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The Management of Security Assistance The Defense Institute of Security Assistance Management 27th Edition THE MANAGEMENT OF SECURITY ASSISTANCE DEFENSE INSTITUTE OF SECURITY ASSISTANCE MANAGEMENT 2475 K STREET BUILDING 52 WRIGHT-PATTERSON AFB, OHIO THE TWENTY-SEVENTH EDITION OCTOBER 2007 International Standard Serial No. 1532-0359 Electronic version located on the DISAM web at: http://www.disam.dsca.mil iii DEFENSE INSTITUTE OF SECURITY ASSISTANCE MANAGEMENT WRIGHT-PATTERSON AFB, OHIO COMMANDANT DR. RONALD H. REYNOLDS EDITOR MR. GREGORY W. SUTTON ASSISTANT EDITOR MR. KENNETH W. MARTIN EDITORIAL ASSISTANT MS. PATRICIA J. VOCKE GRAPHICS MR. DANNY L. PALMER CONTRIBUTING AUTHORS LCDR DAVID W. ADAMS MR. DONALD J. MCCORMICK MR. FRANK J. CAMPANELL MR. AARON M. PRINCE MR. THOMAS M. DOP MR. JOHN M. SMILEK MR. JEFFERY S. GRAFTON MR. FORREST E. SMITH MS. JOANNE B. HAWKINS MR. J. GARY TAPHORN MR. MICHAEL L. LAYTON MR. ROBERT VAN HORN MR. KENNETH W. MARTIN iv v PREFACE This twenty-seventh edition of The Management of Security Assistance, like its pre- decessors, incorporates the most current information available to the Defense Institute of Security Assistance Management (DISAM) regarding U.S. security cooperation programs. The effort to maintain currency requires substantial research and analytical study, and is an ongoing effort shared by the DISAM faculty contributors to this volume. For the most recent changes, readers are encouraged to view the more continuously updated "green textbook" provided online at http://www.disam.dsca.mil. This edition incorporates the latest offi cial guidance concerning new security cooperation policies and procedural requirements, and has been updated to include the most recently enacted legislation governing security cooperation activities. While many security assistance and security cooperation related laws were enacted during 2006, the laws of specifi c interest refl ected in this edition includes the fi scal year 2006 appropriations act, Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, P.L. 109-102, 14 November 2005; the Revised Continuing Appropriations Resolution, 2007, P.L. 110-5, 15 February 2007; and the John Warner National Defense Authorization Act for Fiscal Year 2007, P.L. 109-364, 17 October 2006. Also, the text was edited to refl ect Department of Defense 5108.38-M, Security Assistance Management Manual (SAMM), 3 October 2003, and any interim changes through August 2007, plus a variety of changes in the structure of the principal defense organizations which engage in security cooperation programs. The latest SAMM can be viewed online at http://www.dsca. mil/SAMM. A note of caution is in order regarding the use of this text in other than an academic environment. If such use is contemplated, the user is urged to refer to the most current offi cial source document, directive, manual, or regulation before taking any specifi c management actions. Also, it should be understood that the views or opinions expressed or implied herein are those of the authors or editors only and are not to be construed as representing offi cial policies of the U.S. government or any of the departments thereof. Readers should also recognize that this text was produced specifi cally for use in DISAM educational programs. All rights are reserved. The quotation or other use of material in this text by any agency or department of the U.S. government is encouraged; however, we request that any such usage be afforded the courtesy of an appropriate source credit line. Copyrighted material may not be reproduced, quoted, or extracted without the specifi c permission of the originator. Finally, this text represents the combined output of a thoroughly integrated author/editor effort. Nevertheless, while this effort was jointly executed, the ultimate responsibility for the textbook rests with the editorial staff. We regret any errors in form or substance that may be contained herein, and we ask that any such errors detected by the reader be reported to DISAM/ DR, Building 52, 2475 K Street, Wright-Patterson AFB, Ohio 45433-7641. The continued support and contributions of members of the security cooperation community will help assure that this textbook remains a principal instructional and academic reference source for security cooperation managers throughout the world. Editorial Staff October 2007 vi vii TABLE OF CONTENTS CHAPTER 1 INTRODUCTION TO SECURITY ASSISTANCE Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-1 Security Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-1 Foreign Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-2 Foreign Military Construction Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-2 Foreign Military Financing Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-2 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-3 Military Assistance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-3 International Military Education and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-3 Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-4 Economic Support Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-5 Peacekeeping Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-5 International Narcotics Control and Law Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-6 Nonproliferation, Anti-Terrorism, Demining, and Related Programs . . . . . . . . . . . . . . . . .1-6 Direct Commercial Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-6 Other Security Assistance Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-7 Security Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-7 FAA and AECA - Authorized Programs Administered by DoD . . . . . . . . . . . . . . . . . . . . .1-7 Combined Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-8 Combined Exercises . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-10 Combined Intelligence Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-11 International Armaments Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-11 International Training and Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-12 Senior War College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-13 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-19 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-19 CHAPTER 2 SECURITY ASSISTANCE LEGISLATION AND POLICY Introduction. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-1 Congressional Authorizations and Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-1 viii Authorization Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-1 Appropriations Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-3 Federal Statutes, Regulations, and Federal Register on the Internet . . . . . . . . . . . . . . . . . . . . . . . .2-3 Legislated Management of Security Assistance Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-6 Funding Obligations and Reprogramming. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-6 Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-7 Non-Refunded Security Assistance Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-7 Basic Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-7 Reaffi rmation of United States Security Assistance Policy . . . . . . . . . . . . . . . . . . . . . . . . .2-7 Ultimate Goal . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-7 Purpose of Arms Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-8 Arms Sales and United States Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-8 Effect on United States Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Conventional Arms Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Security Assistance Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Civilian Contract Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Prohibition on Performance of Combatant Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Limitation on Assistance to Security Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-9 Advisory and Training Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-10 Prohibitions Regarding Police Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-10 Personnel End-Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-10 Eligibility for Grant Aid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-10 Eligibility for Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-10 Presidential Determination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-11 Other Restrictions , , , , , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-12 Additional Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-13 Security Assistance Organizations Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-13 Security Assistance Organization Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-14 Security Assistance Organization Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-14 Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-15 Sales from Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-15 Procurement Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-15 Credit Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-16 Foreign Military Construction Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-16 Sales to United States Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-16 ix Direct Commercial Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-16 Drawdown Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-17 Special Emergency Drawdown Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-17 Peacekeeping Emergencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-17 War Crimes Tribunals Drawdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-17 Drawdown Policy and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-17 Special Presidential Waiver Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-18 Congressional Review of Proposed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-18 Foreign Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-18 Direct Commercial Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-19 Third Country Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-20 Leases of Defense Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-20 Congressional Joint Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-21 Other Reports to Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-22 Quarterly Reports to Congress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-22 Annual Reports to Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-22 Additional Provisions Relating to NATO, NATO Members, Japan, Australia, New Zealand, and Other Eligible Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-23 Reduction or Waiver of Nonrecurring Cost Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-23 Cooperative Furnishing of Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-24 Major Non-North Atlantic Treaty Organization Allies . . . . . . . . . . . . . . . . . . . . . . . . . . .2-24 Incremental Tuition Pricing for International Military Education and Training - Designated for Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-24 Contract Administration Services and Catalog Data and Services . . . . . . . . . . . . . . . . . .2-25 Section 27, Arms Export Control Act, Cooperative Projects. . . . . . . . . . . . . . . . . . . . . . .2-25 Special Defense Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-25 Excess Defense Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-26 Sales of Excess Defense Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-27 Grant Transfer of Excess Defense Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-27 War Reserves Stockpiles for Allies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-29 Country-Specifi c Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-29 Weapons-Specifi c Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-30 Depleted Uranium Anti-Tank Shells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-20 STINGER Missiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-30 Missile Technology Control Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-30 Chemical and Biological Weapons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-31 x Anti-Personnel Landmines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-31 Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-31 References. