Direct offset

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Russian: Прямой оффсет

Usually, direct offset is defined as activities that are directly related to the defense products, aircrafts, other complex technical items, subjects of industrial/social infrastructure, or services sold to a foreign purchaser and that are effectuated to compensate partly technical and financial investment losses of the said purchaser.[1]

List of Places for Direct Offsets[2] [3] [4]

Place of Direct Offset Definitions and Comments
  • Distributed-production arrangement in which different firms (often located in different countries) produce different parts of the same end product.
  • Engines, fuselage, tail-section, and wings of the Airbus, for example, are coproduced in different countries of the European Union; titanium elements of fuselage and landing gears are coproduced in Russia.
  • Coproduction may involve transfer of technology as well as of key personnel, especially in the early stages of the agreement.
  • Agreement whereby an owner of a technological intellectual property (the licensor) allows another party (the licensee) to use, to modify, and/or to resell that property in exchange for a compensation (consideration).
  • The compensation may take the form of a
    • (1) lump sum royalty,
    • (2) royalty based on volume of production (called running royalty), or
    • (3) right to use licensee's technology (called cross licensing).
  • Through licensing of proprietary technology, small firms can earn substantial income from markets that they could not penetrate on their own, and large firms can have foreign affiliates without high financial and legal risks.
  • International subcontracting occurs when one firm, the prime manufacturer or contractor (“principal”), contracts with another firm, the subcontractor or “supplier”, for a given production cycle, one or more aspects of production design, processing or manufacture, or construction or maintenance work.
  • International subcontracting takes the form of an agreement, purchase order, or any such legal instrument issued under a prime contract (by the prime contractor to a third party the subcontractor), calling for the performance of a defined piece of work or production and/or delivery of specified goods or services.
  • Subcontracts contain special terms and conditions that are unique to the prime contract, and flow-down provisions [5]that proceed from it.
  • The output is generally incorporated into the principal’s final products.
  • Subcontracting can also involve services, particularly studies, accounting, engineering, R&D, advertising, computer services or legal advice.
  • A contractual agreement joining together two or more parties while one of them, as minimum, is a foreign party related to another(s), for the purpose of executing a particular business undertaking.
  • All parties agree to share in the profits and losses of the enterprise.


  1. Цель, сущность, виды, содержание оффсета и его характерные черты -
  2. OECD, 2005, Measuring Globalisation: OECD Handbook on Economic Globalisation Indicators, OECD, Paris - Glossary. -
  3. BusinessDictionary -
  4. InvestorWords -
  5. A flow down clause is a contract provision by which the parties incorporate the terms of the general contract between the owner and the general contractor into the lower tier agreement. It may also be referred to as a pass-through or conduit clause. They are most common in construction contracts. Such provisions state that the subcontractor is bound to the contractor in the same manner as the contractor is bound to the owner in the prime contract. Flow-down provisions help to ensure that the subcontractor's obligations to the contractor mirror the contractor's obligations to the owner. -
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