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In 2004 the Bahrain-US Free Trade Agreement (FTA) was signed on September 14, and came into force on August 1, 2006.

Bahrain is the first Gulf Cooperation Council member and third Arab country to enter into a free trade agreement with the U.S. The FTA between the Kingdom of Bahrain and the United States is an international agreement that seeks to promote increased trade between both the countries.

The agreement outline the duties and obligations of both countries in the elimination of trade tariffs on imports and exports. It further aims to liberalize other conditions of trade in goods and services between Bahrain and the US.

Bahrain’s overall objective for the FTA is to facilitate trade flows, stimulate inward flows of investment, expand key manufacturing and services sectors, and encourage the exchange of expertise to create employment opportunities and stimulate economic growth in Bahrain.

 

Highlights of Bahrain-US FTA

The FTA contains reciprocal commitments, cooperative agreements and rules and processes applying to customs which includes:

Rules of Origin

Legal definition, rule and processes for determining when a good will be deemed to be of Bahraini origin in order to qualify for preferential tariff treatment as an originating good.

Definition of Originating Good

To be eligible to be an originating good under the FTA, the good must (generally):

  • Be made entirely in the US from US and/or Bahraini materials; OR
  • Be made in the US (made from a foreign material that has been "substantially transformed") and have at least 35% of the value from US and/or Bahraini origin materials and direct costs of processing operation; AND
  • Be imported directly from the US, (Note: Goods are allowed to transit through a 3rd county and be subject to operations such as unloading , reloading and inspections. New documents like Bill of Lading or Invoice etc. issued from a 3rd country are acceptable. Hoewever, the goods cannot undergo production or manufacturing operations).

A good, which has undergone simple combining or packaging operations or mere dilution with water or other substances, shall not be considered originating.

Duty Free and Easier Access to US Markets

The agreement provides for the immediate or staged elimination of duties and barriers to bilateral trade in goods and services originating in either the Kingdom of Bahrain or the U.S.

Duty-free access to the U.S. market will make Bahraini goods and services more cost competitive. Easier access to U.S. markets should also make it possible to expand Bahrain’s services sector through the cross-border supply of services or through establishment of these services in the U.S.

Preferential Tariff Rates

Eligibility

Claims for preferential tariff treatment entry are administered according to rules prescribed in Administrative Order No.16 Dated 28 Sep. 2008 and the subsequent amendments prescribed in Administrative Order No.42 - 2010. The relevant legal provisions of the FTA include Articles 4.10 & 4.11 .

The following procedures apply to most goods. Other procedures apply to some goods, such as those covered by the rules of FTA Annex 3- A (textiles and apparel) or FTA Annex 4-A (certain foods stuffs). If there are questions about these procedures, the FTA should be consulted.

Preferential Customs Tariff Rates under FTA

All goods, which fulfil the provisions of the Rules of Origin stipulated in the FTA will be exempted from customs duty, with the exception of the following:

  1. Goods listed and having a base rate of 20% for which the duty shall be reduced gradually, starting from the 1st of August 2006, until it is completely exempted after 10 years from the date of implementation of the FTA.
  2. Tobacco, Cigarettes and Alcohol will be exempted from customs duty after 10 years from the date of the implementation of the FTA.

Import Procedures Under FTA:

The Bahrain – U.S.A FTA eliminates the requirement of an origin certificate. Instead the following process applies:

  1. The importer will claim eligibility for preferential tariff treatment entry under the FTA by indicating this on the Customs Declaration Form (CDF).
    • Electronic Submission:     using eCAS; on an electronic Customs Declaration Form (CDF) by ticking the 'BH - US FTA' check box.
    • Manual Submission:     On a manual CDF by indicating 'USA' in the origin field and by making the statement 'preferential tariff treatment under BH-US FTA' on the face of the CDF.
  2. By doing this the importer is 'deemed ' to have certified that the goods meet all the requirements and qualify for preferential tariff treatment entry. It should be noted that :
    • No certificate of origin is required.
    • No country of origin marking is required on the goods.
    • No other certification or signatures by foreign producer or exporter are required.
  3. While no certificate of origin is required, Customs may request the importer prepare, sign and submit a detailed declaration under certain circumstances;
    • Where Customs has reason to question the accuracy of the importer's claim.
    • Where it is part of a random verification process.
    • Customs Affairs should not require a declaration as a matter of course.
  4. The declaration requested by Customs Affairs may require the following:
    • Description of the goods, quantity, invoice numbers and bills of lading;
    • Description of the operations of growth, production or manufacture and identification of direct costs of processing operations;
    • Description of the materials used in growth, production or manufacture and value of such materials;
    • Description of the origin and value of any foreign goods or materials used in the production and if applicable the operations performed that have resulted in them being ' substantially transformed'.
  5. While a claim is begin investigated the importer may request release of the goods subject to a bond or security pending a decision.
  6. Where Customs Affairs rejects a claim it will issue a written determination explaining the findings of facts and legal reasons for the decision.

Re-Exporting of Preferential Tariff goods to other GCC countries

Goods which are exempted from customs duty in accordance with the FTA and re-exported to other GCC countries will be liable for customs duty at the final destination.

Investment

The FTA further reduces or eliminates remaining barriers to inward investment by American investors, therefore creating new opportunities for partnering and other business arrangement that can facilitate the exchange of technology, know-how and expertise, all of which can contribute to making Bahraini goods and services more competitive in the U.S. and other export markets.