(a) Report required
(1) In general
The President shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, a detailed annual report on the impact of offsets on the defense preparedness, industrial competitiveness, employment, and trade of the United States.
(2) Duties of the Secretary of Commerce
The Secretary of Commerce (hereafter in this subsection referred to as the "Secretary") shall—
(A) prepare the report required by paragraph (1);
(B) consult with the Secretary of Defense, the Secretary of the Treasury, the Secretary of State, and the United States Trade Representative in connection with the preparation of such report; and
(C) function as the President's Executive Agent for carrying out this section.
(b) Interagency studies and related data
(1) Purpose of report
Each report required under subsection (a) shall identify the cumulative effects of offset agreements on—
(A) the full range of domestic defense productive capability (with special attention paid to the firms serving as lower-tier subcontractors or suppliers); and
(B) the domestic defense technology base as a consequence of the technology transfers associated with such offset agreements.
(2) Use of data
Data developed or compiled by any agency while conducting any interagency study or other independent study or analysis shall be made available to the Secretary to facilitate the execution of the Secretary's responsibilities with respect to trade offset and countertrade policy development.
(c) Notice of offset agreements
(1) In general
If a United States firm enters into a contract for the sale of a weapon system or defense-related item to a foreign country or foreign firm and such contract is subject to an offset agreement exceeding $5,000,000 in value, such firm shall furnish to the official designated in the regulations promulgated pursuant to paragraph (2) information concerning such sale.
The information to be furnished under paragraph (1) shall be prescribed in regulations promulgated by the Secretary. Such regulations shall provide protection from public disclosure for such information, unless public disclosure is subsequently specifically authorized by the firm furnishing the information.
(d) Contents of report
(1) In general
Each report under subsection (a) shall include—
(A) a net assessment of the elements of the industrial base and technology base covered by the report;
(B) recommendations for appropriate remedial action under the authority of this chapter, or other law or regulations;
(C) a summary of the findings and recommendations of any interagency studies conducted during the reporting period under subsection (b);
(D) a summary of offset arrangements concluded during the reporting period for which information has been furnished pursuant to subsection (c); and
(E) a summary and analysis of any bilateral and multilateral negotiations relating to the use of offsets completed during the reporting period.
(2) Alternative findings or recommendations
Each report required under this section shall include any alternative findings or recommendations offered by any departmental Secretary, agency head, or the United States Trade Representative to the Secretary.
(e) Utilization of annual report in negotiations
The findings and recommendations of the reports required by subsection (a), and any interagency reports and analyses shall be considered by representatives of the United States during bilateral and multilateral negotiations to minimize the adverse effects of offsets.
Termination of Section
For termination of section, see section 4564(a) of this title.
References in Text
This chapter, referred to in subsec. (d)(1)(B), was in the original "this Act", meaning act Sept. 8, 1950, ch. 932, 64 Stat. 798, known as the Defense Production Act of 1950, which is classified principally to this chapter. For complete classification of this Act to the Code, see section 4501 of this title and Tables.
Section was formerly classified to section 2172 of the former Appendix to this title prior to editorial reclassification and renumbering as this section.
Delegation of Functions
For directive to Secretary of Commerce to prepare and submit annual report required by this section, see section 702 of Ex. Ord. No. 13603, Mar. 16, 2012, 77 F.R. 16658, set out as a note under section 4553 of this title.
Report on Impact of Offsets on Domestic Contractors and Lower Tier Subcontractors
Pub. L. 108–195, §7(a), Dec. 19, 2003, 117 Stat. 2894, as amended by Pub. L. 111–67, §12(b)(3), Sept. 30, 2009, 123 Stat. 2022, provided that:
"(A) detail the number of foreign contracts involving domestic contractors that use offsets, industrial participation agreements, or similar arrangements during the preceding 5-year period;
"(B) calculate the aggregate, median, and mean values of the contracts and the offsets, industrial participation agreements, and similar arrangements during the preceding 5-year period; and
"(C) describe the impact of international or foreign sales of United States defense products and related offsets, industrial participation agreements, and similar arrangements on domestic prime contractors and, to the extent practicable, the first 3 tiers of domestic contractors and subcontractors during the preceding 5-year period in terms of domestic employment, including any job losses, on an annual basis.
