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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Defense Offsets Disclosure Act of
1999''.

SEC. 2. FINDINGS AND DECLARATION OF POLICY.

(a) Findings.--Congress makes the following findings:
(1) A fair business environment is necessary to advance
international trade, economic stability, and development
worldwide, is beneficial for American workers and businesses,
and is in the United States national interest.
(2) In some cases, mandated offset requirements can cause
economic distortions in international defense trade and
undermine fairness and competitiveness, and may cause
particular harm to small- and medium-sized businesses.
(3) The use of offsets may lead to increasing dependence on
foreign suppliers for the production of United States weapons
systems.
(4) The offset demands required by some purchasing
countries, including some close allies of the United States,
equal or exceed the value of the base contract they are
intended to offset, mitigating much of the potential economic
benefit of the exports.
(5) Offset demands often unduly distort the prices of
defense contracts.
(6) In some cases, United States contractors are required
to provide indirect offsets which can negatively impact
nondefense industrial sectors.
(7) Unilateral efforts by the United States to prohibit
offsets may be impractical in the current era of globalization
and would severely hinder the competitiveness of the United
States defense industry in the global market.
(8) The development of global standards to manage and
restrict demands for offsets would enhance United States
efforts to mitigate the negative impact of offsets.
(b) Declaration of Policy.--It is the policy of the United States
to develop a system for monitoring the use of offsets in international
defense trade, to promote fairness in such trade, and to ensure that
foreign participation in the production of United States weapons
systems does not harm the economy of the United States.

SEC. 3. SENSE OF CONGRESS.

It is the sense of Congress that--
(1) the executive branch should pursue efforts to address
trade fairness by establishing reasonable, business-friendly
standards for the use of offsets in international business
transactions between the United States and its trading partners
and competitors;
(2) 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; and
(3) the United States Government should enter into
discussions regarding the establishment of multilateral
standards for the use of offsets in international defense trade
through the appropriate multilateral fora, including such
organizations as the Transatlantic Economic Partnership, the
Wassenaar Arrangement, the G-8, and the World Trade
Organization.

SEC. 4. DEFINITIONS.

In this title:
(1) Appropriate congressional committees.--The term
''appropriate congressional committees'' means--
(A) the Committee on Foreign Relations of the
Senate; and
(B) the Committee on International Relations 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 entire range of
industrial and commercial benefits provided to foreign
governments as an inducement or condition to purchase military
goods or services, including benefits such as coproduction,
licensed production, subcontracting, technology transfer, in-
country procurement, marketing and financial assistance, and
joint ventures.
(4) Transatlantic economic partnership.--The term
''Transatlantic Economic Partnership'' means the joint
commitment made by the United States and the European Union to
reinforce their close relationship through an initiative
involving 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
conventional 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. 5. 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 the fourth sentence, by striking ''(if known on the date of
transmittal of such certification)'' and inserting ''and a
description of any offset agreement, including the dollar
amount of the agreement''.
(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
offset agreement, including the dollar amount of the
agreement''.
(b) Report on Offset Obligations.--Not later than January 1, 2000,
and annually thereafter, the President shall submit a report to
Congress identifying all contracts or agreements entered into in order
to fulfill any offset obligations made in conjunction with transactions
reported in section 36 (b) or (c) of the Arms Export Control Act. The
report shall contain all the information required in section 36 (b) and
(c) of the Arms Export Control Act, as well as any additional
information that may not have been available at the time of the initial
notification.

SEC. 6. EXPANDED PROHIBITION ON INCENTIVE PAYMENTS.

