[Senate Report 109-364]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-364

======================================================================



 
       UNITED STATES-OMAN FREE TRADE AGREEMENT IMPLEMENTATION ACT

                                _______
                                

                December 5, 2006.--Ordered to be printed

                                _______
                                

  Mr. Grassley, from the Committee on Finance, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 3569]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 3569) to implement the United States-Oman 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-Oman 
    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..........................................     8
        7. Committee and Floor Consideration.....................     9
    C. Trade Relations with Oman.....................................10
        1. United States-Oman Trade..............................    10
        2. Tariffs and Trade Agreements..........................    12
        3. U.S. International Trade Commission Study.............    13
    D. Overview of the United States-Oman Free Trade Agreement.......14
        1. Overview of the Agreement.............................    14
        2. USTR Summary of the Agreement.........................    14
    E. General Description of the Bill to Implement the United States-
    Oman Free Trade Agreement........................................35
            Title I--Approval of, and General Provisions Relating 
                to, The Agreement................................    36
            Title II--Customs Provisions.........................    38
            Title III--Relief From Imports.......................    41
            Title IV--Procurement................................    46
    F. Vote of the Committee in Reporting the Bill...................46
II.  Budgetary Impact of the Bill....................................46
III. Regulatory Impact of the Bill and Other Matters.................48

IV. Changes in Existing Law Made by the Bill, as Reported............48
 V. Additional Views.................................................51

             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. 3569) to implement the United States-Oman 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-Oman 
                          Free Trade Agreement


1. Background

    On November 15, 2004, United States Trade Representative 
Robert B. Zoellick announced the Administration's intent to 
negotiate a bilateral free trade agreement with Oman as one 
step toward achieving a Middle East Free Trade Area proposed by 
President George W. Bush on May 9, 2003. Ambassador Zoellick 
consulted with the relevant congressional committees, including 
the Senate Committee on Finance, with respect to the initiation 
of negotiations with Oman. Ambassador Zoellick also attended a 
meeting of the Congressional Oversight Group on September 8, 
2004, to discuss the initiation of negotiations with Oman. The 
negotiations were launched on March 12, 2005. On October 3, 
2005, United States Trade Representative Rob Portman announced 
that the United States and Oman had successfully concluded the 
negotiations. President George W. Bush notified Congress of his 
intent to enter into the United States-Oman Free Trade 
Agreement on October 17, 2005. Notice of the President's 
notification was published in the Federal Register on October 
19, 2005. On November 15, 2005, Ambassador Portman submitted to 
Chairman Grassley the reports from 27 trade advisory groups 
commenting on the final text of the Agreement with Oman. These 
reports were also made publicly available on the website of the 
Office of the United States Trade Representative. Ambassador 
Portman and Minister of Commerce and Industry Maqbool bin Ali 
Sultan of the Sultanate of Oman signed the United States-Oman 
Free Trade Agreement on January 19, 2006.

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 forth 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 November 15, 2004, 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 Oman. The 
negotiations were initiated on March 12, 2005. 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 an appearance by the United States Trade 
Representative at a meeting of the Congressional Oversight 
Group on September 8, 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 October 17, 2005, President George W. Bush 
notified Congress of his intention to enter into the United 
States-Oman Free Trade Agreement. The Agreement was signed on 
January 19, 2006.

5. Development of the implementing legislation

    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 May 18, 2006, to informally consider draft 
implementing legislation for the Agreement. Chairman Grassley 
introduced a chairman's modification to the proposed Statement 
of Administrative Action to accompany the draft legislation to 
implement the Agreement. The chairman's modification called for 
the Administration to monitor and report annually to Congress 
on the efforts of the Government of Oman to prohibit compulsory 
or indentured labor, including efforts to prohibit any coercive 
action by an employer to compel such labor. The chairman's 
modification was adopted without objection.
    Two amendments were filed in committee to the draft 
implementing legislation. One of those amendments (Conrad-
Bingaman-Kerry #1) was offered by Senator Conrad. This 
amendment provided that ``(a)t an appropriate place, add a 
provision to prevent goods made with slave labor (including 
under sweatshop conditions so egregious as to be tantamount to 
slave labor), or with the benefit of human trafficking, from 
benefiting from the agreement.''
    Appearing before the Committee were James Mendenhall, 
General Counsel in the Office of the United States Trade 
Representative, and Shaun Donnelly, Assistant U.S. Trade 
Representative for Europe and the Middle East. Mr. Mendenhall 
questioned whether the offered amendment was necessary or 
appropriate to implement the Agreement because Omani law 
already prohibited forced labor and the Agreement obligates the 
Government of Oman to enforce that law. Mr. Mendenhall also 
noted that Oman is a signatory to Convention 29 of the 
International Labor Organization, which prohibits forced labor. 
Finally, Mr. Mendenhall noted that section 1307 of title 19, 
United States Code, prohibits the importation of goods produced 
with convict labor, as well as with forced labor and indentured 
labor. Chairman Grassley requested a detailed written response 
from the Office of the United States Trade Representative 
addressing whether existing U.S. law already provided greater 
impediments to forced labor than the offered amendment.
    Senator Conrad requested a roll call vote and the Conrad-
Bingaman-Kerry amendment was adopted by recorded vote, 18 ayes, 
0 nays, a quorum being present. Ayes: Grassley, Hatch (proxy), 
Lott (proxy), Snowe, Thomas, Santorum, Frist, Smith, Bunning, 
Crapo, Baucus, Conrad, Jeffords, Bingaman, Kerry, Lincoln, 
Wyden, Schumer. Chairman Grassley recessed the meeting and, 
later that day, reconvened the meeting to approve the 
Committee's recommendations, as amended, to implement the 
United States-Oman Free Trade Agreement. The Committee approved 
the recommendations, as amended, by recorded vote, 19 ayes, 0 
nays, a quorum being present. Ayes: Grassley, Hatch, Lott, 
Snowe, Kyl, Thomas, Santorum, Frist, Smith, Bunning, Crapo, 
Baucus, Conrad, Jeffords, Bingaman, Kerry, Lincoln, Wyden, 
Schumer.
    Separately, on May 10, 2006, the Committee on Ways and 
Means in the House of Representatives informally approved draft 
legislation to implement the Agreement and accompanying draft 
Statement of Administrative Action, without amendment. The 
Senate Finance Committee and House Ways and Means Committee 
sent their respective recommendations to the President. The 
committees did not conduct a formal ``mock conference'' to 
reconcile the different versions of informal non-binding 
recommendations that had been approved by the two committees. 
Committee precedent does not mandate that a formal ``mock 
conference'' take place to reconcile differences in informal 
recommendations. For example, the two committees approved 
different versions of draft implementing legislation for the 
North American Free Trade Agreement, but there is no record of 
a formal mock conference taking place to reconcile the 
differences. In contrast, the committees did proceed with a 
formal mock conference to reconcile different versions of draft 
implementing legislation for the Uruguay Round Agreements Act. 
The need for a formal ``mock conference'' depends upon the type 
and degree of differences between the informal committee 
recommendations. In this case, the Office of the United States 
Trade Representative consulted with each committee, and based 
upon those consultations, the President subsequently reconciled 
the two versions by including a broader version of the 
Chairman's modification in the Statement of Administrative 
Action and by omitting the amendment relating to slave labor 
and human trafficking. On June 22, 2006, the General Counsel in 
the Office of the United States Trade Representative, James 
Mendenhall, transmitted to Chairman Grassley a letter 
explaining the Administration's view that existing U.S. law 
already prohibited the importation of products made with forced 
or indentured labor and why the Administration did not consider 
the amendment adopted by the Committee in its informal 
consideration to be necessary or appropriate to implement the 
Agreement. As a result, the Administration did not include the 
adopted amendment in the formal implementing legislation 
subsequently submitted to Congress. Mr. Mendenhall's letter is 
reprinted below:

                                                     June 22, 2006.
Hon. Charles Grassley,
Chairman, Senate Finance Committee, Dirksen Senate Office Building, 
        Room 219, U.S. Senate, Washington, DC.
    Dear Chairman Grassley: During the Finance Committee 
hearing on May 18, Senator Conrad introduced an addition to the 
draft implementing legislation for the United States-Oman Free 
Trade Agreement (FTA) to ``add a provision to prevent goods 
made with slave labor (including conditions of de facto 
indentured servitude), or with the benefit of human 
trafficking, from benefiting from the agreement.'' At the 
hearing, I promised to provide you with a letter detailing our 
views on this proposal.
    The proposed addition is neither necessary nor appropriate 
because the FTA already deals effectively with products of 
forced or indentured labor. In addition, U.S. law prohibits the 
importation of products produced with convict, forced, or 
indentured labor under penal sanctions. Moreover, we are aware 
of no evidence suggesting that goods are produced in Oman using 
slave labor or with the benefit of human trafficking.
    First, Oman already prohibits forced labor and Oman has 
promised to take steps to clarify and strengthen its laws 
further. Article 12 of Oman's Basic Law provides that ``Every 
citizen has the right to engage in the work of his choice 
within the limits of the law. It is not permitted to impose any 
compulsory work on anyone except in accordance with the Law and 
for the performance of public service, for a fair wage.'' Oman 
has further committed in writing to ``issue a Royal Decree, no 
later than October 31, 2006, specifying the forms of public 
service that could be required in the event the Government were 
ever to exercise its power under Article 12, consistent with 
ILO Convention 29.'' Oman is, in fact, already a signatory to 
ILO Conventions 29 and 105, which prohibit forced labor. At 
your request, the Administration has committed to update the 
Congress periodically on the progress that Oman achieves in 
realizing all its commitments made to labor law reform.
    Second, Article 16.2.1(a) of the FTA requires Oman to 
enforce its labor laws. If it fails to do so, then the United 
States is entitled to resort to the FTA's dispute settlement 
procedures, and if the United States prevails, Oman may be 
required to pay up to $15 million per year in fines that can be 
used for appropriate labor initiatives in Oman, including 
enforcement.
    Third, U.S. law already prohibits the importation of 
products produced with convict labor, forced labor, and 
indentured labor under penal sanctions. Specifically, 19 U.S.C. 
Sec. 1307 states as follows:
    All goods, wares, articles, and merchandise mined, 
produced, or manufactured wholly or in part in any foreign 
country by convict labor or/and forced labor or/and indentured 
labor under penal sanctions shall not be entitled to entry at 
any of the ports of the United States, and the importation 
thereof is hereby prohibited, and the Secretary of the Treasury 
is authorized and directed to prescribe such regulations as may 
be necessary for the enforcement of this provision. The 
provisions of this section relating to goods, wares, articles, 
and merchandise mined, produced, or manufactured by forced 
labor or/and indentured labor, shall take effect on January 1, 
1932; but in no case shall such provisions be applicable to 
goods, wares, articles, or merchandise so mined, produced, or 
manufactured which are not mined, produced, or manufactured in 
such quantities in the United States as to meet the consumptive 
demands of the United States.
    ``Forced labor'', as herein used, shall mean all work or 
service which is exacted from any person under the menace of 
any penalty for its nonperformance and for which the worker 
does not offer himself voluntarily. For purposes of this 
section, the term ``forced labor or/and indentured labor'' 
includes forced or indentured child labor.
    Notably, the statute is not limited to prison labor, but 
extends to products manufactured with forced or indentured 
labor. In fact, the statute was specifically amended in 1930 to 
add forced and indentured labor.
    The statute is also not limited to involuntary labor. The 
term ``indentured labor'' is understood to mean labor 
undertaken pursuant to a `` `contract entered into by an 
employee the enforcement of which can be accompanied by process 
or penalties.' '' China Diesel Imports, Inc. v. United States, 
855 F. Supp. 380, 384 (CIT 1994) (citing 71 Cong. Rec. 4489 
(1929) (statement of Senator Blaine)).
    While the statute provides for an exception in the case of 
goods that are not produced in the United States, we cannot 
envision a situation where this exception would be applied in 
practice. Given the broad economic base of the United States, 
we do not anticipate a situation where the United States would 
be obliged to import an otherwise banned product from Oman to 
satisfy domestic demand because it cannot be obtained in the 
United States.
    In determining whether importation of a product should be 
prohibited, Customs will look closely at the circumstances of 
the case. For example, the Forced Child Labor Advisory issued 
by the Department of Treasury and U.S. Customs Service in 
December 2000 lists several ``red flag'' factors indicating the 
existence of forced or indentured child labor. These red flags 
may alone provide evidence of forced/indentured labor, and 
include, e.g., slave labor conditions, employment to discharge 
a debt, fmancial penalties that eliminate wages, etc. The 
Advisory also lists several ``yellow flag'' factors that may 
indicate the need for further investigation. These yellow flag 
factors include, for example, employment in violation of local 
laws and regulations, or employment in hazardous industries or 
under extreme conditions.
    Other agencies have interpreted the statute in a similar 
way. Pursuant to Executive Order 13126, the Department of Labor 
applies the Section 1307 standard in developing a list of 
products produced by child labor that are not eligible for 
federal government procurement. According to the Department of 
Labor, ``The essential elements of the definition [of forced or 
indentured child labor] are either the presence of coercion or 
the existence of a contract enforceable by penalties.'' The 
Department has listed illustrative factors it will look at in 
making this determination, including, e.g., confinement, little 
or no pay, deprivation of basic needs, etc. Bureau of 
International Labor Affairs; Notice of Preliminary List of 
Products Requiring Federal Contractor Certification as to 
Forced or Indentured Labor Under Executive Order No. 13126; 
Request for Comments, 65 Fed. Reg. 54108 (Sept. 6, 2000).
    Fourth, Congress recently affirmed that goods made with 
forced or child labor in violation of international standards 
cannot be imported into the United States. On February 17, 
2005, the President signed into law the Trafficking Victims 
Protection Reauthorization Act of 2005 (P. L. 109-164). 
Specifically, section 105(b) of that Act requires United States 
Government departments and agencies to ``consult with other 
departments and agencies of the United States Government to 
reduce forced and child labor internationally and ensure that 
products made by forced labor and child labor in violation of 
international standards are not imported into the United 
States.''
    For these reasons, the Administration does not consider the 
proposed addition to be ``necessary or appropriate to 
implement'' the Oman trade agreement under the terms of 19 
U.S.C. Sec. 3803(b)(3)(B)(ii) and the Administration will not 
include the proposed addition in the text of the legislation 
implementing the United States-Oman Free Trade Agreement.
            Sincerely,
                                       James E. Mendenhall,
                                                   General Counsel.

    On July 9, 2006, His Majesty, Sultan Qaboos bin Said, 
issued a Royal Decree amending Oman's labor law to address many 
of the issues raised during the course of congressional 
consideration of the United States-Oman Free Trade Agreement. 
That action followed through on commitments made by the 
Government of Oman in letters to Chairman Thomas of the House 
Ways and Means Committee (March 2006) and Ambassador Portman 
(May 2006).