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2-32 CHAPTER 3 U.S. GOVERNMENT ORGANIZATIONS FOR SECURITY ASSISTANCE Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-1 Legislative Branch: The Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-1 Role of Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-1 Committee Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-2 Special Congressional Offi ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-2 Judicial Branch: The Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-2 Executive Branch: The President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-2 Offi ce of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-3 Department of State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-4 United States Agency for International Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-6 United States Diplomatic Missions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-7 Department of Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-7 Department of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-7 Department of Homeland Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-7 Department of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-8 Department of Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-8 Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-8 Offi ce of the Secretary of Defense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-9 Joint Chiefs of Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-10 Combatant Commands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-11 Security Assistance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-12 Department of Defense Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-12 Military Departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-15 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-20 References. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-20 xi CHAPTER 4 SECURITY ASSISTANCE ORGANIZATIONS OVERSEAS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-1 Defi nition and Purpose of the Security Assistance Organization . . . . . . . . . . . . . . . . . . . . . . . . . .4-1 Security Assistance and Security Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-3 References for Security Assistance Offi ce Functions and Responsibilities. . . . . . . . . . . . . . . . . . .4-4 Legislative Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-4 Department of Defense Directive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-4 Defense Security Cooperation Agency Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-5 Administrative and Logistical Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-6 Routine Security Assistance Organization Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-7 Foreign Military Sales Case Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-7 Training Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-8 End-Use Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-8 Rationalization, Standardization, and Interoperability . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-9 Security Cooperation Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-9 Security Assistance Organization Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-9 Mission Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-10 Theater Security Cooperation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-10 Combined Education and Training Program Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-10 FMFP and IMET Budget Formulation and Submission Web Tool . . . . . . . . . . . . . . . . . .4-11 Security Assistance Organization Personnel Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-11 Interaction and Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-12 Chief of Mission Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-12 Country Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-13 The Ambassador as Team Chief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-13 Role of the Deputy Chief of Mission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-13 Other Mission Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-14 Relationships Between Security Assistance Organizations and Area Combatant Commands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-15 Host Country Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-15 Security Assistance Organization Limitations and Security Assistance Teams. . . . . . . . .4-16 Security Assistance Organization Oversight and Support of Security Assistance Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-17 The Security Assistance Organization Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-17 xii Rules of Engagement with U.S. Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-18 Promotion of Sale of U.S. Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-19 Security Assistance Organization Support to U.S. Defense Industry . . . . . . . . . . . . . . . .4-19 Role of the Department of Commerce and the Commercial Attach . . . . . . . . . . . . . . . .4-19 Miscellaneous Functions. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-20 U.S. Defense Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-20 Anti-Terrorism/Force Protection Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-21 Administrative Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-21 Department of Defense Foreign Clearance Responsibilities . . . . . . . . . . . . . . . . . . . . . . .4-22 Jurisdiction and Legal Status Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-22 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-23 Vienna Convention on Diplomatic Relations of 1961 . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-23 Status of Forces Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-23 Criminal Matters under Status of Forces Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-24 Notes on Privileges and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-25 Department of Defense Security Assistance Personnel Visiting Foreign Countries . . . . .4-25 Status of Forces Agreements and Article 98 Agreements . . . . . . . . . . . . . . . . . . . . . . . . .4-26 Ethics and Standards of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-26 Confl icts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-26 Gifts and Gratuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-27 Exceptions Involving Gifts and Gratuities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-27 Gifts from Foreign Governments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-28 Disposition of Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-28 Security Assistance Organization Travel and Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-29 Air Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-29 Vehicle Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-29 Domicile to Duty Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-30 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-30 References . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-30 Attachment 4-1 Authorities and Responsibilities of Chiefs of Mission . . . . . . . . . . . . . . . . . . . .4-32 Attachment 4-2 Security Assistance Organization-Industry Relations . . . . . . . . . . . . . . . . . . . . .4-34 Attachment 4-3 Checklist for Meeting Representatives of Defense Industry . . . . . . . . . . . . . . . .4-35 xiii CHAPTER 5 FOREIGN MILITARY SALES PROCESS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-1 Stages of the Foreign Military Sales Process: Preliminary and Defi nition . . . . . . . . . . . . . . . . . . .5-1 Stages of the Foreign Military Sales Process: Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-3 Letter of Request: Format . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-3 Letter of Request: Channels of Submission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-4 Letter of Request Advisories and Pre-Operational Testing and Evaluation Sales Policy . .5-5 Letter of Request: Negative Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-6 Stages of the Foreign Military Sales Process: Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . .5-6 Letter of Request Response Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-6 Foreign Military Sales Case Identifi er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-7 Milestones and Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-7 Initial Processing of the Letter of Request by the Implementing Agency . . . . . . . . . . . . . .5-7 Compilation of Letter of Request Date by the Implementing Agency . . . . . . . . . . . . . . . .5-9 Correlating the Letter of Request with the Military Articles and Service List . . . . . . . . . .5-9 Completeness of Offer: The Total Package Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . .5-10 Quality of Items Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-10 Release of Letter of Offer and Acceptance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-10 Congressional Notifi cation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-11 Defense Security Cooperation Agency Countersignature . . . . . . . . . . . . . . . . . . . . . . . . .5-12 Stages of the Foreign Military Sales Process: Acceptance of a Letter of Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-12 Stages of the Foreign Military Sales Process: Implementation and Execution . . . . . . . . . . . . . . .5-12 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-12 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-13 Foreign Military Sales Case Management Policy, Procedures and Concepts . . . . . . . . . .5-14 Stages of the Foreign Military Sales Process: Reconciliation and Closure . . . . . . . . . . . . . . . . . .5-19 Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-19 Supply and Services Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-19 Procedures for Case Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-20 Enhanced Accelerated Case Closure Procedures and Force Closure. . . . . . . . . . . . . . . . .5-21 Processing Transactions Against Closed Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-22 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-22 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-22 xiv Attachment 5-1 Implementing Agency Organizations in Support of Foreign Military Sales . . . 