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U.S.-Oman Free Trade Agreement

Guiding Principle

This Articles deals with the recent developments in the implementation of the U.S.-Oman Free Trade Agreement (FTA). The FTA is a binding international agreement between the Sultanate of Oman and the Government of the United States of America that is intended to improve economic relations and strengthen the overall relationships between the two countries.

I. Introduction

I. Overview and Recent Developments

The U.S.-Oman Free Trade Agreement is a trade pact between Oman and the United States, signed by two countries on January 19, 2006 and came into force on January 1, 2009, as a part of the broaden plan to create a US – Middle East Free Trade Area (MEFTA).

The U.S.-Oman FTA builds on the 14 existing American Free Trade Agreements in force with 20 different countries (U.S. FTA Partner Countries: Australia; Bahrain; Chile; Colombia; DR-CAFTA: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, & Nicaragua; Israel; Jordan; Korea; Morocco; NAFTA: Canada & Mexico; Oman; Panama; Peru; and Singapore). Oman is the fifth Middle Eastern country to have negotiated an FTA with the United States; the U.S. has an FTA with only one other GCC country (Bahrain), although more are expected in upcoming years. Currently, Oman is also a part of the GCC-South Korea Free Trade Agreement (FTA). The U.S. Free Trade Agreement with the Sultanate of Oman promotes economic reform and provides a framework for integration of the Omani economy with the United States. Implementation of the obligations contained in the comprehensive agreement will generate export opportunities for U.S. goods and services providers, solidify Oman’s trade and investment liberalization, and strengthen intellectual property rights protection and enforcement.

The first meeting of the FTA Joint Committee (JC), chaired jointly by the Office of the U.S. Trade Representative and Oman’s Ministry of Commerce and Industry, took place in February 2010. Officials of the two governments discussed a broad range of trade issues, including implementation of Oman’s obligations under the labour and environment chapters and cooperative efforts in those areas.

During the last months, the two governments scheduled discussions between their respective experts on the ongoing implementation of the FTA. The U.S. Embassy in Muscat and the Omani Ministry of Commerce & Industry held successful talks and confirmed to extend ‘local’ Omani treatment to American companies as stipulated in the FTA, together with their commitment to monitor application of the FTA vigorously to ensure that such benefits are granted only to bona fide American companies and not to third-party nationals with no substantial business activities in the United States.

II. The United States-Oman FTA Summary

1. General Provisions

As of January 1st, 2009, the U.S.-Oman Free Trade Agreement is in effect and will mean increased business between the two countries, mainly by allowing 100% of bilateral products traded between the U.S. and Oman tax free. .In addition, Oman and the United States of America will provide each other immediate duty-free access on virtually all products in their tariff schedules and will phase out tariffs on the remaining handful of products within ten years.

All consumer and industrial products traded between the U.S. and Oman will now be tax free. As a result, residents in Oman can expect lower prices on U.S. consumer and industrial products. Similarly, Omani companies seeking to do businesses with the U.S. will now have open access to the world’s largest economy.

U.S. companies seeking to do businesses in Oman will also enjoy an unprecedented level of openness and access to the Omani services market. The FTA includes benefits for service providers across a range of fields, including banking, insurance, securities, and asset management, among others. Additional provisions provide for state of the art protection of intellectual property, as well as protections for the environment and domestic labour laws.

The Agreement covers also all agricultural products. Oman will provide immediate duty-free access for current U.S. agricultural exports in 87% of agricultural tariff lines. The United States will provide immediate duty-free access for 100% of Oman’s current exports of agricultural products in the United States. Both Oman and the United States will phase out tariffs on the remaining products in ten years.

The FTA provides fully reciprocal market access for U.S. textile and apparel products. The United States and Oman will eliminate tariffs on the same schedule on a product-by-product basis. For the majority of products, tariffs will be eliminated either immediately or in five years. The Agreement requires textile and apparel products to contain either U.S. or Omani yarn or fabric in order to qualify for duty-free treatment. However, in order to allow U.S. and Omani producers to develop and expand business contacts, the Agreement also provides, on a temporary basis, duty-free treatment for limited quantities of textile and apparel products that do not meet this requirement.

2. Recapitulation

Although the implementation of the U.S.-Oman Free Trade Agreement is still ongoing, the FTA has already proven to be of a significant assistance for American companies establishing business relations with the Sultanate of Oman. The FTA introduces 100% ownership of an Omani limited liability company (LLC) and lower minimum share capital requirements for American companies.

The FTA establishes a secure, predictable legal framework for U.S. investors in Oman.  Foreign direct investment can contribute significantly to the economic development and stability of this region. Oman actively seeks private foreign investors, especially in the industrial, information technology, tourism, and higher education fields. Investors transferring technology, providing employment, and training for Omanis are particularly welcome. The comprehensive Agreement not only eliminates tariffs, but also reduces barriers for services, protects leading-edge intellectual property, keeps pace with new technologies, ensures regulatory transparency, and serves as a model for all future agreements.

January, 2013 Catherine Jaskiewicz
Meyer-Reumann & Partners, Oman Office
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