Offset or Industrial Participation is a reciprocal trade agreement between a buying country and an exporting company of industrial goods and services. In most cases, Offset is a mandatory condition in the procurement of goods and services by government owned entities such as, but not limited to a Ministry of Defense. In addition, Offset or Industrial Participation is a key customer requirement in business transactions with state-owned military customers of Rheinmetall. Rheinmetall takes a pro-active approach towards Offset or Industrial Participation requirements with the intention to win customers and satisfy customers against minimal cost and risk for Rheinmetall.
Most offset obligations are satisfied by Rheinmetall through local manufacturing and local procurement activities. Due to our in-house capacities and capabilities at Rheinmetall´s globally active Corporate Offset Office, Rheinmetall makes limited use of offset brokers and offset agents. In 2019 e.g., Rheinmetall defense contracted no offset brokers or agents at all.
Offset agreements are exclusively made with government owned agencies. Before contracting, these undergo an in-house Compliance screening. Furthermore, the Compliance Organization continuously supports the operating divisions with auditing and consulting measures in meeting the offset and industrial participation requirements of government customers. These can play a key role in foreign defence and security projects. In this way, compliance plays a key role in preventing corruption and other fraud offences in this potentially critical business area. Compliance procedures are also established through the internal Corporate Offset Policy that is required to be implemented in all business units.
The implementation of and compliance with this policy as well as the overall monitoring of Rheinmetall´s offset activities is ensured by the Corporate Offset Office which also assesses the business rationale for each offset activity based on a clear definition of services offered and a comprehensive and transparent calculation for remuneration.
Indirect offset activities within Rheinmetall relate primarily to purchase agreements with subcontractors of Rheinmetall that have no causality with the product that caused the offset obligation. Therefore, the beneficiaries of indirect offset activities are subcontractors, suppliers, research and development institutes and the like only. In most cases the beneficiaries of indirect offset activities are published in agreements closed with foreign government owned entities.