[Pub. L. 111–67, §12(b)(3), which directed amendment of section 7(a) of the "Defense Production Act Amendments of 2003 (50 U.S.C. App. 2099 note)" by striking "section 309(a) of the Defense Production Act of 1950 (50 U.S.C. App. 2099(a))" and inserting "section 723(a) of the Defense Production Act of 1950", was executed to section 7(a) of Pub. L. 108–195, the Defense Production Act Reauthorization of 2003, set out above, to reflect the probable intent of Congress.]
Defense Offsets Disclosure
"SEC. 1241. SHORT TITLE.
"This subtitle may be cited as the 'Defense Offsets Disclosure Act of 1999'.
"SEC. 1242. FINDINGS AND DECLARATION OF POLICY.
"(1) A fair business environment is necessary to advance international trade, economic stability, and development worldwide, is beneficial for American workers and businesses, and is in the United States national interest.
"(2) In some cases, mandated offset requirements can cause economic distortions in international defense trade and undermine fairness and competitiveness, and may cause particular harm to small- and medium-sized businesses.
"(3) The use of offsets may lead to increasing dependence on foreign suppliers for the production of United States weapons systems.
"(4) The offset demands required by some purchasing countries, including some close allies of the United States, equal or exceed the value of the base contract they are intended to offset, mitigating much of the potential economic benefit of the exports.
"(5) Offset demands often unduly distort the prices of defense contracts.
"(6) In some cases, United States contractors are required to provide indirect offsets which can negatively impact nondefense industrial sectors.
"(7) Unilateral efforts by the United States to prohibit offsets may be impractical in the current era of globalization and would severely hinder the competitiveness of the United States defense industry in the global market.
"(8) The development of global standards to manage and restrict demands for offsets would enhance United States efforts to mitigate the negative impact of offsets.
"SEC. 1243. DEFINITIONS.
"In this subtitle:
"(A) the Committee on Foreign Relations of the Senate; and
"(B) the Committee on International Relations [now Committee on Foreign Affairs] of the House of Representatives.
"(2) G–8.—The term 'G–8' means the group consisting of France, Germany, Japan, the United Kingdom, the United States, Canada, Italy, and Russia established to facilitate economic cooperation among the eight major economic powers.
"SEC. 1244. SENSE OF CONGRESS.
"It is the sense of Congress that—
"(1) the executive branch should pursue efforts to address trade fairness by establishing reasonable, business-friendly standards for the use of offsets in international business transactions between the United States and its trading partners and competitors;
"(2) the Secretary of Defense, the Secretary of State, the Secretary of Commerce, and the United States Trade Representative, or their designees, should raise with other industrialized nations at every suitable venue the need for transparency and reasonable standards to govern the role of offsets in international defense trade;
"(3) the United States Government should enter into discussions regarding the establishment of multilateral standards for the use of offsets in international defense trade through the appropriate multilateral fora, including such organizations as the Transatlantic Economic Partnership, the Wassenaar Arrangement, the G–8, and the World Trade Organization; and
"(4) the United States Government, in entering into the discussions described in paragraph (3), should take into account the distortions produced by the provision of other benefits and subsidies, such as export financing, by various countries to support defense trade.
"SEC. 1245. REPORTING OF OFFSET AGREEMENTS.
"[Amended section 2776 of title 22.]
"SEC. 1246. EXPANDED PROHIBITION ON INCENTIVE PAYMENTS.
"[Amended section 2779a of title 22.]
"SEC. 1247. ESTABLISHMENT OF REVIEW COMMISSION.
"(1) representatives from the private sector, including—
"(A) one each from—
"(i) a labor organization,
"(ii) a United States defense manufacturing company dependent on foreign sales,
"(iii) a United States company dependent on foreign sales that is not a defense manufacturer, and
"(iv) a United States company that specializes in international investment, and
"(B) two members from academia with widely recognized expertise in international economics; and
"(2) five members from the executive branch, including a member from—
"(A) the Office of Management and Budget,
"(B) the Department of Commerce,
"(C) the Department of Defense,
"(D) the Department of State, and
"(E) the Department of Labor.
The member designated from the Office of Management and Budget shall serve as Chairperson of the Commission. The President shall ensure that the Commission is nonpartisan and that the full range of perspectives on the subject of offsets in the defense industry is adequately represented.
