Legal Updates - May 12, 2014

Update on the US-Oman Free Trade Agreement (“FTA”) Transhipment Issue

The US Embassy recently circulated a ROP Customs circular clarifying the thorny issue of whether transshipment of US origin goods (meeting the 35% value added threshold) are eligible for a duty exemption under the US-Oman Free Trade Agreement (FTA). The Circular confirmed that such qualifying goods can be imported to Oman duty-free.

Under the FTA, Oman must give goods produced in the United States special duty rates as stipulated under this agreement (Article 2.3). The particular goods that are eligible for duty-free treatment or those subject to gradual elimination of duties over a 5-10 year period are detailed in Annex 2-B of the FTA. Oman must follow this provision unless the FTA provides an express exception. However, no exception in relation to goods arriving by land transportation is contained in the treaty. Further, the FTA states that where a US origin good is merely unloaded, reloaded and transported through another territory to the parties, it is still considered “imported directly” from the US and therefore eligible for the FTA duty rate (Articles 4.1 and 4.9).

Additionally, if customs officials decide to deny the FTA rate, they are required to issue a written decision containing the factual and the legal basis for denying the rate (Article 4.1, paragraph 3). If the ROP have a doubt as to the eligibility of goods for the FTA rate, the burden is on the ROP to prove the ineligibility. The FTA does not require certificates of origin; however, Article 4.10 expands on what custom officials do require.