Is the United States Abandoning Oversight and Reporting on Defense Industry Offsets?

The Bureau of Industry and Security (BIS), within the U.S. Department of Commerce, did not publish its legally required annual Offsets in Defense Trade report to Congress in 2025. Unless another report appears by December 31, 2026 will become the second consecutive calendar year without publication – an unprecedented interruption in the reporting series.

Publication began in 1996. Between 1996 and 2024, there were five “skip years” in the numbered annual-report series – 2000, 2002, 2009, 2014, and 2017. Publication resumed the following year in each case: one report in 2001, two in 2003, and one each in 2010, 2015, and 2018. Two numbered annual reports were also published in three other calendar years: 2007, 2013, and 2016. Despite an irregular publication schedule, there have never been two back-to-back skip years.

Interesting developments are taking place in Congress.

Congress may be preparing to eliminate the requirement altogether.

In 2025, Congress began considering modernization of the Defense Production Act (DPA). By February 2026, H.R. 7688, the DPA Modernization Act of 2026, formally proposed eliminating Section 723 of the DPA – the statutory foundation for federal offset oversight and annual reporting.

As of publication of this article, the legislation has not yet become law. Nevertheless, the Congressional Research Service (CRS) specifically addresses the proposed elimination in The DPA Modernization Act of 2026: An Overview, in a small section under the heading “Eliminating Annual Report on Impact of Offsets.”

Meanwhile, Congress enacted a temporary DPA extension on September 2, 2026, moving the relevant sunset date from September 30 to December 11, 2026. The extension did not repeal the offset reporting requirement, leaving the Department of Commerce subject to the existing statutory framework.

We shall see what December brings. If BIS publishes another report, 2025 will remain a single skip year. Otherwise, two consecutive years without publication will raise a more substantial question about the future of federal offset oversight and reporting.

Why eliminate offset oversight and reporting?

I see four possible explanations.

(1) Crime & Punishment

U.S. defense exporters must report qualifying offset agreements and transactions to the Department of Commerce. Failure to comply can result in administrative enforcement and penalties.

Companies may resent reporting obligations that consume resources, introduce compliance risks, and provide little obvious direct benefit.

(2) Useless if Not Applied

What does the U.S. Government actually do with the information?

BIS collects and aggregates offset data, prepares reports, and examines implications for American industrial competitiveness, defense preparedness, employment, and trade. How often do these findings translate into substantive government action?

If agencies rarely apply the information to policy development, international negotiations, or support for American industry, the practical justification for maintaining the reporting mechanism becomes less compelling.

(3) An Old and Continuing Complaint

American defense industry stakeholders have long expressed concerns about foreign governments using publicly available U.S. offset information to understand industrial compensation arrangements associated with American defense exports.

Could those disclosures help foreign governments develop increasingly demanding offset requirements? Could eliminating public reporting deprive them of information useful in designing offset policies?

Both are possibilities. BIS reports contain aggregated information rather than every proprietary detail of individual agreements, and the extent to which foreign governments use the reports to formulate their offset requirements remains uncertain.

(4) The BIG Sweep

This possibility has the most consequential implications.

For decades, Congress has maintained a policy prohibiting U.S. Government agencies from encouraging, entering into, or committing American companies to offset arrangements in international defense trade unless obtaining approval for a presidential exception following a National Security Council recommendation.

What if members of Congress increasingly believe these restrictions, that were originally implemented by Congress, interfere with American defense exporters competing for strategically important foreign contracts? What if they want executive branch agencies to become more active in helping companies navigate offset requirements and industrial participation opportunities?

Removing those restrictions could enable greater U.S. Government support for American exporters.

There is an important legal distinction. Repealing Section 723’s reporting requirements does not automatically eliminate the separate congressional policy restricting government involvement in offsets. A genuine BIG Sweep would require addressing those restrictions as well.

Eliminating offset reporting may be part of a broader legislative reconsideration of federal offset policy.

How is the White House involved?

The relationship between the congressional initiative and the current presidential administration is unknown. Two possibilities deserve consideration.

(A) Coordination: Key members of Congress may be working directly or indirectly with the White House because both recognize benefits in removing legal obstacles to government support for American defense exporters.

(B) Independent but Aligned: Congress may be acting independently while the White House quietly agrees with the direction of the proposed changes. If congressional action would accomplish an administration objective, the White House would have little reason to assume the additional political exposure associated with publicly directing the effort.

What could this mean for American companies?

Consider a U.S. company whose products, services, technology, manufacturing capabilities, or investments could contribute to an offset project in a strategically important foreign market. If congressional restrictions on government involvement were relaxed, that company might gain access to forms of federal support currently constrained by offset policy.

Commercial advocacy, industrial cooperation, supply-chain development, critical minerals, advanced manufacturing, and defense-related technology partnerships could benefit from greater executive-branch participation.

This would not necessarily mean the U.S. Government negotiating offsets on behalf of American exporters. It could mean greater government willingness and authority to facilitate industrial cooperation associated with strategically important defense sales.

Such a change would depend on the specific legal restrictions amended or eliminated. The proposed reporting repeal alone does not establish that authority.

What about Congress and its constituents?

Members of Congress have obvious interests in supporting companies, workers, suppliers, and industrial facilities in their districts and states. Defense exports can sustain production lines, support employment, preserve manufacturing capabilities, and strengthen domestic supply chains.

These constituent interests increasingly intersect with national security priorities.

