10 U.S.C. § 4852 — Offset policy; notification

Page 2886 TITLE 10—ARMED FORCES § 4852 1989—Pub. L. 101–189 inserted ‘‘and related agree- ments’’ after ‘‘understanding’’ in section catchline and amended text generally. Prior to amendment, text read as follows: ‘‘In the negotiation and renegotiation of each memorandum of understanding between the Sec- retary of Defense, acting on behalf of the United States, and one or more foreign countries (or any in- strumentality of a foreign country) relating to re- search, development, or production of defense equip- ment, the Secretary of Defense shall— ‘‘(1) consider the effect of such proposed memo- randum of understanding on the defense industrial base of the United States; and ‘‘(2) regularly solicit and consider information or recommendations from the Secretary of Commerce with respect to the effect on the United States indus- trial base of such memorandum of understanding.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title. DEFENSE TRADE RECIPROCITY Pub. L. 108–375, div. A, title VIII, § 831, Oct. 28, 2004, 118 Stat. 2017, provided that: ‘‘(a) POLICY.—It is the policy of Congress that pro- curement regulations used in the conduct of trade in defense articles and defense services should be based on the principle of fair trade and reciprocity consistent with United States national security, including the need to ensure comprehensive manufacturing capa- bility in the United States defense industrial base. ‘‘(b) REQUIREMENT.—The Secretary of Defense shall make every effort to ensure that the policies and prac- tices of the Department of Defense reflect the goal of establishing an equitable trading relationship between the United States and its foreign defense trade part- ners, including ensuring that United States firms and United States employment in the defense sector are not disadvantaged by unilateral procurement practices by foreign governments, such as the imposition of offset agreements in a manner that undermines the United States defense industrial base. In pursuing this goal, the Secretary shall— ‘‘(1) develop a comprehensive defense acquisition trade policy that provides the necessary guidance and incentives for the elimination of any adverse effects of offset agreements in defense trade; and ‘‘(2) review and make necessary modifications to existing acquisition policies and strategies, and re- view and seek to make necessary modifications to ex- isting memoranda of understanding, cooperative project agreements, or related agreements with for- eign defense trade partners, to reflect this goal. ‘‘(c) REGULATIONS.—The Secretary shall prescribe regulations to implement this section in the Depart- ment of Defense supplement to the Federal Acquisition Regulation. ‘‘(d) DEFINITIONS.—In this section: ‘‘(1) The term ‘foreign defense trade partner’ means a foreign country with respect to which there is— ‘‘(A) a memorandum of understanding or related agreement described in section 2531(a) of title 10, United States Code [now 10 U.S.C. 4851(a)]; or ‘‘(B) a cooperative project agreement described in section 27 of the Arms Export Control Act (22 U.S.C. 2767). ‘‘(2) The term ‘offset agreement’ has the meaning provided that term by section 36(e) of the Arms Ex- port Control Act (22 U.S.C. 2776(e)). ‘‘(3) The terms ‘defense article’ and ‘defense service’ have the meanings provided those terms by section 47(7) of the Arms Export Control Act (22 U.S.C. 2794(7)).’’ § 4852. Offset policy; notification (a) ESTABLISHMENT OF OFFSET POLICY.—The President shall establish, consistent with the re- quirements of this section, a comprehensive pol- icy with respect to contractual offset arrange- ments in connection with the purchase of de- fense equipment or supplies which addresses the following: (1) Transfer of technology in connection with offset arrangements. (2) Application of offset arrangements, in- cluding cases in which United States funds are used to finance the purchase by a foreign gov- ernment. (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 memo- randum 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 connec- tion 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 sub- stantial 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 De- fense, in consultation with the Secretary of Commerce and the Secretary of State, deter- mines that a transfer of United States defense technology pursuant to such understanding or agreement will result in strengthening the na- tional security of the United States and so cer- tifies 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 de- fense technology to a foreign country, the United States firm may protest the determina- tion to the Secretary of Defense on the grounds that the transfer of such technology would ad- versely affect the defense industrial base of the United States and would result in substantial fi- nancial loss to the protesting firm. The Sec- retary of Defense, in consultation with the Sec- retary of Commerce and the Secretary of State, shall make the final determination of the valid- ity of the protesting firm’s claim. (c) NOTIFICATION REGARDING OFFSETS.