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on Masirah Island Oman Continue reading →

Al Balid 2012 Continue reading →

Land of Frankincense Museum in Salalah Continue reading →

the 2nd TEDx in Oman – one of many future ones I hope. Continue reading →

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Dust Storm for Oman
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School Trip in Oman
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legalweek

Linklaters and Allen & Overy (A&O) have advised on the $1.25bn (£795m) debt financing of Oman’s 
Sur Independent Power Project (Sur IPP) alongside Norton Rose. Norton Rose is advising the project’s sponsors, Phoenix Power Company – a special purpose vehicle backed by Japanese investors – on the deal, which will lead to the construction of Oman’s largest independent power plant. The firm’s team is being led by London banking and finance partner Charles Whitney and projects partner Peter Hall.

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legalweek

SNR Denton has advised HSBC on a major deal to grow its Middle East presence via a merger with Oman International Bank (OIB).

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legalweek

Trowers & Hamlins has cut seven lawyers in the Middle East, with the bulk of the layoffs set to affect the firm’s Dubai base. Five lawyers have been laid off in Dubai, while the firm’s Saudi Arabia and Oman offices are also affected, with one lawyer cut in each of Trowers’ bases in Riyadh and Muscat.All of the affected lawyers are associates in the firm’s banking and finance department, which includes the project finance team.

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legalweek

Trowers & Hamlins has boosted its corporate team in Oman with the hire of a new partner from an Australian investment house. The firm has hired Roger Byrne from corporate advisory company Charter Pacific Capital, where he worked as a director. Before joining Charter Pacific, Byrne had previously served as a partner with Australian law firm Clayton Utz and worked with New York investment bank Global Markets Capital Group.

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By David Gallacher and Curt Dombek

Last year in January 2011, the President signed the 2011 National Defense Authorization Act (Pub. L. No. 111-383, Section 846), which included a “Buy American” requirement for photovoltaic devices being purchased by the U.S. Department of Defense (“DoD”). We previously discussed this new requirement in our blog. Twelve months later, the DoD has issued an interim rule to implement this new requirement. See 76 Fed. Reg. 18858 (Dec. 20, 2011). The interim rule appears to be straightforward, implementing exceptions and manufacturing requirements with which most companies are already familiar under the Buy American Act or the Trade Agreements Act, but there is some fine print of which all companies selling photovoltaic devices to the DoD should be aware.

Key Definitions

The interim rule includes a new subsection at Defense Federal Acquisition Regulation Supplement (“DFARS”) 225.7017, as well as a new contract clause at DFARS 252.225-7017, Photovoltaic Devices, and a corresponding certification requirement at DFARS 252.225-7018. Defining its key concepts, the interim rule largely restates the statutory language from Section 846 by defining “covered contracts” and “photovoltaic device.”

  • Covered contracts” means “an energy savings performance contract, a utility service contract, or a private housing contract awarded by DoD, if such contract results in DoD ownership of photovoltaic devices, by means other than DoD purchase as end products. DoD is deemed to own a photovoltaic device if the device is – (1) Installed on DoD property or in a facility owned by DoD; and (2) Reserved for the exclusive use of DoD for the full economic life of the device.” Note that a “covered contract” will not include government contracts valued at less than $150,000 (the simplified acquisition threshold).
  • Photovoltaic device” means “a device that converts light directly into electricity through a solid-state, semiconductor process.” Under this definition, a solar panel containing many individual solar cells would constitute a “photovoltaic device.” If such a panel were manufactured or assembled in the United States in a manner that constituted a substantial transformation (thus qualifying as a “domestic product”), the photovoltaic device would appear to qualify under this regulation, just as it would have under prior rules.

Applicable Dollar Thresholds and Products from U.S. Allies

The interim rule also breaks out the applicable dollar thresholds/categories at which the various free trade agreements apply.

 

 

There are at least four issues worth noting about the applicable dollar thresholds and lists of approved countries:

  1. Dollar Thresholds Apply to the Value of Photovoltaic Devices. The dollar thresholds apply to the value of the photovoltaic devices being purchased as part of the overall contract. As such, if you have a $3 million contract with the DoD but estimate only $100,000 in photovoltaic devices as a part of that overall contract, then it is the $100,000 figure that would determine whether specific trade agreement exceptions apply for the photovoltaic devices.
  2. Updated Dollar Thresholds. These dollar thresholds have been updated effective January 1, 2012, which unfortunately means that the new interim rule is already out of date. While these thresholds will no doubt be reconciled when a final rule is eventually issued, the different thresholds will be confusing in the interim.
  3. Qualifying Countries. The DoD has entered into Memoranda of Understanding with twenty-one U.S. allies whose ministries of defense have agreed that neither the U.S. nor the ally will discriminate against the other in defense procurements. Accordingly, the interim rule acknowledges that purchases at any dollar threshold will satisfy the “Buy American” requirement where the photovoltaic devices are from a “qualifying country,” which includes Australia, Austria, Belgium, Canada, Denmark, Egypt, Finland, France, Germany, Greece, Israel, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Note that even though the U.S. and South Korea have entered into a newly expanded free trade agreement that should be fully implemented in 2012, the free trade agreement does not include a MOU between the DoD and the South Korean Ministry of National Defense such that South Korea would be included on this list as a “qualifying country.” However, South Korea remains a signatory to the WTO GPA, and photovoltaic devices from South Korea would satisfy the interim rule when purchases are at or above the $203,000 threshold.
  4. U.S.-Oman Free Trade Agreement. The rule does not include the U.S.-Oman free trade agreement entered into in 2009, which does not cover the DoD. Oman, therefore, is not listed as an “approved” country under the new DoD photovoltaic rules, even though a product form Oman would otherwise qualify under the Trade Agreements Act when purchased by most civilian agencies.

