The United States' WTO obligations with respect to government procurement are containedin the WTO Agreement on Government Procurement (AGP). (1) Generally, the AGP appliesthe basic WTO national treatment and most-favored-nation obligations to the area of governmentprocurement. The AGP was negotiated during the Uruguay Round of the General Agreement onTariffs and Trade (GATT), and took effect in the United States on January 1, 1996. (2) Unlike other provisions of theWTO, which countries must accept as a condition of membership, the AGP is a plurilateralagreement. Therefore, AGP parties are only committed to apply the agreement to other AGP parties. Presently, in addition to the United States, the AGP has been accepted by the European Communities(EC), each of the 25 EC Member countries, (3) Canada, Hong Kong, Iceland, Israel, Japan, Korea, Liechtenstein,Netherlands with respect to Aruba, Norway, Singapore, and Switzerland. (4) The AGP applies to "any law, regulation, procedure or practice regarding any procurementby entities covered by the Agreement." (5) This includes central and sub-central governmental entities, as wellas other government-related entities that a member Party designates. (6) In addition, the AGP governs"procurement by any contractual means, including through such methods as purchase or as lease,rental or hire purchase, with or without an option to buy, including any combination of products andservices." (7) Pursuant to Article I, each Party to the AGP must submit an Appendix with Annexes that listthe Party's covered entities, as well as the products and services that it may or may not procure forAGP purposes. The Appendix is divided into five Annexes: Annex I covers central governmententities; Annex II, sub-central government entities; Annex III, all other entities which procure inaccordance with the AGP; Annex IV, services and; Annex V, construction services. (8) It is important to note that the AGP does not apply to all procurement contracts, but only tothose contracts that are covered by a Party's specific commitments. Further, of the covered contracts,the AGP only applies to those that are valued at or exceed designated monetary thresholds set forthin each Party's Annexes in terms of Special Drawing Rights (SDRs). (9) In the United States thethresholds are given official dollar amounts in biennial notices issued by the Office of the UnitedStates Trade Representative (USTR). (10) The U.S. Annexes, which set out the scope of U.S.commitments, will be discussed in detail later in this report. (11) The AGP further provides that where governmental entities, "in the context of" AGP-coveredprocurement, require non-listed enterprises to award contracts in accordance with particularrequirements, Article III obligations regarding national treatment and non-discrimination "apply mutatis mutandis to such requirements." (12) One commentator explains this requirement by stating that "alisted entity could not oblige an independent enterprise to favour national suppliers when purchasinggoods on its behalf," and further notes that "[t]he increasing privatization of public services givesadded importance to this rule." (13) Consistent with the overall framework of the WTO, the AGP requires national treatment andnondiscrimination in contracting. In addition, the AGP contains obligations regarding tenderingprocedures, qualification of suppliers, offsets, invitations to participate in procurements, tender andselection procedures, awarding of contracts, transparency, and challenge procedures. Disputes underthe Agreement are generally subject to WTO consultation and dispute settlement procedures,although the AGP does establish some special rules. The AGP also contains general exceptions fromAgreement obligations, as well as a specific national security exception. A party to the AGP mayalso make changes to its Schedule, however, the changes are subject to consultations with the WTOand, in the case of significant changes, negotiations with member states on possible compensation. AGP national treatment and most-favored nation (MFN) obligations apply with respect togoods, services, and suppliers of goods and services and involve issues related to the country oforigin of goods and the degree of foreign affiliation or ownership of locally established servicesuppliers. Both the national treatment and MFN obligations are contained in Article III paragraph 1,which provides that Article III, paragraph 2 of the AGP prohibits discrimination against locally-establishedsuppliers based on foreign ownership links or foreign supply. The provision states that Article III also provides that the obligations stated above do not apply to "customs duties andcharges of any kind imposed on or in connection with importation, the method of levying such dutiesand charges, other import regulations and formalities, and measures affecting trade in services otherthan laws, regulations, procedures and practices regarding government procurement covered by thisAgreement." (15) Rules of Origin are defined in Annex 1A of the WTO