
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 10USC2532]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                PART IV--SERVICE, SUPPLY, AND PROCUREMENT
 
 CHAPTER 148--NATIONAL DEFENSE TECHNOLOGY AND INDUSTRIAL BASE, DEFENSE 
                  REINVESTMENT, AND DEFENSE CONVERSION
 
    SUBCHAPTER V--MISCELLANEOUS TECHNOLOGY BASE POLICIES AND PROGRAMS
 
Sec. 2532. Offset policy; notification

    (a) Establishment of Offset Policy.--The President shall establish, 
consistent with the requirements of this section, a comprehensive policy 
with respect to contractual offset arrangements in connection with the 
purchase of defense equipment or supplies which addresses the following:
        (1) Transfer of technology in connection with offset 
    arrangements.
        (2) Application of offset arrangements, including cases in which 
    United States funds are used to finance the purchase by a foreign 
    government.
        (3) Effects of offset arrangements on specific subsectors of the 
    industrial base of the United States and for preventing or 
    ameliorating any serious adverse effects on such subsectors.

    (b) Technology Transfer.--(1) No official of the United States may 
enter into a memorandum of understanding or other agreement with a 
foreign government that would require the transfer of United States 
defense technology to a foreign country or a foreign firm in connection 
with a contract that is subject to an offset arrangement if the 
implementation of such memorandum or agreement would significantly and 
adversely affect the defense industrial base of the United States and 
would result in a substantial financial loss to a United States firm.
    (2) Paragraph (1) shall not apply in the case of a memorandum of 
understanding or agreement described in paragraph (1) if the Secretary 
of Defense, in consultation with the Secretary of Commerce and the 
Secretary of State, determines that a transfer of United States defense 
technology pursuant to such understanding or agreement will result in 
strengthening the national security of the United States and so 
certifies to Congress.
    (3) If a United States firm is required under the terms of a 
memorandum of understanding, or other agreement entered into by the 
United States with a foreign country, to transfer defense technology to 
a foreign country, the United States firm may protest the determination 
to the Secretary of Defense on the grounds that the transfer of such 
technology would adversely affect the defense industrial base of the 
United States and would result in substantial financial loss to the 
protesting firm. The Secretary of Defense, in consultation with the 
Secretary of Commerce and the Secretary of State, shall make the final 
determination of the validity of the protesting firm's claim.
    (c) Notification Regarding Offsets.--If at any time 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 arrangement exceeding $50,000,000 in value, such 
firm shall notify the Secretary of Defense of the proposed sale. 
Notification shall be made under this subsection in accordance with 
regulations prescribed by the Secretary of Defense in consultation with 
the Secretary of Commerce.
    (d) Definitions.--In this section:
        (1) The term ``United States firm'' means a business entity that 
    performs substantially all of its manufacturing, production, and 
    research and development activities in the United States.
        (2) The term ``foreign firm'' means a business entity other than 
    a United States firm.

(Added Pub. L. 100-456, div. A, title VIII, Sec. 825(b), Sept. 29, 1988, 
102 Stat. 2020, Sec. 2505; renumbered Sec. 2532, Pub. L. 102-484, div. 
D, title XLII, Sec. 4202(a), Oct. 23, 1992, 106 Stat. 2659.)


                               Amendments

    1992--Pub. L. 102-484 renumbered section 2505 of this title as this 
section.


  Contractual Offset Arrangements; Congressional Statement of Findings

    Section 825(a) of Pub. L. 100-456 provided that: ``Congress makes 
the following findings:
        ``(1) Many contracts entered into by United States firms for the 
    supply of weapon systems or defense-related items to foreign 
    countries and foreign firms are subject to contractual arrangements 
    under which United States firms must agree--
            ``(A) to have a specified percentage of work under, or 
        monetary amount of, the contract performed by one or more 
        foreign firms;
            ``(B) to purchase a specified amount or quantity of 
        unrelated goods or services from domestic sources of such 
        foreign countries; or
            ``(C) to invest a specified amount in domestic businesses of 
        such foreign countries.
    Such contractual arrangements, known as `offsets', are a component 
    of international trade and could have an impact on United States 
    defense industry opportunities in domestic and foreign markets.
        ``(2) Some United States contractors and subcontractors may be 
    adversely affected by such contractual arrangements.
        ``(3) Many contracts which provide for or are subject to offset 
    arrangements require, in connection with such arrangements, the 
    transfer of United States technology to foreign firms.
        ``(4) The use of such transferred technology by foreign firms in 
    conjunction with foreign trade practices permitted under the trade 
    policies of the countries of such firms can give foreign firms a 
    competitive advantage against United States firms in world markets 
    for products using such technology.
        ``(5) A purchase of defense equipment pursuant to an offset 
    arrangement may increase the cost of the defense equipment to the 
    purchasing country and may reduce the amount of defense equipment 
    that a country may purchase.
        ``(6) The exporting of defense equipment produced in the United 
    States is important to maintain the defense industrial base of the 
    United States, lower the unit cost of such equipment to the 
    Department of Defense, and encourage the standardized utilization of 
    United States equipment by the allies of the United States.''