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-Oman 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 June 26, 2006. 
The legislation was introduced that same day in both the House 
(H.R. 5684) and the Senate (S. 3569). In lieu of the Chairman's 
modification to the draft Statement of Administrative Action 
adopted by the Committee during its informal consideration, the 
President included in the final Statement of Administrative 
Action a broader commitment to update Congress periodically 
with respect to the progress that Oman achieves in realizing 
all commitments made to labor law reform, and not just with 
respect to Oman's efforts to prohibit compulsory or indentured 
labor. The legislation did not include the amendment adopted by 
the Committee during its informal consideration.
    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-Oman Free 
Trade Agreement (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-Oman 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 
June 28, 2006, to consider favorably reporting S. 3569. The 
agenda for that session did not provide for amendments to be 
filed with respect to S. 3569 because, pursuant to section 
151(d) of the Trade Act of 1974, no amendment to an 
implementing bill is in order under TPA procedures. 
Nevertheless, Senator Conrad again filed the amendment that was 
adopted by the Committee during its informal consideration. 
Senator Conrad discussed, but did not offer, his amendment, 
which would have been subject to a non-germaneness ruling by 
the Chairman. In addition to Senator Conrad, several Members 
also expressed frustration because the amendment adopted by the 
Committee during its informal consideration was omitted from 
the final implementing legislation. One Member expressed the 
view that the subject matter of the amendment adopted by the 
Committee during its informal consideration was already 
addressed in U.S. and Omani law. Chairman Grassley pledged to 
take steps to improve communication between Committee Members 
and the Office of the United States Trade Representative in an 
effort to defuse concerns before the Administration notifies 
Congress of the President's intent to enter into a trade 
agreement.\1\
---------------------------------------------------------------------------
    \1\ As an initial step, Chairman Grassley convened a closed-door 
Members meeting with United States Trade Representative Susan C. Schwab 
on July 19, 2006, to address, inter alia, Member concerns over 
implementation of the United States-Oman Free Trade Agreement.
---------------------------------------------------------------------------
    Chairman Grassley called for a roll call vote to favorably 
report S. 3569, without amendment. The Committee favorably 
reported S. 3569 by a recorded vote of those present and 
voting, 10 ayes, 3 nays, a quorum being present. Ayes: 
Grassley, Hatch, Lott (proxy), Kyl, Thomas, Santorum (proxy), 
Frist, Smith, Bunning, Crapo, Baucus, Jeffords (proxy), Kerry 
(proxy), Schumer. Nays: Snowe, Rockefeller (proxy), Conrad 
(proxy), Bingaman (proxy), Lincoln, Wyden.
    The Senate passed S. 3569 on June 29, 2006, by a roll call 
vote of 60 ayes, 34 nays. The House of Representatives passed 
H.R. 5684 on July 20, 2006, by a recorded vote of 221 ayes, 205 
nays. The Senate passed H.R. 5684 on September 19, 2006, by a 
roll call vote of 62 ayes, 32 nays. President George W. Bush 
signed H.R. 5684 into law on September 26, 2006 (Pub. L. 109-
283).

                      C. Trade Relations With Oman


1. United States-Oman trade

    Oman 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 less than 1 percent of U.S. population. U.S. trade with 
Oman accounted for less than 0.5 percent of total U.S. goods 
trade in 2004. Trade between the United States and Oman is 
currently concentrated in a few products. In 2004, imports of 
petroleum and energy-related products accounted for 50 percent 
of total U.S. imports from Oman, while imports of apparel 
accounted for 30 percent of total U.S. imports from Oman. 
Similarly, 2004 exports of machinery and parts accounted for 46 
percent of total U.S. exports to Oman, while 2004 exports of 
vehicles and parts accounted for 16 percent of total U.S. 
exports to Oman. About 11 percent of U.S. imports from Oman 
entered duty free under the U.S. Generalized System of 
Preferences in 2004. Apparel accounted for 98 percent of all 
duties collected on U.S. imports from Oman in 2004. The United 
States accounted for 4.3 percent of Oman's exports and 6.8 
percent of Oman's imports in 2004.
    The following tables summarize the top U.S. merchandise 
exports to Oman and the top U.S. merchandise imports from Oman 
during the past 6 years.

                                         U.S. EXPORTS TO OMAN, 2000-2005
                                         [In thousands of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
     Top 15 product descriptions, by HTS chapter        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
88  Aircraft, spacecraft, and parts thereof.........     4,853    66,699   148,140    69,374     6,428   170,195
87  Vehicles, other than railway or tramway rolling     22,259    35,393    27,384    23,792    51,254   134,385
 stock, and parts and accessories thereof...........
84  Nuclear reactors, boilers, machinery and            71,548    87,944    74,181   103,491   126,929   115,580
 mechanical appliances; parts thereof...............
85  Electrical machinery and equipment and parts        14,329    19,418    14,138    14,990    18,428    24,232
 thereof; sound recorders and reproducers,
 television recorders and reproducers, parts and
 accessories........................................
90  Optical, photographic, cinematographic,              9,544    13,859    13,552    15,798    17,806    21,579
 measuring, checking, precision, medical or surgical
 instruments and apparatus; parts and accessories
 thereof............................................
98  Special classification provisions, not elsewhere    12,131    13,642    10,241    17,478    15,282    18,216
 specified or otherwise included....................
38  Miscellaneous chemical products.................     2,231     2,096     3,699     3,632     2,546    10,768
93  Arms and ammunition; parts and accessories             899     1,237       179     2,682     5,187     6,074
 thereof............................................
39  Plastics and articles thereof...................    12,233    10,920     5,745    11,505    11,898     5,759
29  Organic chemicals...............................     2,166     1,369     2,809     1,071     2,678     5,205
73  Articles of iron or steel.......................     2,480     1,397     2,945     2,061     3,386     4,950
21  Miscellaneous edible preparations...............     6,810     7,017     7,162     6,188     6,241     3,620
24  Tobacco and manufactured tobacco substitutes....     8,380     6,867     4,336     4,191     4,298     3,537
82  Tools, implements, cutlery, spoons and forks, of       212       577       606       731     2,238     2,421
 base metal; parts thereof..........................
25  Salt; sulfur; earths and stone; plastering           2,753       411     4,731    10,113     3,624     2,226
 materials, lime and cement.........................
                                                     -----------------------------------------------------------
    Subtotal for top 15 products....................   172,827   268,846   319,849   287,095   278,221   528,749
                                                     -----------------------------------------------------------
    Subtotal for all other U.S. exports.............    21,105    30,211    30,844    30,075    36,097    33,024
                                                     ===========================================================
        Total U.S. exports to Oman..................   193,932   299,057   350,694   317,170   314,318  561,772
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of
  Commerce.


