[Senate Report 109-199]
[From the U.S. Government Publishing Office]



                                                       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 
              States-Bahrain 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
          E. General Description of the Bill to Implement the 
              United States-Bahrain 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. Congress 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. 
Sec. Sec. 3803-3806) and section 151 of the Trade Act of 1974 
(19 U.S.C. Sec. 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, 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 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, 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 States-Bahrain 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.

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 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            81,012    44,598    43,257    54,235    44,448    64,493
 mechanical appliances; parts thereof...............
98  Special classification provisions, not elsewhere    65,164    50,145    64,555    92,778    72,398    61,415
 specified or otherwise included....................
87  Vehicles, other than railway or tramway rolling     18,492    26,292    31,601    29,077    31,505    31,871
 stock, and parts and accessories thereof...........
88  Aircraft, spacecraft, and parts thereof.........    38,252   221,797    79,288    74,539   242,801    27,733
90  Optical, photographic, cinematographic,              7,940     8,974    17,189     8,781    14,453    13,820
 measuring, checking, precision, medical or surgical
 instruments and apparatus; parts and accessories
 thereof............................................
85  Electrical machinery and equipment and parts        12,286    15,757    16,142    10,345    17,837    13,545
 thereof; sound recorders and reproducers,
 television recorders and reproducers, parts and
 accessories........................................
21  Miscellaneous edible preparations...............     2,716     3,057     5,212     3,355     4,078     4,772
94  Furniture; bedding, cushions etc.; lamps and         6,451     4,876     5,702     5,349     9,202     4,484
 lighting fittings not elsewhere specified or
 otherwise included; illuminated signs, nameplates
 and the like; prefabricated buildings..............
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          3,439    13,276    18,560     5,104     1,957     4,017
 their distillation; bituminous substances; mineral
 waxes..............................................
73  Articles of iron or steel.......................     1,358       977     4,113     2,891     3,638     3,750
52  Cotton, including yarns and woven fabrics              762       343     6,073    10,133     1,357     3,710
 thereof............................................
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        1,660     1,388     1,424     2,228     2,031     2,142
 printed products; manuscripts, typescripts and
 plans..............................................
    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,       79,489   133,252   164,644   165,693   160,105   155,160
 not knitted or crocheted...........................
27  Mineral fuels, mineral oils and products of          6,985    11,218    19,538         0     5,077    72,805
 their distillation; bituminous substances; mineral
 waxes..............................................
98  Special classification provisions, not elsewhere    15,668    18,951    78,784    85,355    84,581    40,762
 specified or otherwise included....................
63  Made-up textile articles not elsewhere specified         0        66       956       589     9,579    40,450
 or otherwise included; needlecraft sets; worn
 clothing and worn textile articles; rags...........
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            2,218    17,488    16,698    21,199    14,116     8,086
 thereof............................................
84  Nuclear reactors, boilers, machinery and                43       523       197        41       259     1,012
 mechanical appliances; parts thereof...............
99  Special import reporting provisions, not               466       619       822       841       818       817
 elsewhere specified or otherwise included..........
61  Articles of apparel and clothing accessories,       17,887    21,924    25,163    12,653     3,569       700
 knitted or crocheted...............................
71  Natural or cultured pearls, precious or                132       192     2,636        87       345       569
 semiprecious stones, precious metals; precious
 metal clad metals, articles thereof; imitation
 jewelry; coin......................................
39  Plastics and articles thereof...................        23        80        94       338       715       562
94  Furniture; bedding, cushions etc.; lamps and             0        28         4         0        19       387
 lighting fittings not elsewhere specified or
 otherwise included; illuminated signs, nameplates
 and the like; prefabricated buildings..............
68  Articles of stone, plaster, cement, asbestos,           49        20        65       105       205       187
 mica or similar materials..........................
    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 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 important 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 
merchandise 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 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 (most-favored-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 emergency 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 non-originating 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.

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 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 pests and diseases, additives, contaminants, 
toxins, or disease-causing 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 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 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.
---------------------------------------------------------------------------
    \1\ These 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.
---------------------------------------------------------------------------
    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 may also adopt measures relating to procurement of 
goods or services 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 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 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, self-regulatory 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 six-month 
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 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.
    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 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 anti-circumvention, 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 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 
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 Subcommittee on Labor Affairs, if 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 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 States-Bahrain 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.
    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.

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 days after the request is made (or 120 days if 
the panel is reviewing 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.
    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.

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.

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. Sec. 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.
    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.
    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.
    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. Sec. 3511(d)(4)). The term ``Commission'' is defined as 
the United States International Trade Commission.

     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. Sec. 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. Sec. 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 Commission 
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 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. Sec. 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. Sec. 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 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 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. Sec. 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. Sec. 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. Sec. 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.

                    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 
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, 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, 
        [and] title III of the Dominican Republic-Central 
        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.

           *       *       *       *       *       *       *

                              ----------                              


            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; 
                        [or]
                          (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 States[.]; 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) * * *

           *       *       *       *       *       *       *

          [(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 from such fee is provided by 
        reason of this paragraph may not be funded with money 
        contained in the Customers User Fee Account.

           *       *       *       *       *       *       *

          [(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 America-United 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 America-United 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.

                                  
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