(a) In General.--Section 39A(a) of the Arms Export 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.--Section 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. 7. 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 60 days after the date
of enactment of this Act, the President, 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 10
people to serve as members of the Commission. Commission membership
shall include--
(1) representatives from the private sector, including--
(A) one each from--
(i) a labor organization,
(ii) a United States defense manufacturing
company dependent on foreign sales,
(iii) a United States company dependent 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 economics; and
(2) four members from the executive branch, including a
member from--
(A) the Office of Management and Budget,
(B) the Department of Commerce,
(C) the Department of Defense, and
(D) the Department of State.
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 nonpartisan and that the full range of perspectives
on the subject of offsets in the defense industry is adequately
represented.
(c) Duties.--The Commission shall be responsible for reviewing and
reporting on--
(1) the full range of current practices by foreign
governments requiring offsets in purchasing agreements and the
extent and nature of offsets offered by United States and
foreign defense industry contractors;
(2) the impact of the use of offsets on defense
subcontractors and nondefense industrial sectors affected 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 Commission shall submit a report to the
appropriate congressional committees. In addition to the items
described under subsection (c), the report shall include--
(1) an analysis of--
(A) the collateral impact of offsets on industry
sectors that may be different than those of the
contractor providing the offsets, including estimates
of contracts and jobs lost as well as an assessment of
damage to industrial sectors;
(B) the role of offsets with respect to
competitiveness of the United States defense industry
in international trade and the potential damage to the
ability of United States contractors to compete if
offsets were prohibited or limited; and
(C) the impact on United States national security,
and upon United States nonproliferation objectives, of
the use of coproduction, subcontracting, and technology
transfer with foreign governments or companies that
result from fulfilling offset requirements with
particular emphasis on the question of dependency
upon foreign nations for the supply of critical components or
technology;
(2) proposals for unilateral, bilateral, or multilateral
measures aimed at reducing any detrimental effects of offsets;
and
(3) an identification of the appropriate executive branch
agencies to be responsible for monitoring the use of offsets in
international defense trade.
(e) Period of Appointment; Vacancies.--Members 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 appointment.
(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 meeting.
(g) Meetings.--The Commission shall meet at the call of the
Chairman.
(h) Commission Personnel Matters.--
(1) Compensation of members.--Each member of the Commission
who is not an officer or employee of the Federal Government
shall be compensated 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
employees of the United States shall serve without compensation
in addition to that received for their services as officers or
employees of the United States.
(2) Travel expenses.--The members of the Commission shall
be allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized 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 terminate an executive
director and such other additional personnel as may be
necessary to enable the Commission to perform its
duties. The employment of an executive director shall
be subject to confirmation by the Commission.
(B) Compensation.--The Chairman of the Commission
may fix the compensation of the executive director and
other personnel without regard to the provisions of
chapter 51 and subchapter III of chapter 53 of title 5,
United States Code, relating to classification of
positions 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 intermittent services.--
The Chairman of the Commission may procure temporary and
intermittent services 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
8(b).

SEC. 8. MULTILATERAL STRATEGY TO ADDRESS OFFSETS.

(a) In General.--The President shall initiate a review to determine
the feasibility of establishing, and the 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 7(d),
the President shall submit to the appropriate congressional committees
a report containing the President's determination pursuant to
subsection (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 annually thereafter for 5 years, the
President shall submit to the appropriate congressional committees a
report detailing 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 negotiations;
(3) a description on a country-by-country basis of any
United States efforts to engage in negotiations to establish
bilateral treaties or agreements with respect to the use of
offsets in international defense trade; and
(4) an evaluation on a country-by-country basis of any
foreign government efforts to address the use of offsets in
international defense trade.
(d) Comptroller General Review.--The Comptroller General of the
United States shall monitor and periodically report to Congress on the
progress in reaching a multilateral treaty.
A:
Defense Offsets Disclosure Act of 1999 - Declares that U.S. policy is to develop a workable system to monitor the use of offsets in the defense industry (the entire range of industrial and commercial benefits provided to foreign governments as an inducement or condition to purchase military goods or services), to promote fairness in international trade, and to ensure an appropriate level of foreign participation in production of U.S. weapons systems.
Expresses the sense of Congress that: (1) the executive branch should pursue efforts to address trade fairness by establishing transparent standards for the use of offsets in international business transactions among U.S. trading partners and competitors; (2) the Secretary of State, the Secretary of Commerce, and the United States Trade Representative should raise the need for transparency and other standards bilaterally with other industrialized nations at every venue; and (3) the U.S. Government should enter into discussions for the establishment of multilateral standards for the control of the use of offsets in international defense trade through the appropriate multilateral fora, including the Transatlantic Economic Partnership, the Wassenaar Arrangement, the G-8, and the World Trade Organization.
Amends the Arms Export Control Act to require certain numbered certifications to Congress with respect to any letter of offer to sell (Government-to-Government sale), or license for export (commercial sale), major defense equipment in the amount of $14 million or more, or defense articles or services in the amount of $50 million or more. Requires each numbered certification to include a description of any offset agreement, including its dollar amount. Directs the President to report to Congress on all measures taken to fulfill offset obligations under such agreements.
Extends to exports of defense articles or services the current prohibition against incentive payments by U.S. suppliers to satisfy any offset agreement with a foreign country to which such articles or services are sold.
Directs the President to initiate a feasibility review, then report to the appropriate congressional committees on a strategy for U.S. negotiations of multilateral agreements with designated foreign countries that provide standards for the use of offsets with respect to the sale or licensing of defense articles or services, including a timetable for entering into such multilateral agreements, and any progress toward reaching an agreement.
Establishes a National Commission on the Use of Offsets in Defense Trade to address all aspects of the use of offsets in international defense trade. Requires the Commission to report to the appropriate congressional committees with respect to such offset agreements.