                                        U.S. Imports from Oman, 2000-2005
                                         [In thousands of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
     Top 15 product descriptions, by HTS chapter        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
27  Mineral fuels, mineral oils and products of         37,796   216,517   115,492   338,869   211,838   341,225
 their distillation; bituminous substances; mineral
 waxes..............................................
71  Natural or cultured pearls, precious or             48,563    35,742    28,566    39,268    45,725    57,212
 semiprecious stones, precious metals; precious
 metal clad metals, articles thereof; imitation
 jewelry; coin......................................
62  Articles of apparel and clothing accessories,      125,581   110,489    94,109   106,655    90,107    35,372
 not knitted or crocheted...........................
61  Articles of apparel and clothing accessories,       27,828    35,526    30,884    25,196    35,194    17,773
 knitted or crocheted...............................
73  Articles of iron or steel.......................     1,455     3,016     4,152     5,802    18,066    10,145
28  Inorganic chemicals; organic or inorganic                0         0       130        30        23     7,368
 compounds of precious metals, of rare-earth metals,
 of radioactive elements or of isotopes.............
03  Fish and crustaceans, molluscs and other aquatic     7,244     9,411    12,189    13,779     7,316     4,012
 invertebrates......................................
98  Special classification provisions, not elsewhere     3,463     4,984    91,963    67,778     6,250     2,776
 specified or otherwise included....................
25  Salt; sulfur; earths and stone; plastering               0     1,970     3,162       289     1,512     1,625
 materials, lime and cement.........................
68  Articles of stone, plaster, cement, asbestos,        1,442     2,785     1,272       710     1,182     1,470
 mica or similar materials..........................
99  Special import reporting provisions, not               383       858       794     1,685       888     1,185
 elsewhere specified or otherwise included..........
29  Organic chemicals...............................         0     1,300       179       348        16       853
19  Preparations of cereals, flour, starch or milk;          0       231       287       486       529       782
 bakers' wares......................................
20  Preparations of vegetables, fruit, nuts, or            558       544       926     1,324     1,560       754
 other parts of plants..............................
39  Plastics and articles thereof...................       652     1,571     1,223       642       386       391
                                                     -----------------------------------------------------------
    Subtotal for top 15 products....................   254,962   424,944   385,328   602,862   420,593   482,945
                                                     -----------------------------------------------------------
    Subtotal for all other U.S. imports.............     1,941     6,178     4,267     3,695     1,870     1,219
                                                     -----------------------------------------------------------
        Total U.S. imports from Oman................   256,903   431,122   389,595   606,557   422,463  484,164
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of
  Commerce.

2. Tariffs and trade agreements

    Oman acceded to the World Trade Organization (WTO) on 
November 9, 2000, with an average bound tariff rate of 13.8 
percent for all goods (28.0 percent for agricultural goods and 
11.6 percent for nonagricultural goods), and an average applied 
tariff rate of 5.7 percent for all goods (10.2 percent for 
agricultural goods and 5.0 percent for nonagricultural goods). 
Oman's petroleum reserves are projected to be depleted in less 
than 20 years. As a result, the Government of Oman plans to 
continue to diversify the economy, increase private-sector 
employment, privatize state-owned enterprises, and liberalize 
the services sector. Other sectors targeted for expansion 
include manufacturing, information technology, tourism, and 
fisheries. Textile and apparel production is a major source of 
manufacturing activity in Oman, accounting for an estimated 3.4 
percent of GDP and 14 percent of manufacturing jobs in 2003, as 
well as 16 percent of non-energy exports in 2004.
    In addition to the United States-Oman Free Trade Agreement, 
the Government of Oman has signed bilateral investment treaties 
with 24 countries, i.e. Algeria, Austria, Belarus, Brunei, 
China, Croatia, Egypt, Finland, France, Germany, India, Iran, 
Italy, Korea, Morocco, the Netherlands, Pakistan, Sudan, 
Sweden, Switzerland, Tunisia, Ukraine, the United Kingdom, and 
Yemen. In addition, Oman is a member of the Arab free trade 
area (in force since 1998), which also includes Bahrain, Egypt, 
Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, the Palestinian 
Authority, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the 
United Arab Emirates, and Yemen. Oman is also a member of the 
Gulf Cooperation Council (founded in 1981), which in addition 
to Oman includes Bahrain, Kuwait, Qatar, Saudi Arabia, and the 
United Arab Emirates. The Gulf Cooperation Council launched a 
customs union in 2003, with additional plans to establish a 
monetary union, a common market, and a single currency. In 
addition, the Gulf Cooperation Council is engaged in ongoing 
negotiations with the European Union to conclude a free trade 
agreement.
    By letter dated September 28, 2005, Oman's Minister of 
Commerce and Industry Maqbool bin Ali Sultan assured United 
States Trade Representative Rob Portman that Oman does not 
apply any aspect of the Arab League boycott of Israel, whether 
primary, secondary or tertiary, nor does Oman have any laws to 
that effect.
    Bilateral trade data alone fail to capture the full 
importance of Oman 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 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 Oman is an important achievement 
in that effort, and joins previously concluded bilateral trade 
agreements between the United States and Israel, Jordan, 
Morocco, and Bahrain, 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 Oman 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 February 2006, the U.S. International Trade Commission 
(ITC) released the results of its investigation (Investigation 
No. TA-2104-19) into the probable economic effect of a United 
States-Oman Free Trade Agreement (USITC Pub. 3837). In some of 
its prior investigations, the ITC utilized a general 
equilibrium model to estimate the effects of a particular trade 
agreement on the overall U.S. economy. In this case, because 
the apparel sector accounted for almost all (98 percent) of the 
duties paid on U.S. goods imported from Oman in 2004, and 
because the Omani economy is relatively small compared to the 
U.S. economy, the ITC utilized a partial equilibrium model to 
estimate the probable economic effect of tariff elimination 
under the Agreement. This is the same methodology that the ITC 
utilized in its prior investigation of the probable economic 
effects of the United States-Bahrain Free Trade Agreement. The 
ITC did not utilize a partial equilibrium model to estimate the 
effects of the Agreement on U.S. exports to Oman because of a 
lack of information on Oman's domestic market; instead, the ITC 
estimated such effects based on assumptions about the 
responsiveness of Omani demand to changes in export prices.
    The ITC concluded that elimination of U.S. apparel tariffs 
under the Agreement will likely increase U.S. net welfare by 
$302,000 as a result of an $8.9 million increase in U.S. 
consumer surplus, a $1.6 million decrease in U.S. producer 
surplus, and a $7.0 million decline in U.S. tariff revenue. The 
ITC also concluded that U.S. exports of machinery, 
transportation equipment, and measuring instruments, including 
parts for boring or sinking machinery, heat exchange units, 
passenger vehicles, and parts of gas turbines, would likely 
increase by between 5 percent and 14 percent under the 
Agreement.
    More generally, the ITC found that the expected growth in 
U.S. trade with Oman would likely have a small but positive 
impact on the U.S. economy, with the benefits moderated by the 
relatively small size of Oman's economy and Oman's share of 
total U.S. trade. The majority of U.S. imports from Oman 
already enter duty-free or at low tariffs, while most U.S. 
exports to Oman face a tariff of 5 percent ad valorem. The 
expected increase in U.S. apparel imports from Oman would 
likely be small in absolute value and quantity terms, and the 
resulting increased annual level of U.S. apparel imports from 
Oman would likely remain below the 2004 level of U.S. apparel 
imports from Oman. Most of the expected increase in apparel 
imports from Oman would displace U.S. apparel imports from 
other countries rather than domestic production, and thus have 
almost no effect on U.S. industry. Under the Agreement, Oman 
will eliminate tariffs immediately on U.S. products that 
accounted for 91 percent of U.S. exports to Oman in 2004, 
including 87 percent of all agricultural tariff lines. All 
tariffs on the remaining eligible goods will be phased out over 
10 years.
    With respect to services, the ITC concluded that U.S.-based 
service firms are likely to benefit from improved market access 
and greater regulatory transparency, though these benefits will 
be moderated by the relatively small size of Oman's economy. On 
January 18, 2006, Oman's Minister of Commerce and Industry 
Maqbool bin Ali Sultan remarked that the Agreement will provide 
new opportunities for U.S. service providers in areas such as 
banking, insurance, telecommunications, express delivery 
services, and construction.

