246
ensure that foreign participation in the production of
United States weapons systems does not harm the econ-
omy of the United States.
SEC. 1243. DEFINITIONS.
In this subtitle:
(1) APPROPRIATE
CONGRESSIONAL
COMMIT-
TEES.—The term ‘‘appropriate congressional com-
mittees’’ means—
(A) the Committee on Foreign Relations of
the Senate; and
(B) the Committee on International Rela-
tions of the House of Representatives.
(2) G–8.—The term ‘‘G–8’’ means the group
consisting of France, Germany, Japan, the United
Kingdom, the United States, Canada, Italy, and
Russia established to facilitate economic cooperation
among the eight major economic powers.
(3) OFFSET.—The term ‘‘offset’’ means the en-
tire range of industrial and commercial benefits pro-
vided to foreign governments as an inducement or
condition to purchase military goods or services, in-
cluding benefits such as coproduction, licensed pro-
duction, subcontracting, technology transfer, in-
country procurement, marketing and financial assist-
ance, and joint ventures.
247
(4) 
TRANSATLANTIC
ECONOMIC
PARTNER-
SHIP.—The term ‘‘Transatlantic Economic Partner-
ship’’ means the joint commitment made by the
United States and the European Union to reinforce
their close relationship through an initiative involv-
ing the intensification and extension of multilateral
and bilateral cooperation and common actions in the
areas of trade and investment.
(5) WASSENAAR
ARRANGEMENT.—The term
‘‘Wassenaar Arrangement’’ means the multilateral
export control regime in which the United States
participates that seeks to promote transparency and
responsibility with regard to transfers of conven-
tional armaments and sensitive dual-use items.
(6) WORLD TRADE ORGANIZATION.—The term
‘‘World Trade Organization’’ means the organization
established pursuant to the WTO Agreement.
(7) WTO 
AGREEMENT.—The term ‘‘WTO
Agreement’’ means the Agreement Establishing the
World Trade Organization entered into on April 15,
1994.
SEC. 1244. SENSE OF CONGRESS.
It is the sense of Congress that—
(1) the executive branch should pursue efforts
to address trade fairness by establishing reasonable,
248
business-friendly standards for the use of offsets in
international business transactions between the
United States and its trading partners and competi-
tors;
(2) the Secretary of Defense, the Secretary of
State, the Secretary of Commerce, and the United
States Trade Representative, or their designees,
should raise with other industrialized nations at
every suitable venue the need for transparency and
reasonable standards to govern the role of offsets in
international defense trade;
(3) the United States Government should enter
into discussions regarding the establishment of mul-
tilateral standards for the use of offsets in inter-
national defense trade through the appropriate mul-
tilateral fora, including such organizations as the
Transatlantic Economic Partnership, the Wassenaar
Arrangement, the G–8, and the World Trade Orga-
nization; and
(4) the United States Government, in entering
into the discussions described in paragraph (3),
should take into account the distortions produced by
the provision of other benefits and subsidies, such as
export financing, by various countries to support de-
fense trade.
249
SEC. 1245. REPORTING OF OFFSET AGREEMENTS.
(a) INITIAL REPORTING OF OFFSET AGREEMENTS.—
(1) GOVERNMENT-TO-GOVERNMENT
SALES.—
Section 36(b)(1) of the Arms Export Control Act
(22 U.S.C. 2776(b)(1)) is amended in subparagraph
(C) of the fifth sentence, by striking ‘‘and a descrip-
tion’’ and all that follows and inserting ‘‘and a de-
scription of any offset agreement with respect to
such sale;’’.
(2) COMMERCIAL SALES.—Section 36(c)(1) of
the 
Arms 
Export 
Control 
Act 
(22 
U.S.C.
2776(c)(1)) is amended in the second sentence, by
striking ‘‘(if known on the date of transmittal of
such certification)’’ and inserting ‘‘and a description
of any such offset agreement’’.
