GLOBAL TRADE SOLUTIONS, INC

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GLOBAL TRADE SOLUTIONS, INC
OFFSET OVERVIEW
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OFFSET DEFINITIONS
DIRECT OFFSETS

• THE OEM OBLIGATOR AND ITS SUPPLIERS
  BUSINESS TRANSACTIONS WITH FOREIGN INDUSTRY
  RELATING DIRECTLY TO THEIR PRODUCTS

INDIRECT OFFSETS

• THE OEM OBLIGATOR AND ITS SUPPLIERS
  BUSINESS TRANSACTIONS (THIRD PARTY PRODUCTS,
  TECHNOLOGY TRANSFER, TRAINING, INVESTMENT)
  WITH FOREIGN INDUSTRY

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WHAT IS OFFSET?
A TRANSACTION WHEREIN A CONTRACTOR (OEM)
PROVIDES A PRODUCT TO A FOREIGN COUNTRY,
AND IN RETURN, ACCEPTS AN OBLIGATION TO
PROVIDE THE FOREIGN COUNTRY WITH INDUSTRIAL
COMPENSATION EQUAL TO
(1) AN AGREED-UPON PERCENTAGE OF THE
ORIGINAL CONTRACT PRICE (2) A SPECIFIED DOLLAR
AMOUNT
OFFSET IS ALSO CALLED

• INDUSTRIAL COOPERATION
• CO-PRODUCTION
• COUNTER PURCHASE/COUNTERTRADE
• COMPENSATORY TRANSACTION
• BUY BACK
• SWAP
• BARTER

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RESOLVING OFFSET OBLIGATIONS
MULTIPLE PATHS CAN BE PURSUED
-MANUFACTURING -INDIRECT PROJECTS -TRADING
CREDITS -PARTNERS ACTIVITIES -PARENT CORP
PURCHASES -NON-PRODUCT PURCHASES -TECHNOLOGY
TRANSFER -PRODUCT SUPPORT -SOFTWARE APPLICATIONS
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STRATEGY CAPTURE WHAT YOU ARE DOING

• LINK ALL PURCHASES, ACTIVITIES, AND INVESTMENTS
  TO LOCAL INDUSTRIAL COOPERATION PROGRAMS (ICP) OR
  OFFSET OBLIGATIONS.
• IF NOT, THEN OBLIGORCOMPANIES WILL EXPEND
  ADDITIONAL RESOURCES TO MEET OBLIGATIONS THAT
  COULD HAVE BEEN SATISFIED BY OTHER
  TRANSACTIONS.AND THIRD PARTIES LOSE POTENTIAL
  REVENUES BY NOT ASSISTING THE OEM OBLIGATOR.
• FBJ94-65

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GTS MISSION - OFFSET
ASSUMPTIONS

• THAT MANY OF COMPANIES HAVE THE POTENTIAL TO
  EARN OFFSET CREDITS BASED ON THEIR CURRENT
  ACTIVITIES AND FUTURE STRATEGIES
• THAT GTS CAN BRING VALUE TO BOTH THE OEM
  OBLIGATOR AND THE COMPANY DOING QUALIFIABLE
  INTERNATIONAL ACTIVITIES.

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OFFSET RECOGNITION PROCESS
TIMING IS EVERYTHING
FINAL APPROVALS
NEWCO
BUSINESS PLAN DEVELOPMENT
LOCAL PARTNER SUPPORT
EXCHANGE OF DATA
LOI OR MOU AGREEMENT
PRE APPROVAL REQUEST
SCREENING PROCESS
NON-DISCLOSURE AGREEMENT
TIME
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CLASSIC TRADING SCENARIO
THIRD PARTY ACTIVITIES ASSISTING OEM
COMPANY X NEEDS CREDITS, BUT CANNOT PERFORM THE
OBLIGATION
GTS COORDINATING WITH THE COUNTRYOFFSET
AUTHORITIES, AND BOTH COMPANIES
COMPANY Y HAS NO OBLIGATION, BUT IS DOING AN
ACTIVITY THAT WOULD EARN CREDIT
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HOW MULTIPLIERS WORK
COUNTRIES VALUE ACTIVITIES DIFFERENTLY

• EACH COUNTRY TARGETS DESIRED ACTIVITIES AND
  APPLIES INCENTIVES ( OR MULTIPLIERS ) TO
  ENCOURAGE THOSE ACTIVITIES
• EXAMPLES (EACH COUNTRY IS DIFFERENT)
• 1 to 1 FOR PROCUREMENTS
• 1 to 3 FOR TRAINING
• 1 to 5 LOW TECH XFERS
• 1 to 7 LOCAL INVESTMENTS
• 1 to 10 HIGH TECH XFERS

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WHO HAS OFFSET OBLIGATIONS ??
MOSTLY FORTUNE 100 COMPANIES

• US DEFENSE
• BOEING, GENERAL ELECTRIC, LOCKHEED MARTIN,
  UNITED TECHNOLOGIES, NORTHROP GRUMMAN, BAe
  SYSTEMS, HARRIS.
• TIER ONE AND TWO SUPPLIERS TO THE OEMs
• MANY EUROPEAN COMPANIES

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STRATEGIC BENEFITS
MORE THAN JUST OFFSET

