Page 1451 TITLE 10—ARMED FORCES § 2532 ment of Defense supplement to the Federal Acquisition shall make the final determination of the valid- Regulation. ity of the protesting firm’s claim. ‘‘(d) DEFINITIONS.—In this section: (c) NOTIFICATION REGARDING OFFSETS.—If at ‘‘(1) The term ‘foreign defense trade partner’ means any time a United States firm enters into a con- a foreign country with respect to which there is— ‘‘(A) a memorandum of understanding or related tract for the sale of a weapon system or defense- agreement described in section 2531(a) of title 10, related item to a foreign country or foreign firm United States Code; or and such contract is subject to an offset ar- ‘‘(B) a cooperative project agreement described in rangement exceeding $50,000,000 in value, such section 27 of the Arms Export Control Act (22 U.S.C. firm shall notify the Secretary of Defense of the 2767). proposed sale. Notification shall be made under ‘‘(2) The term ‘offset agreement’ has the meaning this subsection in accordance with regulations provided that term by section 36(e) of the Arms Ex- prescribed by the Secretary of Defense in con- port Control Act (22 U.S.C. 2776(e)). ‘‘(3) The terms ‘defense article’ and ‘defense service’ sultation with the Secretary of Commerce. have the meanings provided those terms by section (d) DEFINITIONS.—In this section: 47(7) of the Arms Export Control Act (22 U.S.C. (1) The term ‘‘United States firm’’ means a 2794(7)).’’ business entity that performs substantially all of its manufacturing, production, and research § 2532. Offset policy; notification and development activities in the United (a) ESTABLISHMENT OF OFFSET POLICY.—The States. President shall establish, consistent with the re- (2) The term ‘‘foreign firm’’ means a busi- quirements of this section, a comprehensive pol- ness entity other than a United States firm. icy with respect to contractual offset arrange- (Added Pub. L. 100–456, div. A, title VIII, § 825(b), ments in connection with the purchase of de- Sept. 29, 1988, 102 Stat. 2020, § 2505; renumbered fense equipment or supplies which addresses the § 2532, Pub. L. 102–484, div. D, title XLII, § 4202(a), following: Oct. 23, 1992, 106 Stat. 2659.) (1) Transfer of technology in connection with offset arrangements. AMENDMENTS (2) Application of offset arrangements, in- 1992—Pub. L. 102–484 renumbered section 2505 of this cluding cases in which United States funds are title as this section. used to finance the purchase by a foreign gov- REVIEW OF OFFSET ARRANGEMENTS BY SECRETARY OF ernment. DEFENSE (3) Effects of offset arrangements on specific Pub. L. 108–87, title VIII, § 8138, Sept. 30, 2003, 117 Stat. subsectors of the industrial base of the United 1106, directed the Secretary of Defense to review con- States and for preventing or ameliorating any tractual offset arrangements to which the policy estab- serious adverse effects on such subsectors. lished under this section applied, memoranda of under- standing and related agreements to which the limita- (b) TECHNOLOGY TRANSFER.—(1) No official of tion in section 2531(c) of this title applied that had been the United States may enter into a memoran- entered into with a country with respect to which such dum of understanding or other agreement with a contractual offset arrangements had been entered into, foreign government that would require the and waivers granted with respect to a foreign country transfer of United States defense technology to under section 2534(d)(3) of this title; determine the ef- a foreign country or a foreign firm in connection fects of the use of such arrangements, memoranda of with a contract that is subject to an offset ar- understanding, agreements, and waivers on the na- rangement if the implementation of such memo- tional technology and industrial base; and submit a re- port on the results of the review to Congress not later randum or agreement would significantly and than Mar. 1, 2005. adversely affect the defense industrial base of the United States and would result in a substan- CONTRACTUAL OFFSET ARRANGEMENTS; CONGRESSIONAL tial financial loss to a United States firm. STATEMENT OF FINDINGS (2) Paragraph (1) shall not apply in the case of Section 825(a) of Pub. L. 100–456 provided that: ‘‘Con- a memorandum of understanding or agreement gress makes the following findings: described in paragraph (1) if the Secretary of De- ‘‘(1) Many contracts entered into by United States fense, in consultation with the Secretary of firms for the supply of weapon systems or defense-re- lated items to foreign countries and foreign firms are Commerce and the Secretary of State, deter- subject to contractual arrangements under which mines that a transfer of United States defense United States firms must agree— technology pursuant to such understanding or ‘‘(A) to have a specified percentage of work under, agreement will result in strengthening the na- or monetary amount of, the contract performed by tional security of the United States and so cer- one