(b) CONFIDENTIALITY OF INFORMATION RELATING
TO OFFSET AGREEMENTS.—Section 36 of the Arms Ex-
port Control Act (22 U.S.C. 2776) is amended—
(1) by redesignating the second subsection (e)
(as added by section 155 of Public Law 104–164)
as subsection (f); and
(2) by adding at the end the following new sub-
section:
‘‘(g) Information relating to offset agreements pro-
vided pursuant to subparagraph (C) of the fifth sentence
of subsection (b)(1) and the second sentence of subsection
250
(c)(1) shall be treated as confidential information in ac-
cordance with section 12(c) of the Export Administration
Act of 1979 (50 U.S.C. App. 2411(c)).’’.
SEC. 1246. EXPANDED PROHIBITION ON INCENTIVE PAY-
MENTS.
(a) IN GENERAL.—Section 39A(a) of the Arms Ex-
port Control Act (22 U.S.C. 2779a(a)) is amended—
(1) by inserting ‘‘or licensed’’ after ‘‘sold’’; and
(2) by inserting ‘‘or export’’ after ‘‘sale’’.
(b) DEFINITION OF UNITED STATES PERSON.—Sec-
tion 39A(d)(3)(B)(ii) of the Arms Export Control Act (22
U.S.C. 2779a(d)(3)(B)(ii)) is amended by inserting ‘‘or by
an entity described in clause (i)’’ after ‘‘subparagraph
(A)’’.
SEC. 1247. ESTABLISHMENT OF REVIEW COMMISSION.
(a) IN GENERAL.—There is established a National
Commission on the Use of Offsets in Defense Trade (in
this section referred to as the ‘‘Commission’’) to address
all aspects of the use of offsets in international defense
trade.
(b) COMMISSION MEMBERSHIP.—Not later than 120
days after the date of enactment of this Act, the Presi-
dent, with the concurrence of the Majority and Minority
Leaders of the Senate and the Speaker and Minority
Leader of the House of Representatives, shall appoint 11
251
individuals to serve as members of the Commission. Com-
mission membership shall include—
(1) representatives from the private sector,
including—
(A) one each from—
(i) a labor organization,
(ii) a United States defense manufac-
turing company dependent on foreign
sales,
(iii) a United States company depend-
ent on foreign sales that is not a defense
manufacturer, and
(iv) a United States company that
specializes in international investment, and
(B) two members from academia with
widely recognized expertise in international eco-
nomics; and
(2) five members from the executive branch, in-
cluding a member from—
(A) the Office of Management and Budget,
(B) the Department of Commerce,
(C) the Department of Defense,
(D) the Department of State, and
(E) the Department of Labor.
252
The member designated from the Office of Management
and Budget shall serve as Chairperson of the Commission.
The President shall ensure that the Commission is non-
partisan and that the full range of perspectives on the sub-
ject of offsets in the defense industry is adequately rep-
resented.
(c) DUTIES.—The Commission shall be responsible
for reviewing and reporting on—
(1) the full range of current practices by foreign
governments in requiring offsets in purchasing
agreements and the extent and nature of offsets of-
fered by United States and foreign defense industry
contractors;
(2) the impact of the use of offsets on defense
subcontractors and nondefense industrial sectors af-
fected by indirect offsets; and
(3) the role of offsets, both direct and indirect,
on domestic industry stability, United States trade
competitiveness and national security.
(d) COMMISSION
REPORT.—Not later than 12
months after the Commission is established, the Commis-
sion shall submit a report to the appropriate congressional
committees. In addition to the items described under sub-
section (c), the report shall include—
(1) an analysis of—
253
(A) the collateral impact of offsets on in-
dustry sectors that may be different than those
of the contractor providing the offsets, includ-
ing estimates of contracts and jobs lost as well
as an assessment of damage to industrial sec-
tors;
(B) the role of offsets with respect to com-
petitiveness of the United States defense indus-
try in international trade and the potential
damage to the ability of United States contrac-
tors to compete if offsets were prohibited or
limited; and
(C) the impact on United States national
security, and upon United States nonprolifera-
tion objectives, of the use of coproduction, sub-
contracting, and technology transfer with for-
eign governments or companies that results
from fulfilling offset requirements, with par-
ticular emphasis on the question of dependency
upon foreign nations for the supply of critical
components or technology;
(2) proposals for unilateral, bilateral, or multi-
lateral measures aimed at reducing any detrimental
effects of offsets; and
254
(3) an identification of the appropriate execu-
tive branch agencies to be responsible for monitoring
the use of offsets in international defense trade.
