Offset Agreement Compensation

As with any contract, there are penalties for non-compliance with compensation obligations. Many nations have rigid sanctions systems, including the use of bank guarantees, while other nations believe in new negotiations based on “better effort” clauses. The list of compensation incentives and penalties is no different from many other purchasing systems, with two notable exceptions: compensatory agreements are an exporter`s obligations to a reciprocal purchase obligation. Reciprocal purchase usually refers to the exported product. The defence industry defines offset as a practice of industrial compensation, which is necessary as a condition for the purchase, either in government-to-government or the commercial sale of defence or defence services, as provided for by the International Traffic in Arms Regulations (ITAR). Offsets often consist of component purchases, technology transfers, investments, training and research programs, and counter-purchases. International trade, including military equipment, advanced technology or quality contracts, often requires a compensation agreement. The inclusion of offsets in export trade agreements by an exporter is an integral part of the global competitive landscape. Exporters benefited from the purchase of tenders during the early implementation of compensation agreements. Exporters may receive additional credits to make a specific consideration, for example.

B of a technology transfer or joint venture. 2. In the case of direct distribution contracts, there are legitimate “confidentiality clauses” which, in several countries, may even take the value of official classification up to state secrecy. However, in the States of the European Union, the extension of the secret classifications of the State to indirect offsets – which have nothing to do with military or state security – is considered an abuse. For example, the classification of compensation that is not related to public safety or military will – such as indirect and civil compensation in the field of pharmaceutical research, eco-technology or export aid for non-military and security products – not only leads to great market distortions, but also potentially unpunished corruption, protected by unfounded secrecy. [23] Pre-shift activities are permitted and welcomed by several countries; they are like unsure offsets to obtain a “credit value.” These activities are direct marketing activities, such as lobbying, to promote certain defence purchases. These pre-compensation transactions must, as such, be registered with national authorities. Often, pre-offset activities receive certificates after a sale.

The defense companies put them into the marketing budget, but after the sale, these offsets go into their offset budgets and are counted to the execution of the offset. [24] This type of pre-shifting activity is a selling point to convince the purchasing state of the strength and reliability of the aerospace and defence company as a supplier and potential partner. The pre-offset arena is also the delicate and problematic domain of sales intermediaries, and it is precisely because the customer is a state that it must be monitored more carefully, as this area is vulnerable to abuse and corruption. [25] A compensation agreement is an agreement between a foreign supplier and a company that requires the supplier to purchase a certain quantity of goods from that country in exchange for a contract.

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