       D. Overview of the United States-Oman Free Trade Agreement


1. Overview of the agreement

    The United States-Oman Free Trade Agreement establishes a 
bilateral free trade area that eliminates tariffs on 
merchandise trade in originating goods between the United 
States and Oman. The Agreement eliminates non-tariff barriers, 
liberalizes trade in services, and contains provisions that 
cover telecommunications, electronic commerce, intellectual 
property rights, labor, environment, government procurement, 
and investment. 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. The Agreement is intended to 
strengthen economic relations between the United States and 
Oman, create employment and raise the standard of living, 
enhance the competitiveness of firms, set a structure of clear 
and mutually advantageous rules for bilateral trade, build on 
commitments in the WTO, and promote creativity and innovation. 
In addition, commitments to transparency, worker rights, 
eliminating corruption and bribery, and strengthening 
environmental protection are cited as important goals under the 
Agreement.

2. USTR summary of the agreement

    The Office of the United States Trade Representative (USTR) 
prepared a summary of the United States-Oman Free Trade 
Agreement which was included among the documents transmitted to 
Congress on June 26, 2006. This summary was distributed to 
Members of the Committee to aid in their consideration of the 
implementing legislation, and is reprinted below:

                UNITED STATES-OMAN FREE TRADE AGREEMENT


                        Summary of the Agreement

    This summary briefly describes key provisions of the United 
States-Oman Free Trade Agreement (``FTA'' or ``Agreement'').

                                Preamble

    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: ESTABLISHMENT OF A FREE TRADE AREA AND DEFINITIONS

    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 Oman 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 Omani elimination commitments on all tariffs. For 
example, 100 percent of bilateral trade in consumer and 
industrial goods will become duty-free immediately upon the 
Agreement's entry into force, with the exception of certain 
textile products subject to a longer phase-out period. In 
addition, Oman will provide immediate duty-free access for U.S. 
agricultural exports in 87 percent of its agricultural tariff 
lines. Certain sensitive agricultural goods in Oman 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 textile 
and apparel and 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 also has agreed not to apply its merchandise processing 
fee on imports of originating goods from Oman.
    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 Oman to 
provide tariff preference levels (``TPLs'') for a limited 
quantity of specific non-originating apparel goods. TPL goods 
will be accorded preferential tariff treatment as if they were 
originating goods. For the specified cotton and man-made fiber 
apparel goods, TPL status will apply to a maximum of 50 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.
    Committee on Textiles and Apparel Trade Matters. In Chapter 
Three, the Parties establish a Committee on Textiles and 
Apparel Trade Matters that will meet upon the request of either 
party or the Joint Committee provided for in Article 19.2, to 
consider matters arising under Chapter Three.

                     CHAPTER FOUR: RULES OF ORIGIN

    To benefit from various trade preferences provided under 
the Agreement, including reduced duties or duty-free treatment, 
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-Bahrain, 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 certain textile and apparel goods. 
        Annex 4-A contains specific rules of origin on goods 
        such as citrus juices; dairy products; sugar; and 
        sweetened cocoa powder.)
    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.
    Importer Requirements. Under the Chapter, importers who 
wish to claim preferential tariff treatment for 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 for 
preferential tariff treatment 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. The Chapter also includes requirements for a 
procedure for filing post-importation claims for preferential 
treatment up to one year from importation and for seeking a 
refund of any excess duties paid.
    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, within six months of the date of entry into 
force of the Agreement, the United States and Oman ``shall 
endeavor to develop to the extent practicable . . . a regional 
cumulation regime covering the United States and Middle Eastern 
countries that have free trade agreements with the United 
States.''

                  CHAPTER FIVE: CUSTOMS ADMINISTRATION

    Chapter Five establishes specific commitments intended to 
facilitate trade through increased transparency, 
predictability, and efficiency in each Party's customs 
procedures. It also provides for cooperation between the 
Parties on a variety of customs matters.
    General Principles. The United States and Oman agree to 
implement certain transparency requirements. For example, the 
Parties must promptly publish their customs measures, including 
on the Internet and, where possible, solicit public comments 
before introducing or amending their customs regulations. The 
agreement requires the Parties to release goods from customs 
promptly and establishes separate, expedited customs procedures 
for the clearance of express shipments. 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 Oman up 
to two years to comply with the provisions relating to advance 
rulings. In addition, each Party must guarantee importers 
access to both independent administrative and judicial review 
of customs determinations.
    Cooperation. Chapter Five also contains provisions designed 
to enhance customs cooperation between the Parties. It 
encourages the Parties to give each other advance notice of 
changes to customs laws and regulations that are likely to 
affect the operation of 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 also 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 Oman's Ministry of 
Commerce and Industry 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. (Oman 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., Omani or U.S. federal) government agencies 
of goods and services valued at $193,000 or more and 
construction services valued at $8,422,165 or more.\1\ The 
equivalent thresholds for purchases by ``other entities'' are 
$250,000 for goods and services ($593,000 for the U.S. Rural 
Utilities Service) and $10,366,227 for construction services. 
All thresholds, except the $250,000 threshold, are subject to 
adjustment for inflation.
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    \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.
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    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: INVESTMENT

    Chapter Ten includes rules to protect investors from one 
Party against discriminatory and certain other restrictive 
government actions when they make or attempt to make 
investments in the other Party's territory. Its provisions 
reflect traditional standards incorporated in earlier U.S. 
investment agreements (including those in the North American 
Free Trade Agreement (NAFTA) and U.S. bilateral investment 
treaties) and in customary international law. It also contains 
several innovations that were incorporated in the free trade 
agreements the United States has negotiated with the countries 
of the Dominican Republic-Central American Free Trade Agreement 
(CAFTA-DR), Morocco, Chile, and Singapore.
    Key Concepts. Under Chapter Ten, the term ``investment'' 
covers all forms of investment, including enterprises, 
securities, debt, intellectual property rights, concessions, 
and contracts. It includes both existing and future 
investments. The term ``investor of a Party'' encompasses both 
U.S. and Omani nationals as well as firms (including branches) 
established in one of the Parties.
    General Principles. Chapter Ten provides six basic 
protections: (1) non-discriminatory treatment relative to 
domestic investors as well as investors of non-Parties 
(including where a Party takes measures to deal with armed 
conflict or civil strife in its territory); (2) the ``minimum 
standard of treatment of aliens'' in conformity with customary 
international law; (3) protection from expropriation other than 
in conformity with customary international law; (4) free 
transfer of funds related to an investment; (5) freedom from 
``performance requirements''; and (6) the ability to hire key 
managerial personnel without regard to nationality. (As to this 
last protection, a Party may require that a majority or less of 
the board of directors be of a particular nationality, as long 
as this does not prevent the investor from controlling its 
investment.)
    Sectoral Coverage and Non-Conforming Measures. With the 
exception of investments in or by regulated financial 
institutions (which are treated in Chapter Twelve), Chapter Ten 
generally applies to all sectors, including service sectors. 
However, each Party has listed in annexes to the Chapter 
particular sectors or measures for which it negotiated an 
exemption from the Chapter's rules relating to national 
treatment, MFN treatment, performance requirements, or senior 
management and boards of directors. All current U.S. state and 
local laws and regulations are exempted from these rules. A 
Party may liberalize a measure that it has exempted, but it may 
not make such measures more restrictive.
    Investor-State Disputes. Chapter Ten provides for a 
mechanism for an investor of a Party to pursue a claim against 
the other Party. The investor may assert that the Party has 
breached a substantive obligation under Section A of Chapter 
Ten or that the Party has breached an investment agreement 
with, or an investment authorization granted to, the investor 
or its investment. Innovative provisions afford public access 
to information on Chapter Ten investor-State proceedings and 
ensure proper application of dispute settlement rules. For 
example, Chapter Ten requires the Parties to make public all 
documents and hearings, with limited exceptions for business 
and other legally confidential information, and authorizes 
tribunals to accept amicus submissions from the public. The 
Chapter also includes provisions based on those used in U.S. 
courts to quickly dispose of frivolous claims.

