PART 701—REPORTING OF OFFSETS AGREEMENTS IN SALES OF WEAPON SYSTEMS OR DEFENSE-RELATED ITEMS TO FOREIGN COUNTRIES OR FOREIGN FIRMS Authority: 50 U.S.C. 4568; E.O. 12919, 59 FR 29525, 3 CFR, 1994 Comp., p. 901; E.O. 13286, 68 FR 10619, 3 CFR, 2003 Comp., p. 166. Source: 59 FR 61796, Dec. 2, 1994, unless otherwise noted. § 701.1 Purpose. The Defense Production Act Amendments of 1992 require the Secretary of Commerce to promulgate regulations for U.S. firms entering into contracts for the sale of defense articles or defense services to foreign countries or foreign firms that are subject to offset agreements exceeding $5,000,000 in value to furnish information regarding such agreements. The Secretary of Commerce has designated the Bureau of Industry and Security as the organization responsible for implementing this provision. The information provided by U.S. firms will be aggregated and used to determine the impact of offset transactions on the defense preparedness, industrial competitiveness, employment, and trade of the United States. Summary reports are submitted annually to Congress pursuant to Section 309 of the Defense Production Act of 1950, as amended. [59 FR 61796, Dec. 2, 1994, as amended at 74 FR 68140, Dec. 23, 2009] § 701.2 Definitions. (a) Offsets. (1) Defense articles and/or defense services as defined by the Arms Export Control Act and the International Traffic in Arms Regulations; or (2) Items controlled under an Export Control Classification Number (ECCN) that has the numeral “6” as its third character in the Commerce Control List found in supplement no. 1 to part 774 of this chapter other than semi-submersible and submersible vessels specially designed for cargo transport and parts, components, accessories and attachments specially designed therefor controlled under ECCN 8A620.b; test, inspection and production equipment controlled in ECCN 8B620.b, software controlled in ECCN 8D620.b and technology controlled in ECCN 8E620.b. (b) Military Export Sales. (1) Defense articles and/or defense services as defined by the Arms Export Control Act and International Traffic in Arms Regulations; or (2) Items controlled under an Export Control Classification Number (ECCN) that has the numeral “6” as its third character in the Commerce Control List found in supplement no. 1 to part 774 of this chapter other than semi-submersible and submersible vessels specially designed for cargo transport and parts, components, accessories and attachments specially designed therefor controlled under ECCN 8A620.b; test, inspection and production equipment controlled in ECCN 8B620.b; software controlled in ECCN 8D620.b; and technology controlled in ECCN 8E620.b. (c) Prime Contractor. (d) United States. (e) Offset Agreement. (f) Offset Transaction. (1) Example 1. (2) Example 2. (3) Example 3. (4) Example 4. (5) Example 5. (6) Example 6. (7) Example 7. (8) Example 8. (g) Direct Offset. (h) Indirect Offset. [59 FR 61796, Dec. 2, 1994, as amended at 74 FR 68140, Dec. 23, 2009; 81 FR 10474, Mar. 1, 2016] § 701.3 Applicability and scope. (a) This part applies to U.S. firms entering contracts that are subject to an offset agreement exceeding $5,000,000 in value and that are for the sale to a foreign country or foreign firm of: (1) Defense articles and/or defense services as defined by the Arms Export Control Act and International Traffic in Arms Regulations; or (2) Items controlled under an Export Control Classification Number (ECCN) that has the numeral “6” as its third character in the Commerce Control List found in supplement no. 1 to part 774 of this chapter other than semi-submersible and submersible vessels specially designed for cargo transport and parts, components, accessories and attachments specially designed therefor controlled under ECCN 8A620.b; test, inspection and production equipment controlled in ECCN 8B620.b; software controlled in ECCN 8D620.b and technology controlled in ECCN 8E620.b. (b) This rule applies to all offset transactions completed in performance of existing offset commitments since January 1, 1993 for which offset credit of $250,000 or more has been claimed from the foreign representative, and new offset agreements entered into since that time. [59 FR 61796, Dec. 2, 1994, as amended at 81 FR 10474, Mar. 1, 2016] § 701.4 Procedures. (a) Reporting period. Federal Register (b) Reporting instructions. i.e. (2) Reports must be submitted in hardcopy to the Offset Program Manager, U.S. Department of Commerce, Bureau of Industry and Security, Room 3876, 14th Street and Constitution Avenue, NW., Washington, DC 20230, and as an e-mail attachment to [email protected]. (c) Reports must include the information described below. Any necessary comments or explanations relating to the information shall be footnoted and supplied on separate sheets attached to the reports. (1) Reporting on offset agreements. (i) Name of foreign country. (ii) Description of the military export sale. (iii) Military export sale classification. http://www.census.gov/epcd/www/naics.html (A) Example 1. (B) Example 2. (C) Example 3. (D) Example 4. (E) Example 5. (iv) Foreign party to offset agreement. (v) Military export sale value. (vi) Offset agreement value. (vii) Offset agreement term. (viii) Offset agreement performance measures. (ix) Offset agreement penalties for non-performance. (2) Reporting on offset transactions. (i) Name of foreign country. (ii) Description of the military export sale. (iii) Offset transaction category. (iv) Offset transaction classification. http://www.census.gov/epcd/www/naics.html (A) Example 1. (B) Example 2. (C) Example 3. (D) Example 4. (E) Example 5. (v) Offset transaction type. (vi) Name of offset performing entity. (vii) Name of offset receiving entity. (viii) Actual offset value. (ix) Offset credit value. (x) Offset transaction performance location. [74 FR 68141, Dec. 23, 2009] § 701.5 Confidentiality. (a) As provided by § 309(c) of the Defense Production Act of 1950, as amended, BIS shall not publicly disclose the information it receives pursuant to this part, unless the firm furnishing the information subsequently specifically authorizes public disclosure. (b) Public disclosure must be authorized in writing by an official of the firm competent to make such an authorization. (c) Nothing in this provision shall prevent the use of data aggregated from information provided pursuant to this part in the summary report to the Congress described in § 701.1. § 701.6 Violations, penalties, and remedies. (a) Willful violation of the Defense Production Act may result in punishment by fine or imprisonment, or both. The maximum penalty provided by the Defense Production Act is a $10,000 fine, or one year in prison, or both. (b) The Government may seek an injunction from a court of appropriate jurisdiction to prohibit the continuance of any violation of, or to enforce compliance with, the Defense Production Act and this regulation. [74 FR 68141, Dec. 23, 2009]