• CREATES NEW CORE BUSINESS OPPORTUNITIES
• OPENS NEW GLOBAL CHANNELS
• BENCHMARK INTERNATIONAL COMPETITION
• SUPPORT CURRENT RELATIONSHIPS

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COUNTRIES DOING OFFSET
SOME OF THE MOST ACTIVE

• TURKEY
• UAE
• ITALY
• CZECH REPUBLIC
• ISRAEL
• TAIWAN
• S. KOREA
• ROMANIA
• S. AFRICA

• UK
• SPAIN
• NETHERLANDS
• GREECE
• NORWAY
• SWEDEN
• DENMARK
• BULGARIA
• POLAND

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OFFSET TRANSACTION
UNIQUE SOURCE OF REVENUES
BUSINESS ACTIVITY
CREDITS
OEMs
GTS
REVENUES
YOUR COMPANY
OBJECTIVE - TO LEVERAGE YOUR BUSINESS DEALS TO
DEVELOP NEW
RELATIONSHIPS OR PROFIT
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HOW TO LEVERAGE OFFSET
GAINING OFFSET CREDITS

• ASSUMING THAT THE PARTIES CAN DETERMINE
• A COURSE OF ACTION.
• A STATEMENT OF WORK IS DEVELOPED
• YOU PRICE OUT THE EFFORT
• CALCULATE THE CORRESPONDING AMOUNT
• OF OFFSET CREDITS TO FUND PROJECT
• PROPOSE TRANSACTION TO THE COUNTRY
• LINK OBLIGOR TO THIS OPPORTUNITY

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PROCUREMENT TRANSACTIONS
DO WHAT MAKES SENSE

• PROCUREMENT ACTIVITIES
• MARK ALL POs
• STRATEGIC RELATIONSHIPS
• SUPPLIERS
• CUSTOMERS
• MISC COMPETITIVE INITIATIVES

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COUNTRY CRITERIA FOR CREDIT

• INCREMENTALnew or increased work?
• CASUALTYis the link to the obligor clear?

BOTTOM LINE COUNTRIES BELIEVE THAT U.S.
COMPANIES WILL NOT PLAY HARDBALL FOR OFFSET
CREDIT RECOGNITION
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CAPTURING CURRENT EFFORTS
MARK PURCHASE ORDERS FOR OFFSET
----------- MAY USE ALL OR ANY PART OF
THE VALUE OF ITS PURCHASE ORDER(S) WITH SUPPLIER
FOR OFFSET PURPOSES INCLUDING BUT NOT LIMITED
TO, (1) FULFILLING ----------S OFFSET OR
INDUSTRIAL BENEFIT OBLIGATIONS, (2) TRANSFERRING
OFFSET CREDITS GRANTED AS A RESULT OF SUCH
PURCHASE ORDER(S) TO THIRD PARTIES, AND (3)
RETAINING CREDITS GRANTED FOR USE IN SATISFYING
FUTURE OFFSET OBLIGATIONS
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DOING INTERNATIONAL BUSINESS
INCREMENTAL PROCESS
MULTIPLE COUNTRY OPERATIONS
INVOLVEMENT
JOINT VENTURE
DISTRIBUTORSHIP
BILATERAL MANUFACTURING
MARKET SURVEY
EXPORTING
TIME
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SUPPORT AVAILABLE
GTS CAN HELP

• GTS INTRODUCTIONS TO OTHER COMPANIES THAT MAY
  OFFER NEW OPPORTUNITIES FOR YOU.
• - TECHNOLOGY
• - MARKET
• - COUNTRY SPECIFIC INTERESTS

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OPPORTUNITY SELECTION
CREDIT TRANSACTIONS

• GTS CAN ASSIGN OFFSET CREDITS TO OTHER COMPANIES
  IF YOUR ACTIVITIES CAN BE IDENTIFIED AS
  QUALIFYING FOR CREDIT.
• ANY ACTIVITY MUST MAKE GOOD BUSINESS
• NEVER DO ANYTHING JUST FOR OFFSET CREDITS

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SUMMARY LEVERAGING OFFSET

• OPPORTUNITIES ARE INCREASING
• NOTHING IS EASY
• NEED STRATEGY AND FOCUS
• MUST ASSESS BOTH RISKS AND REWARDS

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FOR MORE INFO
OR QUESTIONS
CONTACT FRED JOHNSON GLOBAL TRADE SOLUTIONS,
INC. office 615-541-2523 fax
615-469-4563 email
fbjj_at_earthlink.net on the web at
www.gtsworldwide.com
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Typical Offset Transaction
  Obligors
1
Procurements
4 2
2
1
Country Offset Authorities
PROCESS   1.    Client provides
documents   2.    Obligor submits for their
offset obligation.   3.    GTS negotiates
credits   4.    Fee paid to Client
3
  GTS
3
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Global Procurement Process
  LOCAL COMPANY SELECTION
COUNTRY SELECTION
  DEVELOP STRATEGY
CURRENT SUPPLIERS
  PRODUCT DELIVERIES
QUALIFY SUPPLIER  BID OPPORTUNITIES  PLACE
ORDERS
OFFSET CREDITS
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OFFSET RELATIONSHIPS
Foreign Company
Local Company
Obligor
Offset Authorities
Third Parties