             CHAPTER ELEVEN: CROSS-BORDER TRADE IN SERVICES

    Chapter Eleven governs measures affecting cross-border 
trade in services between the United States and Oman. 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 Oman);
           in the territory of a Party by a person of 
        that Party to a person of the other Party (e.g., an 
        Omani company provides services to U.S. visitors in 
        Oman); and
           by a national of a Party in the territory of 
        the other Party (e.g., a U.S. lawyer provides legal 
        services in Oman).
    General Principles. Among Chapter Eleven'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.
    Sectoral Coverage and Non-Conforming Measures. Chapter 
Eleven 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 particular 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 in most cases 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 Eleven. 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 a local investment.
    Exclusions. Chapter Eleven 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 Eleven 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 11.9, 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. Under Annex 11.12, Oman will permit U.S. companies 
established in Oman to employ U.S. professionals and specialty 
personnel, and to hire personnel of any nationality for any 
position for which no Omani national is qualified.
    Side Letter. Finally in a side letter, the Parties agree 
that no provision of the Agreement imposes obligations on the 
Parties with respect to immigration.

                   CHAPTER TWELVE: FINANCIAL SERVICES

    Chapter Twelve 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 enterprise 
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 Twelve's core obligations are 
similar to those in Chapter Ten (Investment) and Chapter Eleven 
(Cross-Border Trade in Services). Specifically, Chapter Twelve 
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 preestablishment, and to financial service suppliers 
that are currently supplying or seek to supply financial 
services on a cross-border basis.
    Non-Conforming Measures. Similar to Chapters Ten and 
Eleven, each Party has listed in an Annex to Chapter Twelve 
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 Twelve includes provisions on 
transparency, as well as rules regarding ``new'' financial 
services, self-regulatory organizations, payment and clearing 
systems and the expedited availability of insurance products. 
The Agreement allows Oman up to three years to comply with 
certain provisions on transparency in this Chapter.
    Relationship to Other Chapters. Measures that a Party 
applies to financial services suppliers of another Party, other 
than regulated financial institutions, that make or operate 
investments in the Party's territory are covered principally by 
Chapter Ten (Investment) and certain provisions of Chapter 
Eleven (Cross-Border Trade in Services). In particular, certain 
obligations of Chapter Ten, including the expropriation and 
transfers articles, apply to such measures, as do the market 
access, transparency, and domestic regulation provisions of 
Chapter Eleven.

                  CHAPTER THIRTEEN: TELECOMMUNICATIONS

    Chapter Thirteen includes disciplines beyond those imposed 
under Chapters Ten (Investment) and Eleven (Cross-Border Trade 
in Services) on regulatory measures affecting 
telecommunications trade and investment. Chapter Thirteen 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 Thirteen 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 Thirteen, 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 Thirteen 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., 
        Oman must ensure that its public phone companies do not 
        provide preferential access to Omani 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.

                 CHAPTER FOURTEEN: ELECTRONIC COMMERCE

    Chapter Fourteen 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, 
Morocco, and Bahrain.
    Customs Duties. Chapter Fourteen 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 Fourteen 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 Eleven (Cross-Border Trade in Services) or 
Chapter Twelve (Financial Services).

             CHAPTER FIFTEEN: INTELLECTUAL PROPERTY RIGHTS

    Chapter Fifteen 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 Fifteen 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 Convention Relating to the Distribution of 
Programme-Carrying Signals Transmitted by Satellite (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 Fifteen 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 Fifteen 
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 Fifteen 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 95 to 120 years (for corporate works, 
depending on whether they were published within 25 years of 
their creation). 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 Fifteen the Parties agree 
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 Fifteen 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 Fifteen 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 Fifteen 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 Fifteen 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 Fifteen 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 Fifteen 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 Fifteen 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 Fifteen provides that each Party 
must apply criminal penalties against counterfeiting and 
piracy, including end-user piracy.
    Side Letters. Finally, two side letters to Chapter Fifteen 
that are part of the Agreement contain additional obligations 
on the part of Oman with respect to intellectual property 
rights. In particular, Oman 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 SIXTEEN: LABOR

    Chapter Sixteen sets out the Parties' commitments regarding 
core 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 in force with, for example, Australia, Chile, 
Singapore, and Jordan.
    General Principles. Under Chapter Sixteen, 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 
and its Follow-Up. Each Party must strive to ensure that its 
law recognizes and protects such labor principles and the 
internationally recognized labor rights 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. 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 Chapter defines labor laws to mean those 
directly 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 and, for the United States, that are enforceable by 
actions of the federal government. The U.S. commitment includes 
federal statutes and regulations addressing these areas, but it 
does not cover state or local labor laws.
    Institutional Arrangements. 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 19.2) may establish a Subcommittee on Labor Affairs 
comprising officials from each Party's labor ministry and other 
appropriate agencies to discuss the operation of Chapter 
Sixteen. Meetings of the Subcommittee will, unless the Parties 
otherwise agree, include a public session.
    Cooperation. The Parties will establish a Labor Cooperation 
Mechanism to address labor matters of common interest, such as: 
(1) fundamental rights and their effective application; (2) 
improving working conditions; (3) labor statistics; and (4) 
human resources development and lifelong learning.
    Consultations and Dispute Settlement. If a Party considers 
that the other Party is not complying with its obligations, 
Chapter Sixteen provides for consultations regarding any matter 
arising under the Chapter, including the opportunity to refer a 
matter to the Subcommittee on Labor Affairs. 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 Twenty 
(Dispute Settlement). If a Party chooses to request 
consultations under Chapter Twenty, 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 Twenty.