5-24 Attachment 5-2 Sample Letter of Offer and Acceptance/Total Package Approach Aircraft Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-30 CHAPTER 6 FOREIGN MILITARY SALES CASES Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-1 Categories of Standard Foreign Military Sales Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-1 Defi ned Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-1 Blanket Order Foreign Military Sales Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-2 Restrictions on Blanket Order Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-3 Defi ned versus Blanket Order Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-4 Cooperative Logistics Supply Support Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-4 Case Identifi er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-4 Security Cooperation Program Letter of Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . .6-5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-6 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-6 Attachment 6-1 Sample Defi ned Order Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-7 Attachment 6-2 Sample Blanket Order Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-10 Attachment 6-3 Sample Security Cooperation Special Programs and Services . . . . . . . . . . . . . .6-13 Attachment 6-4 First Position of Case Designator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6-17 CHAPTER 7 TECHNOLOGY TRANSFER, EXPORT CONTROLS AND INTERNATIONAL PROGRAMS SECURITY Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-1 The Concept of Technology Transfer and Export Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-2 Department of Defense Policy on Technology Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . .7-3 Technology Transfer Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-3 The Basics of International Programs Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-4 Key Department of Defense Security Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-6 Exports through the Department of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-8 Exports through the Department of State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-8 Controlled Unclassifi ed Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-9 Freedom of Information Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-10 xv Foreign Disclosure and the National Disclosure Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-11 Classifi ed Military Information and Disclosure Decisions . . . . . . . . . . . . . . . . . . . . . . . .7-11 National Disclosure Policy Committee/Exceptions to National Disclosure Policy. . . . . .7-11 Security Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-12 International Security Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-13 Disclosure Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-13 False Impressions . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-13 Export Approval and License Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-14 Licenses for the Export of Defense Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-14 Export License Applications Staffi ng within Department of Defense. . . . . . . . . . . . . . . .7-14 Foreign Military Sales License Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-15 Commercial Agreements Requiring Approval by Department of State. . . . . . . . . . . . . . .7-15 International Visits and Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-16 Visit Procedures . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-16 Other Visit Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-18 Defense Personnel Exchange Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-18 Foreign Attendance at Classifi ed Meetings Leading to Contract Opportunities . . . . . . . .7-19 Visits Overseas by Department of Defense Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . .7-19 International Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-19 United States Classifi ed Contracts with Foreign Firms . . . . . . . . . . . . . . . . . . . . . . . . . . .7-19 Transmission of Classifi ed Materiel to Foreign Governments . . . . . . . . . . . . . . . . . . . . .7-19 Defense Security Service Role in International Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-20 Technology Control Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-20 Defense Industrial Security Clearance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-21 Foreign Government and North Atlantic Treaty Organization Information . . . . . . . . . . . . . . . . .7-21 Foreign Government Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-21 North Atlantic Treaty Organization Disclosure Security Procedures . . . . . . . . . . . . . . . .7-22 Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-23 Multinational Industrial Security Working Group Documents . . . . . . . . . . . . . . . . . . . . .7-24 Committee on Foreign Investment in the U.S. and Foreign Ownership, Control or Infl uence . . 7-24 Foreign Ownership, Control or Infl uence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-25 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-26 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-26 Attachment 7-1 Memorandum "Training in International Security and Foreign Disclosure Support to International Programs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-28 Attachment 7-2 Selected U.S. Technology Laws and Publications . . . . . . . . . . . . . . . . . . . . . . .7-29 xvi CHAPTER 8 FOREIGN MILITARY SALES CONTRACTUAL AGREEMENTS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-1 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-1 Elements of a Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-1 Letter of Offer and Acceptance Standard Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . .8-3 Section 1 Conditions - United States Government Obligations. . . . . . . . . . . . . . . . . . . . . .8-4 Section 2. Conditions - General Purchaser Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .8-6 Section 3. Indemnifi cation and Assumption of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-8 Section 4. Financial Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-9 Section 5. Transportation and Discrepancy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .8-11 Section 6. Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-12 Section 7. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-13 Additional Letters of Offer and Acceptance Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-14 Changes to the Letter of Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-14 Major Changes in Scope - New Letter of Offer and Acceptance. . . . . . . . . . . . . . . . . . . .8-15 Minor Changes in Scope - Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-15 Changes Not Affecting Scope - Modifi cation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-15 Pen and Ink Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-16 Letter of Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-16 Letter of Intent - Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-16 Lease of Defense Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-17 Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-17 Security Assistance Organization Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-17 Lease Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-17 Lease Identifi cation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-17 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Loss, Destruction or Damage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Lease Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 U.S. Navy Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Loans . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-19 International Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-19 xvii Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-19 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-18 Attachment 8-1 Sample Letter of Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-21 Attachment 8-2 Sample Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8-25 CHAPTER 9 FOREIGN MILITARY SALES ACQUISITION POLICY AND PROCESS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-1 Global Military Market Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-1 United States Item Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-2 Foreign Military Sales Procurement Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-2 Foreign Military Sales Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-2 Contracting for Foreign Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-3 Buyer and Seller Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-3 Letter of Offer and Acceptance and Contract Relationship . . . . . . . . . . . . . . . . . . . . . . . . .9-4 Department of Defense Infrastructure for Foreign Military Sales Acquisition . . . . . . . . . .9-4 Nonstandard Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-5 Contracting Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-5 Contract Source Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-6 Foreign Military Sales Competitive Source Selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-7 Foreign Military Sales Sole Source by Customer Request . . . . . . . . . . . . . . . . . . . . . . . . .9-7 Foreign Military Sales Sole Source without Customer Request . . . . . . . . . . . . . . . . . . . . .9-8 Competitive Source Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-9 Advertising for Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-10 Set-aside Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-10 Contract Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-10 Special Foreign Military Sales Contracting Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-11 Foreign Military Sales Solicitation and Contract Marking . . . . . . . . . . . . . . . . . . . . . . . .9-11 Contracting Offi cer Involvement in Letter of Offer and Acceptance . . . . . . . . . . . . . . . .9-12 Contract Pricing for Foreign Military Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-12 Sales Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-13 Foreign Military Sales Customer Involvement in Contracting . . . . . . . . . . . . . . . . . . . . .9-13 Contract Administration Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-15 Foreign Military Sales Contract Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-15 