Other Key Features of the Interim Rule

  • Components. The interim rule reinforces the fact that it is concerned only with the country of origin for the manufactured end-product – not the components. Where the Buy American Act commonly requires that an end-product be both: (1) manufactured in the U.S.; and (2) consist of more than 50% in domestic component parts, the new photovoltaic “Buy American” requirement requires only that the manufactured photovoltaic device end-product be manufactured in the U.S. or a qualifying country (or a free trade agreement partner, if applicable). This means that a domestically manufactured photovoltaic device could consist of entirely foreign content, so long as the final end-product was manufactured or substantially transformed in an approved country.
  • Commercial Products. The interim rule expressly states that this rule applies to commercial purchases.
  • Unreasonable Cost Exception Remain Available. An existing exception under the Buy American Act permits DoD to purchase products from non-approved countries when the cost of a product from an approved country is 50% more than the product from a non-approved country. In this respect, the interim rule does not absolutely require the purchase of domestic photovoltaic devices, but merely establishes a sizeable preference for the purchase of domestic products or other qualifying goods.

Conclusion

It is doubtful whether Section 846 was even necessary in the first place – after all, the statute merely directed DoD to ensure that the purchases of photovoltaic devices comply with the Buy American Act and the Trade Agreements Act, two statutes that would have applied to DoD purchases even if Section 846 were never passed. Nevertheless, now that the DFARS has been amended with this interim rule, there should be greater clarity for contractors regarding the types of products that will satisfy the new requirement, as well as the specific procedures on how this new “Buy American” requirement will be implemented (particularly with regard to the valuation of photovoltaic devices being procured as part of a larger government contract). DoD is accepting comments on the interim rule through February 21, 2012.

By David Gallacher

2012 will see changes regarding U.S. free trade agreements relating to, first, the dollar thresholds at which the various agreements apply to federal purchases and, second, the likely expansion of the scope of the World Trade Organization Government Procurement Agreement (“WTO GPA”). The updated dollar thresholds are important for government contractors because the thresholds determine when a contract is subject to the Buy American Act (“BAA”) or the Trade Agreements Act (“TAA”). As to the WTO GPA, its expansion should provide significant increased access to the U.S and many of its trading partners in international procurements, although the hoped for accession of China to the WTO GPA remains stalled

Updated Dollar Thresholds

On December 8, 2011, the U.S. Trade Representative (“USTR”), Ronald Kirk, announced the dollar thresholds at which free trade agreements (“FTAs”) will apply to U.S. procurements beginning in 2012. See 76 Fed. Reg. 76808. The USTR has raised some thresholds, maintained others, and even lowered some:
 

As we discussed previously in this blog when the thresholds were last adjusted in 2010, it is unclear whether the FAR will need to be amended to incorporate the new thresholds or whether the new thresholds automatically become “effective January 1, 2012″ as directed by the USTR. However, on January 30, 2012, the DFARS was amended to incorporate the new dollar thresholds. See 77 Fed. Reg. 4630. While the FAR Councils are no doubt also working on updating the relevant FAR clauses at FAR Subpart 25.4, any new rules will probably not be issued until February or March 2012. Contractors should be aware that Contracting Officers may take even longer to update individual contracts, or, for that matter, to agree that modifications to existing contracts are appropriate in the first place.

Pending Updates to the WTO GPA

In December 2011, the members of the WTO met in Geneva to revise the WTO GPA. Ever since Canada and the U.S. negotiated amendments to the U.S.-Canada FTA allowing Canada greater access to procurements by state and local governments (one of the primary outlets for stimulus funds through 2009 and 2010), members of the WTO have clamored for expanded access under the GPA. FTAs typically apply only to governmental agencies that are specifically listed in the free trade agreement; the new December 2011 agreement allows expanded access by foreign companies to U.S. procurements by listing twelve previously uncovered federal agencies (including the Social Security Administration and the Transportation Security Administration) as now covered by the WTO GPA. In exchange, U.S. companies will gain access to hundreds of foreign “central and sub-central” government procurements in countries such as Japan, South Korea, Israel, and many other E.U. countries. The new WTO agreement is expected to open significant international procurement markets, and the USTR hailed the new agreement as a major breakthrough for free trade. The changes to the WTO GPA are expected to be formalized by March 2012.

Meanwhile, in November 2011, China updated its submission to accede to the WTO GPA. But the submission fell short of U.S. and E.U. expectations, setting extremely high dollar thresholds and exempting a large number of Chinese sub-central agencies and state-run enterprises. China joined the WTO in 2001 and China has reiterated that it intends to accede to the WTO GPA. However, given the above high dollar thresholds and exemptions, China has thus far been unable to make the kind of aggressive offers demanded by the international community to complete its accession. Therefore, at least for the time being, products made in China will continue to be noncompliant under the Trade Agreements Act.

Current signatories to the WTO GPA include more than 40 countries: the U.S., the 27 member states of the European Union, Canada, Armenia, Aruba, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Norway, Singapore, South Korea, Switzerland, and Taiwan. Armenia is the most recent addition to the WTO GPA, having just recently acceded to the WTO GPA on September 15, 2011. See 76 Fed. Reg. 58856; 77 Fed. Reg. 4631.

A dhow carrying tourists cruises off the Oman's Khasab shores along the Strait of Hormuz in the GulfIran warned on Thursday it could sue Google for leaving the body of water separating it from the Arabian peninsula nameless on its online map service.

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