Offsets and Domestic Considerations

• Author: Robert S. Metzger
• Pages: 46-60

46

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