Origin rules are used to determine in which country an imported product is manufactured. The rules are designed to ensure that only products that have been significantly manufactured in the United States or Bahrain will enjoy preferential treatment when exported to the other country.
For U.S. goods to meet FTA standards for export to Bahrain, they must meet the following requirements:
o For goods not subject to the specific rules of origin found in Annex 3-A or Annex 4-A, if any third-country materials are used, they must be “substantially transformed” by manufacturing or processing in the territory of one or both of the parties and must contain not less than 35% U.S. and/or Bahrain content.
o Goods covered by the specific rules of origin found in Annex 3-A or Annex 4-A must satisfy the relevant rules found in those Annexes.
Substantial Transformation Requirement
Few products, other than agricultural products, are made up completely of U.S. content.
A product is substantially transformed when it undergoes a change in "name, character, or use" that is deemed "substantial."
Examples of a substantial transformation include:
Wood => Wood table
Glass sheet => Car Windshield
Some examples of manufacturing that do not meet the substantial transformation qualification include:
Blank ceramic vase => Hand-painted vase
Unfinished wood chairs => Finished wood chairs
Goods not covered by the rules in Annex 3-A and Annex 4-A must also meet the quantitative origin requirement to qualify for preferential treatment under the FTA. Under this requirement, 35% of the appraised value of the good imported into Bahrain must be attributable to the cost or value of U.S./Bahrain origin materials and/or the direct costs of processing the product in the United States/Bahrain. (Unlike the U.S.-Jordan FTA, a U.S. exporter may apply the full value of components imported from Bahrain, as long as the components meet the requirements specified in Article 4.1 of Chapter 4 of the FTA, toward satisfying the 35% value-content requirement.)
It is important to note that the cost or value of materials incorporated in the imported good may be counted toward the 35% domestic content requirement only if such materials are produced in the United States and/or Bahrain. Materials will be considered produced in the United States and/or Bahrain if the materials are wholly the growth, product, or manufacture of one or both of the Parties; or the materials are substantially transformed in the United States into a new and different article of commerce, which is then incorporated into the finished good.
For more information about what may be included when calculating the cost or value of the materials used and the direct costs of processing operations please see Chapter 4 of the Agreement.
The U.S.-Bahrain FTA also contains a limited number of product-specific requirements (edible products and textiles and apparel goods) that may be found in Annex 3-A of Chapter 3 and Annex 4-A of Chapter 4 of the Agreement.
Prepared by the International Trade Administration
Trade Information Center