        Negotiations With Countries Requiring Offset Arrangements

    Section 825(c) of Pub. L. 100-456, as amended by Pub. L. 101-189, 
div. A, title VIII, Sec. 816, Nov. 29, 1989, 103 Stat. 1501, provided 
that:
    ``(1) The President shall enter into negotiations with foreign 
countries that have a policy of requiring an offset arrangement in 
connection with the purchase of defense equipment or supplies from the 
United States. The negotiations should be conducted with a view to 
achieving an agreement with the countries concerned that would limit the 
adverse effects that such arrangements have on the defense industrial 
base of each such country. Every effort shall be made to achieve such 
agreements within two years after September 29, 1988.
    ``(2) In the negotiation or renegotiation of any memorandum of 
understanding between the United States and one or more foreign 
countries relating to the reciprocal procurement of defense equipment 
and supplies or research and development, the President shall make every 
effort to achieve an agreement with the country or countries concerned 
that would limit the adverse effects that offset arrangements have on 
the defense industrial base of the United States.''
    [For delegation of functions of President under section 825(c) of 
Pub. L. 100-456 to Secretary of Defense and United States Trade 
Representative, see section 5-201 of Ex. Ord. No. 12661, 54 F.R. 779, 
set out as a note under section 2901 of Title 19, Customs Duties.]


Report to Congress on Offset Arrangements Required by Foreign Countries 
                 and Firms; Discussion of Policy Options

    Section 825(d) of Pub. L. 100-456 provided that:
    ``(1) Not later than November 15, 1988, the President shall submit 
to Congress a comprehensive report on contractual offset arrangements 
required of United States firms for the supply of weapon systems or 
defense-related items to foreign countries or foreign firms. Such report 
shall include, at a minimum, the following:
        ``(A) An analysis of the amount and type of contractual offsets 
    required of United States firms by the governments of foreign 
    countries or by foreign firms.
        ``(B) An assessment of the benefits for and costs to United 
    States manufacturers of defense products at all tiers that result 
    from requirements of foreign governments for contractual offset 
    arrangements in the case of products procured from United States 
    firms.
        ``(C) An assessment of the benefits for and the costs to United 
    States manufacturers of defense products at all tiers that would 
    result from restriction of the ability of foreign governments or 
    foreign firms to require contractual offsets in the case of defense 
    products procured from United States firms.
        ``(D) An assessment of the benefits and costs of a United States 
    policy that requires reciprocal offsets in the procurement of 
    defense products from those countries whose governments have a 
    policy of requiring contractual offsets in the case of defense 
    products procured from United States firms.
        ``(E) An assessment of the impact that elimination of 
    contractual offset requirements in international sales of defense 
    products would have on the national security of the United States.
        ``(F) Recommendations for a national policy with respect to 
    contractual offset arrangements.
        ``(G) A preliminary discussion of the actions referred to in 
    paragraph (2).
    ``(2) Not later than March 15, 1990, the President shall transmit to 
Congress a report containing a discussion of appropriate actions to be 
taken by the United States with respect to purchases from United States 
firms by a foreign country (or a firm of that country) when that country 
or firm requires an offset arrangement in connection with the purchase 
of defense equipment or supplies in favor of such country. The report 
shall include a discussion of the following possible actions:
        ``(A) A requirement for an offset in favor of the United States 
    or United States firms in any case in which the Department of 
    Defense or any other department or agency of the United States 
    purchases goods from such foreign country or a firm of such country.
        ``(B) A demand for offset credits from such foreign country to 
    be used, to the extent practicable, to meet offset obligations of 
    United States firms to such foreign country or to a firm of such 
    country.
        ``(C) A reduction in assistance furnished such foreign country 
    by the United States.
        ``(D) A requirement for alternative equivalent advantages in the 
    case of any such foreign country or a firm of such country if the 
    United States does not purchase a sufficient volume of goods from 
    such country or firm for a requirement described in subparagraph (A) 
    to be effective.
    ``(3) The President shall report to Congress at least once each 
year, for a period of 4 years, on the progress of the negotiations 
referred to in subsection (c) [set out above]. The first such report 
shall be submitted not later than one year after the date of the 
enactment of this Act [Sept. 29, 1988].
    ``(4) In this subsection, the terms `United States firm' and 
`foreign firm' have the same meanings as are provided in section 2505(d) 
[now 2532(d)] of title 10, United States Code, as added by subsection 
(b).''
    [For delegation of functions of President under section 825(d) of 
Pub. L. 100-456 to Director of Office of Management and Budget, see 
section 5-202 of Ex. Ord. No. 12661, 54 F.R. 779, set out as a note 
under section 2901 of Title 19, Customs Duties.]

                  Section Referred to in Other Sections

    This section is referred to in section 2534 of this title.