                     CHAPTER SEVENTEEN: ENVIRONMENT

    Chapter Seventeen sets out the Parties' commitments 
regarding environmental protection.
    Chapter Seventeen 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 
in force with, for example,
    Australia, 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 an investment in its territory. The Chapter also 
includes commitments to 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 Seventeen includes commitments to 
enhance bilateral cooperation in environmental matters. In 
particular, the Parties agree to undertake activities pursuant 
to a United States-Oman Memorandum of Understanding on 
Environmental Cooperation. The Parties also commit to continue 
to seek means to enhance the mutual supportiveness of the 
multilateral environmental agreements to which they are both 
party and the international trade agreements to which they are 
both party.
    Institutional Arrangements. At the request of either Party, 
a Subcommittee on Environmental Affairs (``Subcommittee'') will 
be established to discuss the operation of Chapter Seventeen. 
The Subcommittee will include government officials from each 
Party. Unless the Parties otherwise agree, Subcommittee 
meetings will include an open session, and Subcommittee 
decisions will be made public. In addition, the Subcommittee 
may prepare reports concerning implementation of Chapter 
Seventeen and such reports will be made public. Each Party may 
convene a national environment advisory committee, made up of 
members of its public to advise it on the implementation of the 
Chapter.
    Effective Enforcement. The U.S. commitment on enforcement 
of environmental laws applies to federal environmental statutes 
and regulations enforceable by action of 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 considers 
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 the matter concerns a Party's compliance with the 
Chapter's effective enforcement obligation, the complaining 
Party may choose to pursue consultations under Chapter 
Seventeen or Chapter Twenty (Dispute Settlement). If a Party 
chooses to request consultations under Chapter Twenty, 
consultations under Chapter Seventeen on the same matter cease. 
In addition, after 60 days of consultations under Chapter 
Seventeen, the Parties may agree to refer the matter concerning 
compliance with the effective enforcement obligation directly 
to the Joint Committee for resolution under Chapter Twenty.

                     CHAPTER EIGHTEEN: TRANSPARENCY

    Chapter Eighteen 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. 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 Eighteen 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 Eighteen contains innovative 
provisions on combating bribery and corruption. Each Party 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 governments 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 NINETEEN: ADMINISTRATION OF THE AGREEMENT

    Chapter Nineteen 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 prevention 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 TWENTY: DISPUTE SETTLEMENT

    Chapter Twenty 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 
Party 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-ONE: EXCEPTIONS

    Chapter Twenty-One 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 Eleven (Cross Border 
Trade in Services), Thirteen (Telecommunications), and Fourteen 
(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-One 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 (1) national treatment 
obligation for goods; (2) national treatment and MFN 
obligations for services and investment; (3) prohibition on 
performance requirements; and (4) expropriation rules.
    Disclosure of Information. The Chapter also provides that a 
Party may withhold confidential information from the other 
Party where such disclosure would impede domestic law 
enforcement or otherwise be contrary to the public interest, or 
would prejudice legitimate commercial interests.

                  CHAPTER TWENTY-TWO: FINAL PROVISIONS

    Chapter Twenty-Two 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-Two 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-Oman 
                          Free Trade Agreement


Sec. 1. Short title; table of contents

    This section provides that the short title of the act 
implementing the United States-Oman Free Trade Agreement (the 
Agreement) is the ``United States-Oman 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 Oman, to establish free trade between the United 
States and Oman through the reduction and elimination of 
barriers to trade in goods and services and to investment, and 
to lay the foundation for further cooperation to expand and 
enhance the benefits of 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 Oman has taken measures necessary to come into 
compliance with obligations that take effect at the time the 
Agreement enters into force, the President is authorized to 
exchange notes with Oman to provide for the entry into force of 
the Agreement with respect to the United States on or after 
January 1, 2007.

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 clearly states that no 
provision of the Agreement will be given effect under U.S. law 
if it is inconsistent with any federal law.
    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 action by 
proclamation that is subject to the requirements of this 
section. 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 20 of the 
Agreement. Section 105 also authorizes the appropriation of 
funds to support this office.

Sec. 106. Arbitration of claims

    This section authorizes the United States to resolve 
certain claims pursuant to the Investor-State Dispute 
Settlement procedures set forth in section B of chapter 10 of 
the Agreement.

Sec. 107. 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 107, 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 of any duty, continuation of any 
duty, or imposition of additional duties, or the continuation 
of duty-free or excise 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 of the 
Agreement. In addition, section 201(a) requires the President 
to terminate the designation of Oman 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 modification of any duty or modification to the staging of 
any duty elimination, the continuation of any duty, the 
imposition of additional duties, or the continuation of duty-
free or excise treatment, as the President determines to be 
necessary or appropriate to maintain the general level of 
reciprocal and mutually advantageous concessions with respect 
to Oman 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 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 Oman 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 Oman. 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 Oman 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 Oman or the United States, or both, from a good 
or material that is not wholly the growth, product, or 
manufacture of Oman 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 
Oman or the United States, or both, and the direct costs of 
processing operations performed in Oman 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, the United States-
Morocco Free Trade Agreement Implementation Act, and the United 
States-Bahrain 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 of Oman 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 Oman 
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 Oman 
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 Oman 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 Oman or the United States, 
or both,'' (4) ``indirect material,'' (5) ``material,'' (6) 
``material produced in the territory of Oman 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 
Oman conduct a verification to determine the compliance of 
exporters and producers with applicable customs laws, 
regulations, procedures, requirements, or practices 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 an Omani exporter or producer is 
complying with applicable customs laws, regulations, 
procedures, requirements, or practices 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 Oman is complying 
with applicable customs laws, regulations, procedures, 
requirements, and practices 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. 
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. Reliquidation of entries

    Section 205 amends section 520(d) of the Tariff Act of 1930 
(19 U.S.C. 1520(d)) to authorize the reliquidation of an entry 
of a good qualifying under the rules of origin specified in the 
Agreement and for which no claim for preferential treatment was 
made at the time of importation, notwithstanding the fact that 
a valid protest was not filed. However, the importer must file 
a claim for such reliquidation within 1 year after the date of 
importation.

Sec. 206. Regulations

    Section 206 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 ``Omani article,'' ``Omani 
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 ``Omani 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 ``Omani textile or apparel article'' is 
defined as an Omani 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, an Omani article is being imported into the United 
States in such increased quantities and under such conditions 
that imports of the Omani 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 Omani 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 such report, except for any 
confidential information contained in the report, and to 
publish in the Federal Register a summary of such 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 Omani 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 Oman 
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 Oman 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 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, an Omani 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 Oman 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 June 
28, 2006, S. 3569 was ordered favorably reported, without 
amendment, by a recorded vote of those present and voting, 10 
ayes, 3 nays, a quorum being present.

                    II. BUDGETARY IMPACT OF THE BILL

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 28, 2006.
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. 3569, a bill to 
implement the United States-Oman 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, who may be reached at 226-2680.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

S. 3569--United States-Oman Free Trade Agreement Implementation Act

    Summary: S. 3569 would approve the free trade agreement 
between the government of the United States and the government 
of Oman that was entered into on January 19, 2006. 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 $15 million in 2007, by $111 
million over the 2007-2011 period, and by $271 million over the 
2007-2016 period, net of income and payroll tax offsets. CBO 
estimates that enacting S. 3569 also would increase direct 
spending by $1 million in 2007, $6 million over the 2007-2011 
period, and $10 million over the 2007-2016 period. Further, CBO 
estimates that implementing the legislation would incur new 
discretionary spending of less than $1 million per year, 
assuming the availability of appropriated funds.
    CBO has determined that S. 3569 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. 3569 over the 2007-2016 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--
                                 -------------------------------------------------------------------------------
                                   2007    2008    2009    2010    2011    2012    2013    2014    2015    2016
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES
 
Changes in Revenues.............     -15     -21     -23     -25     -26     -28     -30     -32     -34     -37
 
                                           CHANGES IN DIRECT SPENDING
Estimated Budget Authority......       1       1       1       1       1       1       1       1       0       0
Estimated Outlays...............       1       1       1       1       1       1       1       1       0       0
----------------------------------------------------------------------------------------------------------------
Note: Negative changes in revenues and positive changes in direct spending correspond to increases in budget
  deficits.