(e) PERIOD OF APPOINTMENT; VACANCIES.—Mem-
bers shall be appointed for the life of the Commission. Any
vacancy in the Commission shall not affect its powers, but
shall be filled in the same manner as the original appoint-
ment.
(f) INITIAL MEETING.—Not later than 30 days after
the date on which all members of the Commission have
been appointed, the Commission shall hold its first meet-
ing.
(g) MEETINGS.—The Commission shall meet at the
call of the Chairman.
(h) COMMISSION PERSONNEL MATTERS.—
(1) COMPENSATION OF MEMBERS.—Each mem-
ber of the Commission who is not an officer or em-
ployee of the Federal Government shall be com-
pensated at a rate equal to the daily equivalent of
the annual rate of basic pay prescribed for level IV
of the Executive Schedule under section 5315 of title
5, United States Code, for each day (including travel
time) during which such member is engaged in the
performance of the duties of the Commission. All
members of the Commission who are officers or em-
255
ployees of the United States shall serve without com-
pensation in addition to that received for their serv-
ices as officers or employees of the United States.
(2) TRAVEL EXPENSES.—The members of the
Commission shall be allowed travel expenses, includ-
ing per diem in lieu of subsistence, at rates author-
ized for employees of agencies under subchapter I of
chapter 57 of title 5, United States Code, while
away from their homes or regular places of business
in the performance of services for the Commission.
(3) STAFF.—
(A) IN GENERAL.—The Chairman of the
Commission may, without regard to the civil
service laws and regulations, appoint and termi-
nate an executive director and such other addi-
tional personnel as may be necessary to enable
the Commission to perform its duties. The em-
ployment of an executive director shall be sub-
ject to confirmation by the Commission.
(B) COMPENSATION.—The Chairman of
the Commission may fix the compensation of
the executive director and other personnel with-
out regard to the provisions of chapter 51 and
subchapter III of chapter 53 of title 5, United
States Code, relating to classification of posi-
256
tions and General Schedule pay rates, except
that the rate of pay for the executive director
and other personnel may not exceed the rate
payable for level V of the Executive Schedule
under section 5316 of such title.
(4) DETAIL
OF
GOVERNMENT
EMPLOYEES.—
Any Federal Government employee may be detailed
to the Commission without reimbursement, and such
detail shall be without interruption or loss of civil
service status or privilege.
(5) PROCUREMENT OF TEMPORARY AND INTER-
MITTENT SERVICES.—The Chairman of the Commis-
sion may procure temporary and intermittent serv-
ices under section 3109(b) of title 5, United States
Code, at rates for individuals which do not exceed
the daily equivalent of the annual rate of basic pay
prescribed for level V of the Executive Schedule
under section 5316 of such title.
(i) TERMINATION.—The Commission shall terminate
30 days after the transmission of the report from the
President as mandated in section 1248(b).
SEC. 1248. MULTILATERAL STRATEGY TO ADDRESS OFF-
SETS.
(a) IN GENERAL.—The President shall initiate a re-
view to determine the feasibility of establishing, and the
257
most effective means of negotiating, a multilateral treaty
on standards for the use of offsets in international defense
trade, with a goal of limiting all offset transactions that
are considered injurious to the economy of the United
States.
(b) REPORT REQUIRED.—Not later than 90 days
after the date on which the Commission submits the report
required under section 1247(d), the President shall submit
to the appropriate congressional committees a report con-
taining the President’s determination pursuant to sub-
section (a), and, if the President determines a multilateral
treaty is feasible or desirable, a strategy for United States
negotiation of such a treaty. One year after the date the
report is submitted under the preceding sentence, and an-
nually thereafter for 5 years, the President shall submit
to the appropriate congressional committees a report de-
tailing the progress toward reaching such a treaty.
(c) REQUIRED INFORMATION.—The report required
by subsection (b) shall include—
(1) a description of the United States efforts to
pursue multilateral negotiations on standards for the
use of offsets in international defense trade;
(2) an evaluation of existing multilateral fora as
appropriate venues for establishing such negotia-
tions;