—If at any time a United States firm enters into a con- tract 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 ar- rangement 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 con- sultation 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 Page 2887 TITLE 10—ARMED FORCES § 4861 and development activities in the United States. (2) The term ‘‘foreign firm’’ means a busi- ness entity other than a United States firm. (Added Pub. L. 100–456, div. A, title VIII, § 825(b), Sept. 29, 1988, 102 Stat. 2020, § 2505; renumbered § 2532, Pub. L. 102–484, div. D, title XLII, § 4202(a), Oct. 23, 1992, 106 Stat. 2659; renumbered § 4852, Pub. L. 116–283, div. A, title XVIII, § 1870(b), Jan. 1, 2021, 134 Stat. 4284.) Editorial Notes AMENDMENTS 2021—Pub. L. 116–283 renumbered section 2532 of this title as this section. 1992—Pub. L. 102–484 renumbered section 2505 of this title as section 2532. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title. CONTRACTUAL OFFSET ARRANGEMENTS; CONGRESSIONAL STATEMENT OF FINDINGS Pub. L. 100–456, div. A, title VIII, § 825(a), Sept. 29, 1988, 102 Stat. 2019, provided that: ‘‘Congress makes the following findings: ‘‘(1) Many contracts entered into by United States firms for the supply of weapon systems or defense-re- lated 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 op- portunities in domestic and foreign markets. ‘‘(2) Some United States contractors and sub- contractors may be adversely affected by such con- tractual arrangements. ‘‘(3) Many contracts which provide for or are sub- ject 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 for- eign firms in conjunction with foreign trade practices permitted under the trade policies of the countries of such firms can give foreign firms a competitive ad- vantage against United States firms in world mar- kets 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 de- fense industrial base of the United States, lower the unit cost of such equipment to the Department of De- fense, and encourage the standardized utilization of United States equipment by the allies of the United States.’’ NEGOTIATIONS WITH COUNTRIES REQUIRING OFFSET ARRANGEMENTS Pub. L. 100–456, div. A, title VIII, § 825(c), Sept. 29, 1988, 102 Stat. 2021, as amended by Pub. L. 101–189, div. A, title VIII, § 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 off- set arrangement in connection with the purchase of de- fense 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 arrange- ments 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 memo- randum of understanding between the United States and one or more foreign countries relating to the recip- rocal 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 ef- fects that offset arrangements have on the defense in- dustrial base of the United States.’’ [For delegation of functions of President under sec- tion 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.] SUBCHAPTER II—LIMITATIONS ON PRO- CUREMENT OF CERTAIN ITEMS FROM FOREIGN SOURCES Sec. 4861. Determinations of public interest under chap- ter 83 of title 41. 4862. Requirement to buy certain articles from American sources; exceptions. 4863. Requirement to buy strategic materials crit- ical to national security from American sources; exceptions. 4864. Miscellaneous limitations on the procure- ment of goods other than United States goods. § 4861. Determinations of public interest under chapter 83 of title 41 (a) In determining under section 8302 of title 41 whether application of chapter 83 of such title is inconsistent with the public interest, the Sec- retary of Defense shall consider the following: (1) The bids or proposals of small business firms in the United States which have offered to furnish American goods. (2) The bids or proposals of all other firms in the United States which have offered to fur- nish American goods. (3) The United States balance of payments. (4) The cost of shipping goods which are other than American goods. (5) Any duty, tariff, or surcharge which may enter into the cost of using goods which are other than American goods. (6) A need to ensure that the Department of Defense has access to advanced, state-of-the- art commercial technology. (7) The need to protect the national tech- nology and industrial base, to preserve and en- hance the national technology employment base, and to provide for a defense mobilization base. (8) A need to ensure that application of dif- ferent rules of origin for United States end items and foreign end items does not result in an award to a firm other than a firm providing a product produced in the United States. (9) Any need—