Contract Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-18 xviii Contract Administration of Direct Commercial Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-18 Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-18 Types of Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-19 Congressional Interest and Notifi cation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-19 United States Government Offset Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-19 Offset Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-20 Letter of Offer and Acceptance Offset Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-21 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-21 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-22 CHAPTER 10 LOGISTICS SUPPORT OF INTERNATIONAL MILITARY SALES Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-1 The Total Package Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-1 Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-1 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-2 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-2 Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-3 Department of Defense Logistics Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-4 Inventory Control Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-4 International Logistics Control Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-6 Defense Logistics Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-8 Requisition Process Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-9 Military Standard Requisitioning and Issue Procedures . . . . . . . . . . . . . . . . . . . . . . . . . .10-9 North Atlantic Treaty Organization Codifi cation System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-10 Item Identifi cation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-11 Federal Supply Catalogs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-11 North Atlantic Treaty Organization Codifi cation System Sponsorship . . . . . . . . . . . . . .10-12 Uniform Materiel Movement and Issue Priority System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-13 Logistics Communications . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-13 Life Cycle Logistics Support Planning Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-15 Site Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-15 Planning for Initial Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-15 Provisioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-16 Foreign Military Sales Follow-on Support Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-19 Options for Follow-on Support Other Than Foreign Military Sales . . . . . . . . . . . . . . . .10-20 xix Purchaser Preference for Foreign Military Sales Support . . . . . . . . . . . . . . . . . . . . . . . .10-21 Cooperative Logistics Supply Support Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-21 Foreign Military Sales Order I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-22 Foreign Military Sales Order II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-23 Cooperative Logistics Supply Support Arrangement Effectiveness . . . . . . . . . . . . . . . .10-23 Sole Source Procurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-23 Single Vendor Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-23 Commercial Buying Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-24 Repair of Repairables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-25 Purchaser Country Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-26 Concepts of Repair . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-26 Excess Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-27 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-27 Excess Defense Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-28 Defense Reutilization and Marketing Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-28 Other Support Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-29 U.S. Air Force Technical Coordination Groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-29 U.S. Navy F/A-18 In-Service Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-30 System Support Buyout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-30 Foreign Military Sales Reserve Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-30 Worldwide Warehouse Redistribution Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-31 Aerospace Maintenance and Regeneration Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-31 Publications Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-31 Initial versus Follow-On Publications Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-32 Types of Cases/Categories of Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-32 Navy Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-32 Army Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-32 Air Force Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-33 Publications from DoD and Other Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-33 Equipment Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-33 Teams Used to Support Country Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-34 Quality Assurance Teams. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-34 Technical Assistance Teams. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-34 Mobile Training Teams and Mobile Education Teams . . . . . . . . . . . . . . . . . . . . . . . . . .10-34 Extended Training Service Specialists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-35 xx Contract Field Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-35 Technical Assistance Field Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-35 Discrepancy Reporting . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-35 Transportation Discrepancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-36 Product Quality Defi ciency Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-36 Financial Discrepancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-36 Supply Discrepancies . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-37 Billing Discrepancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-38 Submission of Supply Discrepancy Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-39 The Discrepancy Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-41 Initial Edit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-42 Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-42 Final Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-42 Mandatory Defense Security Cooperation Agency Approval . . . . . . . . . . . . . . . . . . . . .10-43 Materiel Returns . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-43 Warranties and Supply Discrepancy Reports . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-43 Foreign Military Sales Transportation Reimbursement Policy . . . . . . . . . . . . . . . . . . . . . . . . . .10-43 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-44 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-44 CHAPTER 11 FOREIGN MILITARY SALES TRANSPORTATION POLICY Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-1 Basic Transportation Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-1 Title Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-1 Point of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-1 The Defense Transportation System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-3 Preservation, Packing and Marking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-3 Small Parcel Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-4 Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-4 Dangerous Goods Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-4 Classifi ed Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-5 Sensitive Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-6 Notice of Availability .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-6 xxi United States Flag Shipping .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-7 Accessorial Services and Charges . . . . . .. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-7 Transportation Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-8 United States Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-8 Security Assistance Offi ce Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-9 Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-11 Freight Forwarder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-12 Transportation Discrepancies . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-13 Three Major Delivery Elements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-15 Letter of Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-15 Military Standard Requisitioning and Issue Procedures . . . . . . . . . . . . . . . . . . . . . . . . .11-18 Military Assistance Program Address Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-18 Military Assistance Program Address Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-20 Type of Address Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-23 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-23 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-25 Useful Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-25 CHAPTER 12 FOREIGN MILITARY SALES FINANCIAL MANAGEMENT Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Financial Management Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Under Secretary of Defense (Comptroller) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Defense Finance and Accounting Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Defense Security Cooperation Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Defense Finance and Accounting Service-Indianapolis Center Deputate for Security Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-1 Implementing Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-2 Funds Management for Foreign Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-2 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-2 Purchaser Sources of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-3 Foreign Military Sales Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-3 Holding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-4 Flow to Department of Defense Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-4 Terms of Sale and Type of Assistance Codes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-5 xxii Type of Assistance Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-6 Financial Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-6 Payment Schedule Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-6 Payment Schedule Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-7 Foreign Military Sales Billing Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-8 Department of Defense Financial Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-9 Purchaser Payments to the Foreign Military Sale Trust Fund . . . . . . . . . . . . . . . . . . . . .12-10 Defense Security Cooperation Agency Financial