[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2652 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2652

 To increase monitoring of the use of offsets in international defense 
                                 trade.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 29, 1999

 Mr. Tierney introduced the following bill; which was referred to the 
Committee on International Relations, and in addition to the Committee 
 on Ways and Means, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To increase monitoring of the use of offsets in international defense 
                                 trade.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

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.
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