WHAT IS AN OFFSET AGREEMENT?

Offset agreements are commitments by an exporter to a reciprocal purchase obligation. The reciprocal purchase is generally related to the exported product. The defense industry defines an offset as an industrial compensation practice required as a condition of purchase, in either government-to-government or commercial sales of defense articles or defense services as specified by the International Traffic in Arms Regulations (ITAR). Offsets are often comprised of component purchases, technology transfers, investments, training and research programs, and counter purchases. International trade, especially involving military equipment, advanced technology or high value contracts, frequently requires an offset agreement. An exporter’s incorporation of offsets into export trade agreements is an integral aspect of the global competitive landscape. Exporters have benefited in procuring contract awards from the early performance of offset arrangements. Exporters may receive extra credits for conducting a specific offset transaction, such as a technology transfer, or a joint-venture.