China’s industrial and technological ambitions, market mercantilism, territorial claims, and gray-zone activities present growing strategic challenges. Russia’s open military aggression and covert activities create additional demands on the United States and its allies.

Defense industrial cooperation with foreign partners increasingly contributes to military readiness, supply-chain resilience, industrial capacity, and strategic competition. Congressional policy restricting government involvement in offsets may therefore deserve reconsideration under circumstances considerably different from those in which the restrictions developed.

Are we witnessing the end of the post-Cold War offset policy era?

Federal offset oversight predates the end of the Cold War. The 1978 Duncan Memorandum limited Department of Defense involvement in offset arrangements. In 1984, Congress added offset reporting under Section 309 of the Defense Production Act. Section 825 of the FY1989 National Defense Authorization Act (Pub. L. 100-456, enacted in 1988) then directed the president to establish a comprehensive policy on defense offsets. President George H. W. Bush responded with the White House offsets policy of April 16, 1990. The Defense Production Act Amendments of 1992 (Pub. L. 102-558, Sections 123–124) subsequently established congressional offset policy, including a presidential exception following a National Security Council recommendation, and assigned the Secretary of Commerce responsibility for preparing the annual offset report as the president’s executive agent. The modern BIS reporting series began in 1996. The reporting framework reflects longstanding concerns about the economic costs, market distortions, technology transfers, and industrial consequences of foreign offset demands.

The strategic calculus may now be changing.

What if facilitating defense industrial cooperation with strategic partners becomes more important to U.S. policymakers than maintaining restrictions on government involvement in offsets? What if the priority shifts from limiting the adverse consequences of offsets toward making industrial participation arrangements more useful for American national security?

Under those circumstances, eliminating the BIS reporting requirement could be one element of a larger transition. Repealing an annual reporting requirement alone would not demonstrate on its own that the post-Cold War era has ended. However, eliminating reporting while also removing restrictions on government support for strategically important defense industrial cooperation would signal a substantial change in U.S. policy.

Such a change would be consistent with a return to great-power competition in which defense industrial cooperation, industrial capacity, and international arms trade become increasingly important instruments of national strategy.

Call it Cold War II.

The missing BIS reports may prove to be an administrative publication problem, or they may eventually be recognized as a more consequential policy transition.

Congress may be moving toward a significant change in U.S. defense offset policy, with implications extending beyond oversight and reporting. If the legislative changes also remove restrictions on U.S. Government support for defense exporters, American companies could find new opportunities for government assistance in meeting foreign offset obligations, particularly where those arrangements advance U.S. national security and industrial interests. [15873]

Dr. Brian Hobbs is the author of U.S. Defense Industry Offsets: The Presidential Exception for National Security, which examines the legal and policy restrictions on U.S. Government involvement in defense offsets and the presidential exception for national security.

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Selected sources

1. Hobbs, Brian. U.S. Defense Industry Offsets: The Presidential Exception for National Security. Routledge, 2026. https://www.routledge.com/US-Defense-Industry-Offsets-The-Presidential-Exception-for-National-Security/Hobbs/p/book/9781041160465

2. Bureau of Industry and Security. Offsets in Defense Trade. Official annual report archive, 1996–2024. https://www.bis.gov/about-bis/bis-leadership-and-offices/SIES/offsets-defense-trade

3. U.S. Congress. H.R. 7688, DPA Modernization Act of 2026, 119th Congress, Section 5. https://www.congress.gov/bill/119th-congress/house-bill/7688

4. Congressional Research Service. The DPA Modernization Act of 2026: An Overview, R49178, section “Eliminating Annual Report on Impact of Offsets.” https://www.congress.gov/crs-product/R49178

5. United States Code. 50 U.S.C. § 4568, Annual Report on Impact of Offsets, including statutory notes concerning congressional offset policy and presidential exceptions. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title50-section4568

6. Public Law 119-103, September 2, 2026, Section 2004, Extension of Defense Production Act of 1950. https://www.govinfo.gov/content/pkg/PLAW-119publ103/html/PLAW-119publ103.htm

7. U.S. International Trade Commission. Assessment of the Effects of Barter and Countertrade Transactions on U.S. Industries. USITC Publication 1766, 1985, p. 69 (1978 Duncan Memorandum). https://www.usitc.gov/publications/332/pub1766.pdf

8. Bureau of Industry and Security. Guidance for Reporting on Offset Agreements and Transactions, “Background” (1984 addition of DPA Section 309). https://media.bis.gov/about-bis/bis-leadership-and-offices/sies/guidance-reporting-offset-agreements-transactions

9. Public Law 100-456, September 29, 1988. National Defense Authorization Act, Fiscal Year 1989, Section 825, 102 Stat. 2019–2022. https://uscode.house.gov/statutes/pl/100/456.pdf

10. U.S. General Accounting Office. Military Exports: Implementation of Recent Offset Legislation. GAO/NSIAD-91-13, December 1990, p. 2 (April 16, 1990 presidential policy). See also BIS, 1990 Presidential Policy on Offsets. GAO report; BIS policy text.

11. Public Law 102-558, October 28, 1992. Defense Production Act Amendments of 1992, Sections 123–124, 106 Stat. 4206–4208. https://www.govinfo.gov/content/pkg/STATUTE-106/pdf/STATUTE-106-Pg4198.pdf

12. Bureau of Industry and Security. Offsets in Defense Trade, report archive, “First Report to Congress – May 1996.” https://www.bis.gov/about-bis/bis-leadership-and-offices/SIES/offsets-defense-trade