Management Review Program . . . . .12-12 Foreign Military Sales Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-12 Foreign Military Sales Pricing Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-13 Foreign Military Sales Billing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-19 Foreign Military Sales Delivery Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-19 Billing Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-19 DD Form 645 Supporting Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-21 Cross-Leveling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-24 Special Billing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-24 DFAS-IN Performance/Delivery Reporting Feedback to Implementing Agency . . . . . .12-25 Case Reconciliation and Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-25 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-27 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-27 Attachment 12-1 Foreign Military Sales Delivery Transaction . . . . . . . . . . . . . . . . . . . . . . . . .12-28 Attachment 12-2 Delivery Source Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-30 Attachment 12-3 Delivery Source Code Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-33 CHAPTER 13 INTERNATIONAL ARMAMENTS COOPERATION Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-1 United States Systems Acquisition Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-1 System Acquisition Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-2 Defense Acquisition Oversight Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-2 Defense Acquisition Management Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-2 System Acquisition Documents Associated with Foreign Military Sales . . . . . . . . . . . . . . . . . . .13-4 Cooperative Opportunities Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-4 Program Protection Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-5 Technology Assessment and Control Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-5 xxiii Delegation of Disclosure Authority Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-6 Program Security Instruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-7 Anti-Tamper Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-7 International Armaments Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-7 International Armaments Cooperation Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-7 International Armaments Cooperation Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-8 International Armaments Cooperation Legislative Authority . . . . . . . . . . . . . . . . . . . . . .13-8 International Armaments Cooperation Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-9 International Armaments Cooperation within Military Departments . . . . . . . . . . . . . . . .13-9 International Armaments Cooperation Government-to-Government International Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-12 Armaments Cooperation Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-12 International Armaments Cooperation Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-13 Information Exchange Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-13 Engineer and Scientist Exchange Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-14 International Cooperative Research, Development, and Acquisition Programs . . . . . . .13-15 Foreign Comparative Testing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-17 Defense Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-18 Cooperative Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-19 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-21 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-21 CHAPTER 14 INTERNATIONAL TRAINING Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-1 International Training Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-1 Total Package Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-3 International Military Education and Training Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-4 International Military Education and Training Objectives . . . . . . . . . . . . . . . . . . . . . . . .14-4 Expanded International Military Education and Training Program. . . . . . . . . . . . . . . . . .14-5 Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-5 Categories of Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-5 Professional Military Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 Flying Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 Technical Profi ciency Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 xxiv On-the-Job and Qualifi cation Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 Observer and Familiarization Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 Orientation Tours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-6 Exported Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-7 Mobile Training Teams and Mobile Education Teams . . . . . . . . . . . . . . . . . . . . . . . . . . .14-7 Field Training Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-8 Technical Assistance Field Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-8 English Language Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-8 Classifi ed Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-9 Training program Development and Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-10 Combined Education and Training Program Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-10 International Military Education and Training Program . . . . . . . . . . . . . . . . . . . . . . . . .14-10 Foreign Military Sales Funded Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-11 Combating Terrorism Fellowship Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-11 Other Security Cooperation Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-12 Sanctions and Training Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-12 Annual International Military Training Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-13 Financial Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-13 Tuition Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-13 Total Cost of Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-14 Cancellation Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-14 Student Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-14 Predeparture Phase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-14 Training Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-16 Post Training Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-17 Training Management Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-17 Training Policy Community. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-17 Military Departments and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-19 Combatant Commands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-22 Security Assistance Offi ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-23 Defense Language Institute English Language Center . . . . . . . . . . . . . . . . . . . . . . . . . .14-23 Defense Institute of Security Assistance Management . . . . . . . . . . . . . . . . . . . . . . . . . .14-24 Training Program Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-24 International Training Management Web Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-24 Defense Security Assistance Management System Training Module . . . . . . . . . . . . . . .14-24 xxv Security Assistance Network and Training Management System . . . . . . . . . . . . . . . . . .14-25 International Security Assistance Network and International Training Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-25 Security Assistance Network Web Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-26 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-26 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-27 Attachment 14-1 Sample Invitational Travel Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-29 CHAPTER 15 A COMPARISON OF FOREIGN MILITARY SALES AND DIRECT COMMERCIAL SALES Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-1 Foreign Military Sales Only Items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-1 Direct Commercial Sales Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-2 Comparison Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-2 Nature of Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-2 United States Government Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-2 United States Military Involvement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-2 Lead Times . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-3 Contract Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-3 Financial Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-4 Concurrent Price Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-6 Nonrecurring Cost Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-6 Other Costs . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-6 Production Priority Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-7 Follow-on Logistics Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-7 Nonstandard Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-8 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-8 Classifi ed Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-8 Foreign Military Financing Program Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-8 Range of Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-9 Traditional Foreign Military Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-9 Sole Source Foreign Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-10 Foreign Military Sales with Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-10 Combination of Foreign Military Sales and Direct Commercial Sales . . . . . . . . . . . . . .15-10 Direct Commercial Sales with Foreign Military Financing Program . . . . . . . . . . . . . . .15-10 xxvi Direct Commercial Sales with United States Government Contract Administration . . .15-11 Traditional Direct Commercial Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-12 Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15-12 Attachment 15-1 Foreign Military Sales - Potential Advantages and Considerations . . . . . . . .15-13 Attachment 15-2 Direct Commercial Sales - Potential Advantages and Considerations . . . . . .15-14 Attachment 15-3 Common Misperceptions of Foreign Military Sales or Commercial Sales . . .15-15 CHAPTER 16 HUMAN RIGHTS AND RELATED CONCEPTS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-1 Human Rights Instruments and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-1 United States Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-2 International Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-2 United States Foreign Policy Concerning Democracy and the Rule of Law. . . . . . . . . . . . . . . . .16-5 The Rule of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-5 Civilian Control of the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-6 Military Justice . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-6 Human Rights and the Foreign Assistance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-7 Foreign Policy Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-7 Role of the Department of State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-7 Role of International and Non-governmental Organizations. . . . . . . . . . . . . . . . . . . . . . .16-8 Expanded-International Military Education and Training . . . . . . . . . . . . . . . . . . . . . . . . .16-9 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-10 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-10 Attachment 16-1 Universal Declaration of Human Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-11 Attachment 16-2 The "Five Rs". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-14 Attachment 16-3 Guidance for Screening Candidates of United States-Sponsored Training Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-15 CHAPTER 17 RESOURCE MANAGEMENT FOR THE SECURITY ASSISTANCE ORGANIZATION Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-1 Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-1 xxvii Security Assistance Offi ce Personnel Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-1 Security Cooperation Personnel Authorizations other than for Security Assistance . . . . .17-3 Changes in Security Assistance Organization Manpower . . . . . . . . . . . . . . . . . . . . . . . . .17-3 Security Assistance Organization Selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-3 Funding Resources . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-3 Security Assistance Administrative Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-4 Foreign Military Sales Case Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-4 Operation and Maintenance Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-5 Partnership for Peace . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-5 Traditional Combatant Commander Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-5 Combatant Commanders Initiative fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-5 Counternarcotics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-6 Defense Cooperation in Armaments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-6 Demining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-6 Humanitarian Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-6 United States Code Title 10 Program . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-6 Assistance-in-Kind . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-7 Other Sources of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-7 Practical Application of Different Fund Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-7 Anti-terrorism and Force Protection Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-8 Flow of Funding Authority for the Security Assistance Offi ce . . . . . . . . . . . . . . . . . . . . . . . . . .17-10 Security Assistance Offi ce Budget Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-11 Security Assistance Automated Resource Management Suite. . . . . . . . . . . . . . . . . . . . . . . . . . .17-12 Representation Funds . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-13 Representation Fund Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-13 Representation Fund Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-13 Representation Fund Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-13 International Cooperative Administrative Support Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-14 Security Assistance Offi ce Security Assistance Budget Preparation Process . . . . . . . . . . . . . . .17-15 Security Assistance Offi ce Security Assistance Budget Execution Process . . . . . . . . . .17-16 Budget Execution Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-7 Capital Security Cost Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-17 Security Assistance Offi ce Security Assistance Budget Cautions and Problems . . . . . . . . . . . .17-19 Internal Management Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-19 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-19 xxviii References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-20 Attachment 17-1 National Security Decision Memorandum Number 38 . . . . . . . . . . . . . . . . .17-22 Attachment 17-2 Guidelines to Implement National Security Decision Directive Number 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-23 CHAPTER 18 END-USE MONITORING AND THIRD-PARTY TRANSFERS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-1 End-Use Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-1 The Department of State's Blue Lantern Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-1 The Department of Defense's Golden Sentry Program . . . . . . . . . . . . . . . . . . . . . . . . . . .18-2 Security Assistance Offi ce and the Partner Nation End-Use Monitoring Plan . . . . . . . . . . . . . . .18-3 Third-Party Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-4 Requirement for Prior Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-5 Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-5 Summary . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-6 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18-7 Attachment 18-1 Department of State Third-Party Transfer Request Form. . . . . . . . . . . . . . . . .18-8 APPENDIX 1 CASE DOCUMENT PACKAGE Case Document Package Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-1 Memorandum of Understanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-3 Annex to the National Disclosure Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-8 Letter of Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-9 Embassy Approval Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-10 Defense Security Cooperation Agency Nonrecurring Cost Waiver Memorandum . . . . . . . . . . A1-12 Letter of Offer and Acceptance Standard Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . A1-13 Letter of Offer and Acceptance Standard Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . A1-34 Letter of Offer and Acceptance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-39 Termination Liability Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-44 Manpower Travel Data Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-45 Military Articles Service List . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-47 Transportation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-55 Selected Foreign Military Sales Acquisition Contract Clauses . . . . . . . . . . . . . . . . . . . . . . . . . A1-62 xxix SCIP Requisition Ad-Hoc Query . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-76 Military Assistance Program Address Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-77 Supply Discrepancy Report (SF 364) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-83 Foreign Military Sales Billing Statement (DD 645) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-85 Notice of Supply/Services Completion (NSSC) Memorandum . . . . . . . . . . . . . . . . . . . . . . . . A1-88 Final Certifi cate of Case Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-89 APPENDIX 2 HISTORY OF SECURITY ASSISTANCE Security Assistance and Foreign Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-1 Historical Precedents of Security Assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-1 The Truman Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-4 The Eisenhower Doctrine . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-7 The Kennedy and Johnson Administrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-8 The Nixon Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-8 The Ford Administration . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-9 The Carter Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-10 Regan's Arms Transfer Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-12 The George H. W. Bush Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-13 The Clinton Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-14 The George W. Bush Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-16 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-17 References . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-18 APPENDIX 3 SECURITY ASSISTANCE AUTOMATION Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-1 Security Assistance Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-1 Training Webs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-3 Commercial Security Assistance Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-4 Financial and Logistics Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-4 Additional Software Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-10 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-13 xxx ANNEXES Annex A - Abbreviations . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AA-A-1 Annex B - Glossary of Selected Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AB-B-1 INDEX Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 LIST OF FIGURES Figure 1-1 State Partnership Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-18 Figure 2-1 Major Security Assistance Authorization Acts Since 1954. . . . . . . . . . . . . . . . . . . . . .2-2 Figure 3-1 United States Government Organization for Security Assistance. . . . . . . . . . . . . . . . .3-3 Figure 3-2 United States Department of State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3-6 Figure 3-3 Department of the Army Functional Organization for Security Assistance . . . . . . . .3-17 Figure 3-4 Department of the Navy Functional Organization for Security Assistance . . . . . . . .3-18 Figure 3-5 Department of the Air Force Functional Organization for Security Assistance . . . . .3-19 Figure 5-1 Channels of Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-4 Figure 5-2 Foreign Military Sales Case Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-14 Figure 5-3 Case Closure Inhibitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-21 Figure 7-1 Key Players in Technology Transfer and International Programs Security . . . . . . . . . .7-6 Figure 7-2 Comparing Department of State and Department of Commerce . . . . . . . . . . . . . . . . . .7-9 Figure 7-3 International Visit Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7-18 Figure 9-1 Foreign Military Sales Contracting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-3 Figure 9-2 DD Form 250 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-7 Figure 9-4 Offset Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-21 Figure 10-1 Logistics Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-9 Figure 10-2 Foreign Military Sales Unique Record Positions . . . . . . . . . . . . . . . . . . . . . . . . . .10-10 Figure 10-3 Total Logistics Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-20 Figure 10-4 Discrepancy Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-41 Figure 11-1 Foreign Military Sales Transportation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-2 Figure 11-2 Notice of Availability (DD 1348-5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-7 Figure 11-3 Document Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-15 Figure 11-4 Delivery Term Codes for Shipments from the U.S. (Outbound). . . . . . . . . . . . . . .11-16 Figure 11-5 Military Assistance Program Address Directory. . . . . . . . . . . . . . . . . . . . . . . . . . .11-19 xxxi Figure 11-6 Relationship of the MAPAC to the MILSTRIP Requisition . . . . . . . . . . . . . . . . .11-21 Figure 11-7 Relationship of the MAPAC to the MILSTRIP Requisition for DTS Shipments. . 