or more foreign firms; tifies to Congress. ‘‘(B) to purchase a specified amount or quantity (3) If a United States firm is required under of unrelated goods or services from domestic sources of such foreign countries; or the terms of a memorandum of understanding, ‘‘(C) to invest a specified amount in domestic or other agreement entered into by the United businesses of such foreign countries. States with a foreign country, to transfer de- Such contractual arrangements, known as ‘offsets’, fense technology to a foreign country, the are a component of international trade and could United States firm may protest the determina- have an impact on United States defense industry op- tion to the Secretary of Defense on the grounds portunities in domestic and foreign markets. that the transfer of such technology would ad- ‘‘(2) Some United States contractors and sub- versely affect the defense industrial base of the contractors may be adversely affected by such con- tractual arrangements. United States and would result in substantial fi- ‘‘(3) Many contracts which provide for or are sub- nancial loss to the protesting firm. The Sec- ject to offset arrangements require, in connection retary of Defense, in consultation with the Sec- with such arrangements, the transfer of United retary of Commerce and the Secretary of State, States technology to foreign firms. § 2533 TITLE 10—ARMED FORCES Page 1452 ‘‘(4) The use of such transferred technology by for- (2) The bids or proposals of all other firms in eign firms in conjunction with foreign trade practices the United States which have offered to fur- permitted under the trade policies of the countries of nish American goods. such firms can give foreign firms a competitive ad- (3) The United States balance of payments. vantage against United States firms in world mar- (4) The cost of shipping goods which are kets for products using such technology. ‘‘(5) A purchase of defense equipment pursuant to other than American goods. an offset arrangement may increase the cost of the (5) Any duty, tariff, or surcharge which may defense equipment to the purchasing country and enter into the cost of using goods which are may reduce the amount of defense equipment that a other than American goods. country may purchase. (6) A need to ensure that the Department of ‘‘(6) The exporting of defense equipment produced Defense has access to advanced, state-of-the- in the United States is important to maintain the de- art commercial technology. fense industrial base of the United States, lower the (7) The need to protect the national tech- unit cost of such equipment to the Department of De- nology and industrial base, to preserve and en- fense, and encourage the standardized utilization of hance the national technology employment United States equipment by the allies of the United States.’’ base, and to provide for a defense mobilization base. NEGOTIATIONS WITH COUNTRIES REQUIRING OFFSET (8) A need to ensure that application of dif- ARRANGEMENTS ferent rules of origin for United States end Section 825(c) of Pub. L. 100–456, as amended by Pub. items and foreign end items does not result in L. 101–189, div. A, title VIII, § 816, Nov. 29, 1989, 103 Stat. an award to a firm other than a firm providing 1501, provided that: a product produced in the United States. ‘‘(1) The President shall enter into negotiations with (9) Any need— foreign countries that have a policy of requiring an off- (A) to maintain the same source of supply set arrangement in connection with the purchase of de- for spare and replacement parts for an end fense equipment or supplies from the United States. item that qualifies as an American good; or The negotiations should be conducted with a view to (B) to maintain the same source of supply achieving an agreement with the countries concerned for spare and replacement parts in order not that would limit the adverse effects that such arrange- ments have on the defense industrial base of each such to impair integration of the military and country. Every effort shall be made to achieve such commercial industrial base. agreements within two years after September 29, 1988. (10) The national security interests of the ‘‘(2) In the negotiation or renegotiation of any memo- United States. randum of understanding between the United States and one or more foreign countries relating to the recip- (b) In this section, the term ‘‘goods which are rocal procurement of defense equipment and supplies or other than American goods’’ means— research and development, the President shall make (1) an end product that is not mined, pro- every effort to achieve an agreement with the country duced, or manufactured in the United States; or countries concerned that would limit the adverse ef- or fects that offset arrangements have on the defense in- (2) an end product that is manufactured in dustrial base of the United States.’’ [For delegation of functions of President under sec- the United States but which includes compo- tion 825(c) of Pub.