Basis of Estimate

            Revenues
    Under the United States-Oman agreement, tariffs on U.S. 
imports from Oman 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 about $20 million in customs duties in 2004 on $422 
million of imports from Oman. Those imports consist largely of 
various types of apparel articles and oils. Based on these 
data, CBO estimates that phasing out tariff rates as outlined 
in the U.S.-Oman agreement reduce revenues by $15 million in 
2007, by $111 million over the 2007-2011 period, and by $271 
million over the 2007-2016 period, net of income and payroll 
tax offsets.
    This estimate includes the effects of increased imports 
from Oman 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 Oman 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 Oman would displace imports from 
other countries.
            Direct Spending
    This legislation would exempt certain goods imported from 
Oman from 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 Oman in 2005, CBO estimates 
that implementing this provision would reduce fee collections 
by about $1 million in fiscal year 2007 and in each year 
through 2014, for a total of $10 million over the 2007-2014 
period. There would be no effects in later years because the 
authority to collect merchandise processing fees expires at the 
end of 2014.
            Spending Subject to Appropriation
    Title I of S. 3569 would authorize the appropriation of 
necessary funds for the Department of Commerce to pay the 
United States' share of the costs of the dispute settlement 
procedures established by the agreement. Based on information 
from the agency, CBO estimates that implementing this provision 
would cost less than $1 million per year, subject to the 
availability of appropriated funds.
    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.
    Estimate prepared by: Federal Revenues: Emily Schlect; 
Federal Spending: Mark Grabowicz and Kim Cawley. Impact on 
State, Local, and Tribal Governments: Melissa Merrell. Impact 
on the Private Sector: Craig Cammarata.
    Estimate approved by: Roberton C. Williams, Deputy 
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. 3569 as approved by the Committee on June 28, 2006. In 
accordance with the requirements 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 italic, existing law in which no change is 
proposed is shown in roman):

SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 
                                  1985


SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

    (a) * * *
    (b) Limitations on Fees.--(1) * * *

           *       *       *       *       *       *       *

    (17) 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-Oman 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.

           *       *       *       *       *       *       *

                              ----------                              


                 SECTION 520 OF THE TARIFF ACT OF 1930


SEC. 520. REFUNDS AND ERRORS.

    (a) * * *

           *       *       *       *       *       *       *

    (d) Goods Qualifying Under Free Trade Agreement Rules of 
Origin.--Notwithstanding the fact that a valid protest was not 
filed, the Customs Service may, in accordance with regulations 
prescribed by the Secretary, reliquidate an entry to refund any 
excess duties (including any merchandise processing fees) paid 
on a good qualifying under the rules of origin set out in 
section 202 of the North American Free Trade Agreement 
Implementation Act, section 202 of the United States-Chile Free 
Trade Agreement Implementation Act, [or] section 203 of the 
Dominican Republic-Central America-United States Free Trade 
Agreement Implementation Act [for which], or section 202 of the 
United States-Oman Free Trade Agreement Implementation Act for 
which no claim for preferential tariff treatment was made at 
the time of importation if the importer, within 1 year after 
the date of importation, files, in accordance with those 
regulations, a claim that includes--
          (1) * * *

           *       *       *       *       *       *       *

          (3) such other documentation and information relating 
        to the importation of the goods as the Customs Service 
        may require.
                              ----------                              


                 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 III of the United 
        States-Singapore Free Trade Agreement Implementation 
        Act, title III of the United States-Australia Free 
        Trade Agreement Implementation Act, title III of the 
        United States-Morocco Free Trade Agreement 
        Implementation Act, 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, and title III of the United States-
        Oman 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) * * *

           *       *       *       *       *       *       *

          (4) Eligible products.--
                  (A) In general.--The term ``eligible 
                product'' means, with respect to any foreign 
                country or instrumentality that is--
                          (i) * * *

           *       *       *       *       *       *       *

                          (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[.]; or
                          (vi) a party to the United States-
                        Oman Free Trade Agreement, a product or 
                        service of that country or 
                        instrumentality which is covered under 
                        that Agreement for procurement by the 
                        United States. 

           *       *       *       *       *       *       *


                          V. ADDITIONAL VIEWS

                 ADDITIONAL VIEWS OF SENATOR MAX BAUCUS

    Regarding the development of the implementing legislation, 
Senator Conrad's amendment (Conrad-Bingaman-Kerry #1) was 
introduced and discussed with a view toward recent events and 
apparent failures to enforce measures to prevent the 
importation of goods produced with slave labor. Specifically, 
the sponsors of the amendment cited recent examples of U.S. 
imports of goods from Jordan produced under conditions 
tantamount to slave labor and involving human trafficking. The 
existence of these imports, which benefited from the U.S.-
Jordan Free Trade Agreement, called into question the adequacy 
of existing measures that prohibit the importation of such 
goods. The sponsors of the amendment also noted that while 
United States law prohibits the importation of goods produced 
with convict labor, as well as with forced labor and indentured 
labor, the law does not expressly address the use of human 
trafficking in the production of these goods.
    In terms of the process by which the United States-Oman 
Free Trade Agreement was considered, the Trade Promotion 
Authority Act of 2002 stipulates the procedures under which 
this Agreement was considered and builds on a history of 
Congressional-Executive consultation procedures. These 
procedures were designed to facilitate the negotiation, 
conclusion, and consideration of international trade 
agreements. This process was designed to be a Congressional-
Executive partnership. The ``mock'' consideration of the draft 
implementing bill is both symbolic of and integral to this 
partnership. Congress and the President first used these 
procedures adopted in the Trade Act of 1974 to implement the 
GATT Tokyo Round agreements in 1979. Congress and the 
Administration have since used these procedures to implement 
the WTO Uruguay Round Agreements, as well as subsequent free 
trade agreements.
    Throughout the history of these procedures, the Committee 
has on many occasions considered and adopted amendments to 
implementing legislation. When the Committee considered the 
United States-Israel Free Trade Agreement in 1984, Committee 
Members offered 13 amendments, and the Committee adopted 3. In 
1988, when the Committee considered the Canada-United States 
Free Trade Agreement, Members offered 9 amendments, all of 
which were adopted. When the Finance Committee considered draft 
implementing legislation for the North American Free Trade 
Agreement in 1993, members offered at least 15 amendments, of 
which 14 were adopted. These amendments added in the mock 
markup led to differences between the versions of the draft 
bill approved by the Finance Committee and the bill approved by 
the Ways and Means Committee.
    Consistent with normal legislative practice since 1974, the 
two Committees resolved these differences in informal or 
``mock'' conferences. Although these informal procedures are 
not statutory, they are critical to Congress's Constitutional 
oversight authority over trade policy, and to the smooth 
operation of the Congressional-Executive partnership on trade. 
These informal procedures included consultation on the Member 
as well as the staff levels, both formally and informally.
    In the case of the United States-Oman Free Trade Agreement 
implementing legislation, the Committee unanimously adopted the 
Conrad-Bingaman-Kerry amendment, while the Ways and Means 
Committee adopted no amendments. The Democratic staff of the 
Finance Committee and the Ways and Means Committee both 
requested a mock conference in line with historical precedent. 
The request was denied and no conference was convened, despite 
the differences in the legislation.
    The Trade Promotion Authority Act of 2002 was intended to 
build on and enhance Congressional oversight of United States 
trade policy. The consultative process by which the United 
States-Oman Free Trade Agreement was handled was a departure 
from the longstanding Congressional-Executive partnership on 
trade.

                                  
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