11-21 Figure 11-8 Figure 11-8 Relationship of MAPAC to the MILSTRIP Requisition for Grant Aid Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-22 Figure 12-1 Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-3 Figure 12-2 Foreign Military Sales Billing Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-8 Figure 12-3 Foreign Military Sales Pricing Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-13 Figure 12-4 Defense Transportation System Percentage Rates . . . . . . . . . . . . . . . . . . . . . . . . .12-17 Figure 12-5 CY-07 Transportation Cost Look-Up Table Army Annex . . . . . . . . . . . . . . . . . . . .12-18 Figure 12-6 DD 645 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-20 Figure 12-7 Foreign Military Sales Delivery Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-21 Figure 12-8 Foreign Military Sales Reply Listing to Customer Requests for Adjustments . . . .12-22 Figure 12-9 Foreign Military Sales Financial Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-23 Figure 12-10 Holding Account Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-23 Figure 12-11 Accelerated Case Closure Suspense Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12-24 Figure 13-1 Defense Acquisition System Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-3 Figure 13-2 Building Blocks of International Armaments Cooperation. . . . . . . . . . . . . . . . . . . .13-8 Figure 13-3 Department of Defense International Programs Organization . . . . . . . . . . . . . . . . .13-9 Figure 13-4 Acquisition Order of Preference DoD 5000.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-12 Figure 14-1 CONUS-Overseas - Training Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-3 Figure 14-2 Training Management Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-18 Figure 14-3 International Training Management Data Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-25 Figure 16-1 Illustrations of Human Rights Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-5 Figure 16-2 U.S. Department of State Country Report on Human Rights Practices. . . . . . . . . . .16-8 Figure 17-1 Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17-10 Figure A1-1 Map of Bandaira . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-2 Figure A3-1 Security Assistance Network. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-2 Figure A3-2 Security Cooperation Information Portal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-9 LIST OF TABLES Table 4-1 U.S. Security Assistance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4-2 Table 5-1 Foreign Military Sales Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-2 Table 7-1 DoD Organizational Export Control Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . .7-7 Table 7-2 Forms to Be Used for Export of Munitions List Items. . . . . . . . . . . . . . . . . . . . . . . . .7-15 Table 10-1 NCS Sponsorship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-12 xxxii Table 10-2 UMMIPS Matrix . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-13 Table 10-3 Decision Table for Supply Discrepancy Report Submissions . . . . . . . . . . . . . . . . .10-40 Table 11-1 Delivery Term Codes for Shipments from the U.S. (Outbound) . . . . . . . . . . . . . . .11-16 Table 11-2 Delivery Term Codes for Shipments Returning to the U.S. (Inbound). . . . . . . . . . .11-17 Table 11-3 Type of Address Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11-24 Table 13-1 Countries with Armaments Cooperation Personnel Assigned . . . . . . . . . . . . . . . . .13-10 Table 13-2 ODC/SAO Functions for Armaments Cooperation . . . . . . . . . . . . . . . . . . . . . . . . .13-10 Table 13-3 Cooperative RD&A Program Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13-15 Table 17-1 Security Assistance Offi ce Bandaria Offi ce Make-Up and Funding Source . . . . . . . .17-8 1-1 Introduction to Security Cooperation INTRODUCTION The term security cooperation was fi rst introduced in 1997 by the Defense Reform Initiative (DRI) which proposed that certain Department of Defense (DoD)-funded international programs along with their personnel and associated resources be managed by the then Defense Security Assistance Agency (DSAA) which already had the day-to-day management responsibility of many Department of State (DoS) security assistance programs authorized by the Foreign Assistance Act (FAA) and the Arms Export Control Act (AECA). To better refl ect its enlarged mission and diverse functions beyond security assistance to other agencies, the private sector, and foreign governments; DSAA was redesignated, effective 1 October 1998, the Defense Security Cooperation Agency (DSCA). Management responsibilities for many of the DoD-authorized international programs over the recent years have been transferred to DSCA. But many security cooperation programs continue to be managed by other Offi ce of the Secretary of Defense (OSD) agencies, the combatant commanders (COCOMs), or the military departments (MILDEPs). What further complicates the management of security cooperation is that the in-country point of contact between the United States government (USG) and the host nation generally is either the Defense Intelligence Agency (DIA)-sponsored defense attach offi ce (DAO) or the DSCA-sponsored security assistance offi ce (SAO). These two spigots for security cooperation with a country require a broad knowledge and skill baseline of the very different international programs that are initiated, funded, and managed from throughout the DoD and its agencies and the MILDEPs. It was not until 9 June 2004 that a formal, yet still very broad, defi nition of security cooperation was published in Joint Pub 1-02: All DoD interactions with foreign defense establishments to build defense re- lationships that promote specifi c U.S. security interests, develop allied and friend- ly military capabilities for self-defense and multinational operations, and provide U.S. forces with peacetime and contingency access to a host nation. Other DoD policy statements identify DoD-managed or administered security assistance programs as one of the major elements of the broader defi ned DoD security cooperation program. The purpose of this fi rst chapter is to provide defi nitions of the various programs within security assistance and the broader area of security cooperation. SECURITY ASSISTANCE DSCA outlines security assistance as twelve major programs in DoD 5105.38-M, Security Assistance Management Manual (SAMM), 3 October 2003, Table C1.T1. While seven of these FAA and AECA-authorized programs are administered by DoD, specifi cally by DSCA, they remain under the general control of the DoS as components of U.S. foreign assistance. These twelve security assistance programs include the following. INTRODUCTION TO SECURITY COOPERATION Chapter 1 1-2 Introduction to Security Cooperation Foreign Military Sales Foreign military sales ( FMS) is a non-appropriated program administered by DSCA through which eligible foreign governments purchase defense articles, services, and training from the United States government. The purchasing government pays all costs that may be associated with a sale. In essence, there is a signed government-to-government agreement, normally documented on a letter of offer and acceptance (LOA) between the USG and a foreign government. Each LOA is commonly referred to as a case and is assigned a unique case identifi er for accounting purposes. Under FMS, military articles and services, including training, may be provided from DoD stocks (Section 21, AECA) or from new procurement (Section 22, AECA). If the source of supply is new procurement, on the basis of having an LOA which has been accepted by the foreign government, the USG agency or MILDEP assigned cognizance for this case is authorized to enter into a subsequent contractual arrangement with U.S. industry in order to provide the article or service requested. The DoS congressional budget justifi cation (CBJ) for fi scal year (FY) 2008 estimated that about 80 foreign countries and international organizations would participate in FY 2008 in the FMS program, with total estimated sales of $17 billion. The estimate for FY 2007 FMS is $21 billion. The fi nal FMS total for FY 2006 was $18.2 billion. Additionally, there was $2.7 billion in FMS agreements during FY 2006 which were funded by DoD security cooperation programs. Foreign Military Construction Services Foreign military construction services (FMCS) is a non-appropriated program administered by DSCA and authorized by Section 29, AECA, to include the sale of design and construction services by the USG to eligible purchasers. The construction sales agreement and sales procedures generally parallel those of FMS and are usually implemented by the MILDEP civil engineering agencies. The CBJ for FY 2008 projection for FMCS during FY 2008 and FY 2007 are included in the above FMS projections. The fi nal FMCS total for FY 2006 was $170 million. Foreign Military Financing Program The foreign military fi nancing program (FMFP) is an appropriated program administered by DSCA that has undergone a variety of substantive and terminological changes over the years. At present, the program consists of congressionally appropriated grants and loans which enable eligible foreign governments to purchase U.S. defense articles, services, and training through either FMS or direct commercial sales (DCS) channels. The foreign military construction service (FMSCR) is authorized under the provisions of Sections 23 and 24, AECA, and originally served to provide credit (loans) as an effective means for easing the transition of foreign governments from grant aid, i.e., Military assistance program (MAP) and international military education and training (IMET) to cash purchases. Prior to FY 1989, this fi nancing program was variously identifi ed as the foreign military sales credit program or the foreign military sales fi nancing program. In the FY 1989 Foreign Operations Appropriations Act (FOAA), Congress introduced a new title, the FMFP, and the forgiven loan/forgiven credit component of the program was identifi ed as FMFP grants to distinguish them from repayable direct FMFP loans. Also, the terms non repayable loans or non repayable credits are used by various security assistance organizations (including Defense Security Cooperation Agency) in place of the legislatively-based term FMFP grants. 