The International Chamber of Commerce (ICC), in collaboration with the European Club for Countertrade and Offset (ECCO), has released guidance to help firms navigate and negotiate international offset contracts – a growing phenomenon in global trade across a variety of strategic sectors.
The ICC-ECCO Guide to International Offset Contracts provides practical guidance and legal context for firms engaging in the use of offset contracts within public procurement procedures around the world. The new tool provides an overview of the functional and legal technicalities of offsets, including their legal status within global agreements and international public law.
Emily O’Connor, ICC Director of Trade and Investment said “The guide is a practical tool for both businesses and governments to understand and navigate the risks associated with international offset contracts, which often involve multiple jurisdictions and differing legal landscapes.”
Currently used in more than 130 countries, offset contracts require that a form of economic activity is transferred from the seller to the government of the purchasing country as a condition for the sale of goods and/or services on government procurement markets. Offsets are typically applied to public procurement contracts of high-value, high-technology sectors, including the defence, energy, aeronautics and transportation sectors.
When governments use foreign suppliers for public purchasing, offsets are perceived to reduce the “cost” of procuring government project services from abroad. International offset and countertrade transactions are important mechanisms to spur capacity-building, technology transfer and growth in developing countries’ infrastructures and economies. The three main types of offsets include direct, semi-direct and indirect offsets.
Chantal Dagnaud, CEO, Institutions and Strategies, and Chairman of ECCO said: “For developing countries, international offset contracts and countertrade transactions have proven useful tools to spur economic growth and enable a transfer of know-how that helps countries further establish strategic industries.”
Drawing on the practical experience of the joint ICC-ECCO working group, the guide is intended to serve as a useful resource in the complex field of offset contracts. Companies interested in conducting an offset contract can reference the Guide’s analysis of global trends and review the comprehensive list of countries where offsets are applicable. Not only does the guide provide instruction on specific steps for concluding offset contracts, but it also outlines key stakeholders and tips for a quick approval and internal management of offset obligations.
The ICC-ECCO Guide to International Offset Contracts is a concrete example of ICC’s commitment to collaboration and partnership in providing concrete business solutions. The practical instructions and tools set out in the guide can assist businesses around in the world in successfully engaging governments in public procurement procedures and offset mechanisms.