuant to the bilateral safeguard provision if the President 

determines that Bahrain consents to the application of such relief. 

Sec. 315. Compensation authority 

This section authorizes the President, under section 123 of the 

Trade Act of 1974 (19 U.S.C. § 2133), to grant Bahrain new concessions as compensation for the imposition of import relief pursuant 

to the bilateral safeguard provision, in order to maintain the general level of reciprocal concessions under the Agreement. 

Sec. 316. Confidential business information 

This section applies the same procedures for the treatment and 

release of confidential business information by the Commission in 

a global safeguard investigation under chapter 1 of title II of the 

Trade Act of 1974 (19 U.S.C. § 2251 et seq.) to bilateral safeguard 

investigations under subtitle A of Title III of the Implementation 

Act. 

SUBTITLE B. TEXTILE AND APPAREL SAFEGUARD MEASURES

Sec. 321. Commencement of action for relief 

This section requires the filing of a request with the President 

by an interested party in order to commence action for relief under 

the textile and apparel safeguard provision. Upon the filing of a request, the President shall review the request to determine, from information presented in the request, whether to commence consideration of the request. Section 321(b) provides that, if the President 

determines that the request provides the information necessary for 

the request to be considered, the President shall cause to be published in the Federal Register a notice of commencement of consideration of the request, and notice seeking public comments regarding the request. The notice shall include a summary of the request 

and the dates by which comments and rebuttals must be received. 

The Committee notes that our regulatory processes should be administered in an open and transparent manner that can serve as 

a model for our trading partners. For example, in addition to publishing a summary of a request for safeguard relief, the Committee 

notes that the President plans to make available the full text of the 

request on the website of the International Trade Administration 

of the U.S. Department of Commerce, subject to the protection of 

business confidential information, if any. The Committee encourages this and similar efforts to enhance government transparency. 

In particular, the Committee encourages the President to issue regulations on procedures for: requesting a textile and apparel safeguard action under section 321(a) of the Implementation Act; making a determination under section 322(a) of the Implementation 

40 

Act; providing safeguard relief under section 322(b) of the Implementation Act; and, extending safeguard relief under section 323(b) 

of the Implementation Act. 

Sec. 322. Determination and provision of relief 

This section provides that following the President’s commencement of consideration of a request, the President shall determine 

whether, as a result of the reduction or elimination of a duty under 

the Agreement, a Bahraini textile or apparel article is being imported into the United States in such increased quantities and 

under such conditions as to cause serious damage, or actual threat 

thereof, to a domestic industry producing an article that is like, or 

directly competitive with, the imported article. Section 322(a) provides that in making such a determination the President shall examine the effect of increased imports on the domestic industry’s 

output, productivity, capacity utilization, inventories, market 

share, exports, wages, employment, domestic prices, profits, and investment, none of which is necessarily decisive. Section 322(a) also 

provides that the President shall not consider changes in technology or consumer preference as factors supporting a determination of serious damage or actual threat thereof. 

Section 322(b) authorizes the President, in the event of an affirmative determination of serious damage or actual threat thereof, 

to provide import relief to the extent that the President determines 

necessary to remedy or prevent the serious damage and to facilitate 

adjustment by the domestic industry to import competition. Section 

322(b) also specifies the nature of the import relief that the President may impose, to consist of an increase in the rate of duty imposed on the article to a level that does not exceed the lesser of: 

(1) the NTR (MFN) duty rate imposed on like articles at the time 

the import relief is provided, or (2) the NTR (MFN) duty rate imposed on like articles on the day before the date on which the 

Agreement enters into force. 

Sec. 323. Period of relief 

Section 323(a) provides that any import relief that the President 

imposes under the textile and apparel safeguard provision may not, 

in the aggregate, be in effect for more than 3 years. If the initial 

period of import relief is less than 3 years, then under section 

323(b) the President may extend the effective period of such import 

relief to a total of no more than 3 years if the President determines 

that the import relief continues to be necessary to remedy or prevent serious damage and to facilitate adjustment by the domestic 

industry to import competition, and that there is evidence that the 

domestic industry is making a positive adjustment to import competition. 

