Offset Program

The Government of the State of Kuwait purchases large amounts of goods and services from foreign contractors. This results in economic benefits accruing in foreign countries where the goods and services are manufactured, mainly through job creation and capital accumulation. The Kuwait Counter-Trade Offset Program seeks to achieve equitable distribution of these benefits between Kuwait and the foreign countries. Therefore on July 26, 1992, the Council of Ministers of the State of Kuwait established the Counter-Trade offset program (Offset Program) through the Decision No. 694 which requires all foreign contractors who meet certain criteria to participate in the offset program.

The guidelines issued by the Ministry of Finance for the Counter-Trade offset program define in Article 4 the terms "Offset obligation" and "foreign contractor." Offset obligation is incurred when the single cumulative value of supply contract(s) awarded to a foreign contractor is equal to or greater than KD. 1 million. The offset obligation is effective as of the signature date of the supply contract and is equal to 30% of the monetary value of the said supply contract. 50% of the offset obligation must be completed in the first four years and 100% in eight years. "Foreign contractors" are defined as any business entity having all of the following characteristics, namely:

1. It does not exist or operate under Kuwaiti Laws as per Ministry of Commerce and Industry, Department of Corporations.

2. It has been awarded either as prime contractor or sub-contractor, a supply contract by the government or any of its public sector institutions.

3. The goods and/or services to be provided under the supply contract are defined as foreign produced under Kuwaiti Laws.

Kuwaiti business entities acting on behalf of foreign businesses which are formed for the purpose of circumventing the offset program will be deemed to be foreign contractors.