Offsets and Domestic Considerations

AuthorRobert S. Metzger
Chapter 4
Offsets and Domestic Considerations
Robert S. Metzger
I. An Introduction to Offsets
Executive Summary
Offsets are a means by which purchasing countries impose obligations on foreign sellers
to provide compensating measures, engage in countertrade, or provide other domestic economic
benefits as a condition to award and as a requirement of performance of certain international
sales transactions. Offsets are especially common in markets for the sale of defense articles and
services, where government contractors from various nations compete to make foreign sales.
Offsets are a very big business. By some accounts, the total value of offset commitments, already
made or in the pipeline, exceeds $500 billion.
Countries purchasing defense supplies and services require offsets. Offsets are important
and can be decisive in the capture of new international business. Offsets may present substantial
performance risk, significant financial exposure, and elevated compliance challenges. In recent
years, the demands of purchasing nations have increased in both monetary value and in the
complexity of applicable requirements. While there are many differences among offset regimes,
certain common principles apply. In this chapter, we explore the legal regimes governing offsets
and provide a practical overview for contractors.
Legal Regime
1. Overview
Offsets are not subject to any prevailing regulation, and at present there are no
established and prevailing “best practices” to inform selling companies or purchasing countries.1

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