Sec. 324. Articles exempt from relief 

This section precludes the President from providing import relief 

under the textile and apparel safeguard provision with respect to 

any article for which import relief has already been provided under 

the textile and apparel safeguard provision after the date on which 

the Agreement enters into force. Section 324 also precludes the 

President from providing import relief under the textile and apparel safeguard provision with respect to any article that is already 

41 

subject to import relief pursuant to the global safeguard provision 

set forth in chapter 1 of title II of the Trade Act of 1974 (19 U.S.C. 

§ 2251 et seq.). 

Sec. 325. Rate after termination of import relief 

This section provides that the duty rate applicable to a textile or 

apparel article after termination of the import relief shall be the 

duty rate that would have been in effect, but for the provision of 

such import relief, on the date on which the relief terminates. 

Sec. 326. Termination of relief authority 

This section provides that the President’s authority to provide 

import relief with respect to an article under the textile and apparel safeguard provision terminates after the date that is 10 years 

after the date on which duties on the article are eliminated pursuant to the Agreement. 

Sec. 327. Compensation authority 

This section authorizes the President, under section 123 of the 

Trade Act of 1974 (19 U.S.C. § 2133), to grant Bahrain new concessions as compensation for the imposition of import relief pursuant 

to the textile and apparel safeguard provision, in order to maintain 

the general level of reciprocal concessions under the Agreement. 

Sec. 328. Confidential business information 

This section precludes the President from releasing information 

received in a textile and apparel safeguard proceeding 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 by the President, or such party subsequently consents to the 

release of the information. This section also provides that, to the 

extent a party submits confidential business information to the 

President, the party shall also submit a nonconfidential version of 

the information in which the confidential business information is 

summarized or, if necessary, deleted. 

TITLE IV—PROCUREMENT 

Sec. 401. Eligible products 

This section amends section 308(4)(A) of the Trade Agreements 

Act of 1979 (19 U.S.C. § 2518(4)(A)) to implement the government 

procurement provisions of the Agreement. 

F. VOTE OF THE COMMITTEE IN REPORTING THE BILL

In compliance with section 133 of the Legislative Reorganization 

Act of 1946, the Committee states that on November 18, 2005, S. 

2027 was ordered favorably reported, without amendment, by recorded vote, 20 ayes, 0 nays, a quorum being present. 

42 

II. BUDGETARY IMPACT OF THE BILL 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, November 29, 2005. 

Hon. CHARLES E. GRASSLEY, 

Chairman, Committee on Finance, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 2027, a bill to implement 

the United States-Bahrain Free Trade Agreement. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Emily Schlect. 

Sincerely, 

DONALD B. MAY

(For Douglas Holtz-Eakin, Director). 

Enclosure. 

S. 2027—United States-Bahrain Free Trade Agreement Implementation Act 

Summary: S. 2027 would approve the free trade agreement between the government of the United States and the government of 

Bahrain that was entered into on September 14, 2004. It would 

provide for tariff reductions and other changes in law related to implementation of the agreement. 

The Congressional Budget Office estimates that enacting the bill would reduce revenues by $20 million in 2006, by $143 million over 

the 2006–2010 period, and by $341 million over the 2006–2015 period, net of income and payroll tax offsets. CBO estimates that enacting S. 2027 also would increase direct spending by $1 million in 

2006, $3 million over the 2006–2010 period, and $6 million over the 

2006–2015 period. 

CBO has determined that S. 2027 contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act (UMRA) and would not directly affect the budgets of 

state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 2027 over the 2006–2015 period is shown in the 

following table. The cost for spending under this legislation falls 

within budget function 750 (administration of justice). 

By fiscal year, in millions of dollars—

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 

Changes in Revenue 

Changes in Revenue ..................... ¥20 ¥28 ¥30 ¥32 ¥34 ¥35 ¥37 ¥39 ¥42 ¥45 

Changes in Direct Spending 

Estimated Budget Authority .......... 1 1 1 1 1 1 1 1 1 0 

Estimated Outlays ......................... 1 1 1 1 1 1 1 1 1 0 

Note: Negative changes in revenues and positive changes in direct spending to increases in budget deficits. 

