Although the U.S.-Oman Free Trade Agreement has been a major success story, as with any lengthy and complex treaty, its implementation has not happened overnight.
One implementation issue that has generated much discussion lately is the accordance of Omani national treatment to U.S. companies that have some percentage of non-U.S. ownership.
The position historically taken by the Omani Ministry of Commerce & Industry (MOCI) is that, as matter of principle, the national treatment benefits under the U.S.-Oman FTA (such as the right to hold 100% ownership of an Omani limited liability company) should apply only to companies that are both (i) incorporated in the U.S. and (ii) wholly owned by U.S. natural persons.
As an accommodation to the fact that larger American companies often have broad ownership bases – e.g., a U.S.-incorporated, U.S.-headquartered, U.S.-listed company may likely have a shareholder base that includes some non-U.S. citizens – the MOCI will review on a discretionary, case-by-case basis all requests for U.S.-Oman FTA treatment by companies that are incorporated in the U.S. but are not wholly owned by U.S. persons. The MOCI generally does not have a bright-line test, but rather they evaluate each request on a holistic basis giving consideration to the following factors:
- What are the U.S. company’s ownership percentages by nationality? (E.g., if the U.S. company is owned 90% by U.S. persons and 10% by non-U.S. persons, there would be a much stronger case for FTA treatment than if the ownership percentages are the opposite.)
- How substantial are the U.S. company’s business activities in the U.S.?
- How many years has the U.S. company has been in existence?
- Is the U.S. company listed on a U.S. stock exchange?
- How many U.S.-based employees does the U.S. company have?
In sum, a plain vanilla U.S. company – for example, Acme Inc.; incorporated in Ohio; makes widgets in its factory in Cleveland; owned by John Smith and Jane Doe, both U.S. citizens – will easily qualify for U.S.-Oman FTA treatment.
At the other end of the spectrum, the MOCI will most likely deny FTA treatment to a U.S.-incorporated company that is foreign owned and has no substantial business activities in the U.S.. The MOCI would consider it an abuse of the U.S.-Oman FTA for a foreign company to set up a U.S.-incorporated shell subsidiary for the purpose of partaking of the FTA.
In between these two ends of the spectrum, of course, lie all other companies, and this is where the MOCI weighs the factors in the bullet point list above. For example, a U.S.-incorporated, U.S.-headquartered, U.S. stock exchange-listed company that is majority owned by U.S. shareholders is likely to be accorded FTA treatment even if some percentage of its shares are held by non-U.S. shareholders. However, the final determination would hinge on the MOCI’s discretion.