as laws, regulations and administrative determinations ofgeneral application applied by any Member to determine the country of origin of goods providedsuch rules of origin are not related to contractual or autonomous trade regimes leading to the grantingof tariff preferences going beyond the application of paragraph 1 of Article I of GATT 1994. (16) While the AGP itself does not contain separate rules of origin, it does provide that a Party may notimplement rules of origin regarding the importation or supply of government procured products orservices "which are different from the rules of origin applied in the normal course of trade and at thetime of the transactions in question to imports of supplies of the same products or services from theParties." (17) Article IV,paragraph 2, however, allows this requirement to be amended in light of the results of WTOnegotiations on rules of origin for products and services. (18) Article VII of the AGP establishes the general rules regarding tendering procedures. Atendering procedure is the system through which companies engage in competitive bidding forgovernment and other contracts. Specifically, Parties to the AGP are to ensure that their proceduresare "applied in a non-discriminatory manner" (19) and "shall not provide to any supplier information with regardto a specific procurement in a manner which would have the effect of precluding competition." (20) Article VII, paragraph 3defines the three types of tendering procedures governed by the AGP as: (1) open tenderingprocedures -- in which all interested supplies may bid; (2) selective tendering procedures -- underwhich only those suppliers invited to bid may do so and; (3) limited tendering procedures -- wherethe entity contacts the suppliers individually and requests bids. (21) Article VIII requires that AGP Parties not discriminate among suppliers of other Parties, orbetween domestic suppliers and suppliers of other Parties in the process of drawing up lists ofqualifying suppliers. (22) Article VIII also requires qualification procedures to be consistent with eight categories ofrequirements including that "[a]ny conditions for participation in tendering procedures . . . be limitedto those which are essential to ensure the firms' capability to fulfill the contract in question." (23) Article VIII(b) further mandates that participation requirements "be no less favourable tosuppliers of other parties than to domestic suppliers and shall not discriminate among suppliers ofother parties." In addition, when evaluating the financial or technical capacity of a potential supplierunder Article VIII, both "the supplier's global business activity as well as . . . its activity in theterritory of the procuring entity" shall be taken into account. (24) Moreover, Article VIII provides that nothing in the listed requirements "shall preclude the exclusion of any supplier ongrounds such as bankruptcy or false declarations, provided that such an action is consistent with thenational treatment and non-discrimination provisions of this Agreement." (25) Article X requires that for every covered procurement, the selection of suppliers be fair,non-discriminatory and that international competition be ensured by "inviting tenders from themaximum number of domestic suppliers and supplier of other parties, consistent with the efficientoperation of the procurement system." (26) As provided in Article VIII, Parties may establish qualificationprocedures and keep lists of qualified suppliers. However, in cases where there is sufficient time tocomplete the qualification procedures, suppliers requesting participation "shall be permitted tosubmit a tender and be considered." (27) The only exclusionary principle is the efficient operation of theprocurement system. In other words, additional suppliers who meet the qualification proceduresmust be permitted until the admission of additional suppliers would make the operation of theprocurement system inefficient. Parties may utilize limited tendering procedures as provided for in Article VII if they are "notused with a view to avoiding maximum possible competition or in a manner which would constitutea means of discrimination among suppliers of other Parties or protection to domestic producers orsuppliers." (28) ArticleXV provides numerous situations where limited tender provisions are appropriate. (29) The situations include: The absence of tenders under open or selectiveprocedures. When the tenders received are collusive. When the tenders received are not in conformity with the essentialrequirements of the tender. When the tenders received are from suppliers who do not comply with theconditions for participation established in accordance with the AGP. When the products or services can only be supplied by a particular supplier andno reasonable alternative or substitute exists, such as in the case of art work or other exclusive rightsarraignments (i.e., patents or copyrights). When the products or services can not be obtained in time by means of an openor selective tendering procedure.