"(1) the full range of current practices by foreign governments in requiring offsets in purchasing agreements and the extent and nature of offsets offered by United States and foreign defense industry contractors;
"(2) the impact of the use of offsets on defense subcontractors and nondefense industrial sectors affected by indirect offsets; and
"(3) the role of offsets, both direct and indirect, on domestic industry stability, United States trade competitiveness and national security.
"(1) an analysis of—
"(A) the collateral impact of offsets on industry sectors that may be different than those of the contractor providing the offsets, including estimates of contracts and jobs lost as well as an assessment of damage to industrial sectors;
"(B) the role of offsets with respect to competitiveness of the United States defense industry in international trade and the potential damage to the ability of United States contractors to compete if offsets were prohibited or limited; and
"(C) the impact on United States national security, and upon United States nonproliferation objectives, of the use of coproduction, subcontracting, and technology transfer with foreign governments or companies that results from fulfilling offset requirements, with particular emphasis on the question of dependency upon foreign nations for the supply of critical components or technology;
"(2) proposals for unilateral, bilateral, or multilateral measures aimed at reducing any detrimental effects of offsets; and
"(3) an identification of the appropriate executive branch agencies to be responsible for monitoring the use of offsets in international defense trade.
"SEC. 1248. MULTILATERAL STRATEGY TO ADDRESS OFFSETS.
"(1) a description of the United States efforts to pursue multilateral negotiations on standards for the use of offsets in international defense trade;
"(2) an evaluation of existing multilateral fora as appropriate venues for establishing such negotiations;
"(3) a description on a country-by-country basis of any United States efforts to engage in negotiations to establish bilateral treaties or agreements with respect to the use of offsets in international defense trade; and
"(4) an evaluation on a country-by-country basis of any foreign government efforts to address the use of offsets in international defense trade.
Declaration of Offset Policy
Pub. L. 102–558, title I, §123, Oct. 28, 1992, 106 Stat. 4206, as amended by Pub. L. 108–195, §7(c), Dec. 19, 2003, 117 Stat. 2895; Pub. L. 111–67, §12(b)(1), Sept. 30, 2009, 123 Stat. 2022, provided that:
"(1) no agency of the United States Government shall encourage, enter directly into, or commit United States firms to any offset arrangement in connection with the sale of defense goods or services to foreign governments;
"(2) United States Government funds shall not be used to finance offsets in security assistance transactions, except in accordance with policies and procedures that were in existence on March 1, 1992;
"(3) nothing in this section shall prevent agencies of the United States Government from fulfilling obligations incurred through international agreements entered into before March 1, 1992; and
"(4) the decision whether to engage in offsets, and the responsibility for negotiating and implementing offset arrangements, reside with the companies involved.
"(A) research, development, or production of defense equipment; or
"(B) the reciprocal procurement of defense items."
Ex. Ord. No. 13177. National Commission on the Use of Offsets in Defense Trade and President's Council on the Use of Offsets in Commercial Trade
Ex. Ord. No. 13177, Dec. 4, 2000, 65 F.R. 76558, as amended by Ex. Ord. No. 13316, §3(f), Sept. 17, 2003, 68 F.R. 55256, provided:
By the authority vested in the President by the Constitution and the laws of the United States of America, including Public Law 106–113 [see Tables for classification] and the Federal Advisory Committee Act, as amended (5 U.S.C. App.), and in order to implement section 1247 of Public Law 106–113 (113 Stat. 1501A–502) [set out in a note above] and to create a parallel "President's Council on the Use of Offsets in Commercial Trade," it is hereby ordered as follows:
(b) Members of the Commission who are not officers or employees of the Federal Government will be compensated at a rate of basic pay prescribed for level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day (including travel time) during which such member is engaged in performance of the duties of the Commission. Members of the Commission who are officers or employees of the Federal Government will serve without compensation in addition to that received for their services as officers or employees of the Federal Government.
(c) Members of the Commission will be allowed travel expenses, including per diem in lieu of subsistence, under subchapter 1 of chapter 57 of title 5, United States Code, while on business in the performance of services for the Commission.
(d) The Commission will terminate 30 days after transmitting the report required in section 1248(b) of Public Law 106–113 (113 Stat. 1501A–505) [set out in a note above].