Basis of estimate 

Revenues 

Under the United States-Bahrain agreement, tariffs on U.S. imports from Bahrain would be phased out over time. The tariffs 

43 

would be phased out for individual products at varying rates according to one of several different timetables ranging from immediate elimination on the date the agreement enters into force, to 

gradual elimination over 10 years. According to the U.S. International Trade Commission, the United States collected $29 million 

in customs duties in 2004 on $406 million of imports from Bahrain. 

Those imports consist largely of various types of apparel articles, 

oils, aluminum, and chemicals. Based on these data, CBO estimates that phasing out tariff rates at outlined in the U.S.-Bahrain 

agreement would reduce revenues by $20 million in 2006, by $143 

million over the 2006–2010 period, and by $341 million over the 

2006–2015 period, net of income and payroll tax offsets. 

This estimate includes the effects of increased imports from Bahrain that would result from the reduced prices of imported products 

in the United States, reflecting the lower tariff rates. It is likely 

that some of the increase in U.S. imports from Bahrain would displace imports from other countries. In the absence of specific data 

on the extent of this substitution effect, CBO assumes that an 

amount equal to one-half of the increase in U.S. imports from Bahrain would displace imports from other countries. 

Direct spending 

This legislation would exempt certain goods imported from Bahrain from the merchandise processing fees collected by the Department of Homeland Security. Such fees are recorded as offsetting receipts (a credit against direct spending). Based on the value of 

goods imported from those countries in 2004, CBO estimates that 

implementing this provision would reduce fee collections by under 

$1 million in fiscal year 2006 and in each year through 2014, for 

a total of $6 million over the 2006–2014 period. There would be no 

effects in later years because the authority to collect merchandise 

processing fees expires at the end of 2014. 

Intergovernmental and private-sector impact: The bill contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Previous CBO estimate: On November 22, 2005, CBO transmitted a cost estimate of H.R. 4340, an identically titled bill ordered reported by the House Committee on Ways and Means on 

November 18, 2005. The two bills are identical, as are CBO’s estimates. 

Estimate prepared by: Federal Revenues: Emily Schlect. Federal 

Spending: Mark Grabowicz. Impact on State, Local, and Tribal 

Governments: Melissa Merrell. Impact on the Private Sector: Craig 

Cammarata. 

Estimate approved by: G. Thomas Woodward, Assistant Director 

for Tax Analysis. Peter H. Fontaine, Deputy Assistant Director for 

Budget Analysis. 

III. REGULATORY IMPACT OF THE BILL AND OTHER 

MATTERS 

Pursuant to the requirements of paragraph 11(b) of Rule XXVI 

of the Standing Rules of the Senate, the Committee states that the 

bill will not significantly regulate any individuals or businesses, 

44 

will not affect the personal privacy of individuals, and will result 

in no significant additional paperwork. 

The following information is provided in accordance with section 

423 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. 

L. No. 104–04). The Committee has reviewed the provisions of S. 

2027 as approved by the Committee on November 18, 2005. In accordance with the requirement of Pub. L. No. 104–04, the Committee has determined that the bill contains no intergovernmental 

mandates, as defined in the UMRA, and would not affect the budgets of State, local, or tribal governments. 

IV. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by the bill, as 

reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new matter is printed in italics, existing law in which no change is proposed is shown in roman): 

SECTION 202 OF THE TRADE ACT OF 1974 

SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY COMMISSION. 

(a) PETITIONS AND ADJUSTMENT PLANS.—

(1) * * * 

* * * * * * * 

(8) The procedures concerning the release of confidential 

business information set forth in section 332(g) of the Tariff 

Act of 1930 shall apply with respect to information received by 

the Commission in the course of investigations conducted 

under this chapter, part 1 of title III of the North American 

Free Trade Agreement Implementation Act, title II of the 

United States-Jordan Free Trade Area Implementation Act, 

title III of the United States-Chile Free Trade Agreement Implementation Act, title II of the United State-Singapore Free 

Trade Agreement Implementation Act, title II of the United 

States-Australia Free Trade Agreement Implementation Act, 

title III of the United States-Morocco Free Trade Agreement 

Implementation Act, øand¿ title III of the Dominican RepublicCentral America-United States Free Trade Agreement Implementation Act, and title III of the United States-Bahrain Free 

Trade Agreement Implementation Act. The Commission may request that parties providing confidential business information 

furnish nonconfidential summaries thereof or, if such parties 

indicate that the information in the submission cannot be summarized, the reasons why a summary cannot be provided. If 

the Commission finds that a request for confidentiality is not 

warranted and if the party concerned is either unwilling to 

make the information public or to authorize its disclosure in 

generalized or summarized form, the Commission may disregard the submission. 

* * * * * * * 

45 

SECTION 308 OF THE TRADE AGREEMENTS ACT OF 1979 

SEC. 308. DEFINITIONS. 

As used in this title—

(1) * * * 

* * * * * * * 

(43) ELIGIBLE PRODUCTS.—

(A) IN GENERAL.—The term ‘‘eligible product’’ means, 

with respect to any foreign country or instrumentality that 

is—

(i) * * * 

(ii) a party to the North American Free Trade 

Agreement, a product or service of that country or instrumentality which is covered under the North American Free Trade Agreement for procurement by the 

United States. 

(iii) a party to a free trade agreement that entered 

into force with respect to the United States after December 31, 2003, and before January 2, 2005, a product or service of that country or instrumentality which 

is covered under the free trade agreement for procurement by the United States; øor¿ 

(iv) a party to the Dominican Republic-Central 

America-United States Free Trade Agreement, a product or service of that country or instrumentality which 

is covered under that Agreement for procurement by 

the United Statesø.¿; or 

(v) a party to a free trade agreement that entered into 

force with respect to the United States after December 

31, 2005, and before July 2, 2006, a product or service 

of that country or instrumentality which is covered 

under the free trade agreement for procurement by the 

United States. 

* * * * * * * 

SECTION 13031 OF THE CONSOLIDATED OMNIBUS 

BUDGET RECONCILIATION ACT OF 1985 

SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES. 

(a) * * * 

(b) LIMITATIONS ON FEES.—(1) * * * 

* * * * * * * 

ø(13) No fee may be charged under subsection (a)(9) or (10) 

with respect to goods that qualify as originating goods under 

section 202 of the United States-Singapore Free Trade Agreement Implementation Act. Any service for which an exemption 

from such fee is provided by reason of this paragraph may not 

be funded with money contained in the Customs User Fee Account.¿ 

(13) No fee may be charged under subsection (a)(9) or (10) 

with respect to goods that qualify as originating goods under 

section 202 of the United States-Singapore Free Trade Agreement Implementation Act. Any service for which an exemption 

46 

from such fee is provided by reason of this paragraph may not 

be funded with money contained in the Customers User Fee Account. 

* * * * * * * 

ø(15) No fee may be charged under subsection (a) (9) or (10) 

with respect to goods and that qualify as originating goods 

under secton 203 of the Dominican Republic-Central AmericaUnited States Free Trade Agreement Implementation Act. Any 

service for which an exemption from such fee is provided by 

reason of this paragraph may not be funded with money contained in the Customs User Fee Account.¿ 

(15) No fee may be charged under subsection (a) (9) or (10) 

with respect to goods and that quality as originating goods 

under section 203 of the Dominican Republic-Central AmericaUnited States Free Trade Agreement Implementation Act. Any 

service for which an exemption from such fee is provided by reason of this paragraph may not be funded with money contained 

in the Customs User Fee Account. 

(16) No fee may be charged under subsection (a) (9) or (10) 

with respect to goods and that quality as originating goods 

under section 203 of the United States-Bahrain Free Trade 

Agreement Implementation Act. Any service for which an exemption from such fee is provided by reason of this paragraph 

may not be funded with money contained in the Customs User 

Fee Account. 

Æ