1-3 Introduction to Security Cooperation Beginning in FY 1992, the Federal Credit Reform Act of 1992 (P.L. 101-508) changed the method of accounting and budgeting for all government loans, including FMFP loans issued under the AECA. This legislation provides a more accurate portrayal of the true cost of loans by providing new budget authority only for the subsidy element of the loan program and is the basis for the establishment of two new fi nancial accounts: The fi rst contains only the FMFP grant portion of the program administrative costs The second account provides the budget authority needed to fund the subsidy element of the proposed loan programs While there are previously authorized FMFP loans still being repaid to the USG, this loan element is seldom used with the FMFP grant element (no repayment) being the norm. The administration requested $4,588.6 million in FMFP funding for FY 2006 and $4,465 million was initially appropriated. The initial FMFP requests for FY 2007 and FY 2008 were $4,455 million and 4,536 million respectively. $4,551 million was initially appropriated for FY 2007 FMFP with an additional $265 million later appropriated as an emergency supplemental. All of these requests and subsequent appropriations are grants. Leases Chapter 6, AECA, authorizes the president to lease defense articles to friendly governments or international organizations for up to fi ve years (renewable). This non-appropriated program is administered by DSCA. The law allows the lease of defense articles only for compelling foreign policy or national security reasons, and stipulates that the full cost of the lease, with some exceptions, must be borne by the recipient. Furthermore, leased articles must not be needed, for the time, for U.S. public use, and the U.S. retains the right to terminate the lease at any time. For the recipient country, leases may be cheaper than purchasing the article outright, and they provide a convenient vehicle for obtaining defense articles for temporary use. Leases are executed through a lease agreement, with an associated FMS case to cover repair, training, supply support and/or transportation, if required. Military Assistance Program In FY 1990 the MAP was formally merged with the FMFP as Congress adopted an Administration proposal for integrating all MAP grant funding into the appropriations account for the FMFP. This appropriated program was administered by DSCA. No MAP funds have been appropriated for subsequent fi scal years, and there is no interest in seeking any such funds for the future. This legislative change, therefore, had the dual effect of causing existing MAP-funded programs to lose their former identity and become FMFP-funded programs and establishing the FMFP as the major U.S. fi nancing program for the acquisition of U.S. defense articles and services by foreign governments. MAP continues to be identifi ed as a current security assistance program because the MAP-provided articles remain throughout the world with the continued requirements for end-use monitoring, return to the USG when no longer needed, and any proceeds from a sale to a third country or scrapping being returned to the USG. International Military Education and Training The IMET program provides grant fi nancial assistance for training in the U.S. and, in some cases, in overseas facilities to selected foreign military and related civilian personnel. In earlier years, grant aid training of foreign military personnel was funded as part of the MAP appropriation. Starting with 1-4 Introduction to Security Cooperation FY 1976, a separate authorization for IMET was established in Section 541, FAA. This appropriated program is administered by DSCA. Although historically a relatively modest program in terms of cost, both the president and Congress attach signifi cant importance to this program. The recipient countries, likewise, are heavily reliant on this grant program and, in many cases; this program serves as the only method to receive training from the U.S. military. At a time of declining defense and foreign aid budgets, IMET advances U.S. objectives on a global scale at a relatively small cost. In many countries, having a core group of well-trained, professional leaders with fi rst hand knowledge of America will make a difference in winning access and infl uence for our diplomatic and military representatives. Thus, a relatively small amount of IMET funding will provide a return for U.S. policy goals, over the years, far greater than the original investment. In 1980, Section 644(m)(5), FAA, was amended to authorize IMET tuition costing in terms of the additional costs that are incurred by the USG in furnishing such assistance. Section 21(a)(1)(C), AECA, was also amended to allow IMET recipients to purchase FMS training on an additional cost basis. The practical effects of these changes were to substantially reduce tuition costs for IMET- funded students, and thereby increase the amount of training an eligible country can obtain with its IMET grant funds and through FMS purchases. A new IMET initiative was introduced in the FY 1991 FOAA when Congress adopted a Senate- proposed IMET earmark of $1 million to be used exclusively for expanding courses for foreign offi cers as well as for civilian managers and administrators of defense establishments. The focus of such training is on developing professional level management skills, with emphasis on military justice systems, codes of conduct, and the protection of human rights. Section 541, FAA, was amended to permit non-Ministry of Defense civilian government personnel to be eligible for this program, if such military education and training would: Contribute to responsible defense resource management Foster greater respect for and understanding of the principle of civilian control of the military Contribute to cooperation between military and law enforcement personnel with respect to counter-narcotics law enforcement efforts Improve military justice systems and procedures in accordance with internationally recognized human rights This expanded IMET (E-IMET) program was further extended in FY 1993 to also include participation by national legislators who are responsible for oversight and management of the military. The E-IMET program authority was again amended in 1996 by P.L.104-164 to also include non- governmental organization personnel. With annual increases, $80 million and $91 million were appropriated for FY 2003 and FY 2004 IMET programs respectively. A similar level of nearly $90 million was appropriated for FY 2005, FY 2006, and FY 2007 to train in excess of 11,000 IMET students each year from over 100 countries. The IMET request for FY 2008 is for $89.5 million. Drawdowns During a crisis, Section 506, FAA, authorizes the president to provide USG articles, services, and training to friendly countries and international organizations at no cost, to include free transportation. 1-5 Introduction to Security Cooperation There is a $100 million ceiling per fi scal year on articles, services, and training provided for military purposes; and another fi scal year ceiling of $200 million for articles, services and training required for non-military purposes such as disaster relief, nonproliferation, anti-terrorism, counter-narcotics, refugee assistance, and Vietnam War-era missing in action/prisoners of war (MIA/POW) location and repatriation. When emergency support for peacekeeping operations is required, Section 552(c)(2), FAA, separately authorizes the President to draw down up to $25 million per fi scal year in USG articles and services from any agency. Special drawdown authorities are periodically legislated to include $30 million in support for the Yugoslav International Criminal Court. These are non-appropriated authorities and administered by DSCA when defense articles, services, or training from DoD are to be drawn down. Economic Support Fund The economic support fund (ESF) is authorized by Chapter 4 of Part II of the FAA. ESF is an appropriated program administered by the U.S. Agency for International Development (USAID). This fund was established to promote economic and political stability in areas where the U.S. has special political and security interests and where the U.S. has determined that economic assistance can be useful in helping to secure peace or to avert major economic or political crises. ESF is a fl exible economic instrument which is made available on a grant basis for a variety of economic purposes, including balance of payments support, infrastructure, and other capital and technical assistance development projects. In earlier years, the ESF program included a concessional (i.e., low interest rate) loan element as well as grants. However, in FY 1989 the loan element was dropped, and until FY 2003 all ESF funds have been allocated as grant assistance. In FY 2003, Turkey, Israel, and Egypt were authorized a total of $19,500 million in ESF loans in addition to grant assistance. While a substantial amount of these ESF grants are used to provide balance of payments type aid, the ESF also provides for programs aimed at primary needs in health, education, agriculture, and family planning. Where long-term political and economic stability is the primary concern, ESF fi nances projects that meet the basic needs of the poor. In response to the administration's request for $3,037 million for FY 2006 ESF, Congress initially appropriated $2,634 million. The administration has requested an additional $1,638 million in ESF as an emergency supplemental appropriation for Southwest Asia reconstruction operations in Afghanistan and Iraq. The administration's initial request for FY 2007 ESF was $3,214 million with $2,455 million initially appropriated and later supplemented with an additional $2,624 million. The FY 2008 request for ESF is $3,320 million. All of these requests and subsequent appropriations are grants. Peacekeeping Operations Peacekeeping operations (PKO) is an appropriated program authorized by Chapter 6 of Part II of the FAA. For several years, PKO provided funds for the Multinational Force and Observers (MFO) which implemented the 1979 Egyptian-Israeli peace treaty, and the U.S. contribution to the United Nations Force in Cyprus (UNFICYP). Subsequent funding has been provided to support peacekeeping efforts in the Balkans, East Timor, sub-Saharan Africa, and lately in Afghanistan and the Dafur region of the Sudan. PKO funds appropriated for FY 2006 totaled $173 million. The Administration requested $200 million for FY 2007 and received $223 million. As an emergency supplemental appropriation, the Administration has requested an additional $230 million for PKO efforts in the Darfur region in Sudan. The PKO request for FY 2008 is $221 million. All of these requests and subsequent appropriations are grants to be administered by the DoS. 1-6 Introduction to Security Cooperation International Narcotics Control and Law Enforcement The international narcotics control and law enforcement (INCLE) program is an appropriated grant program administered by the DoS authorized by Section 481, FAA, to suppress the worldwide illicit manufacture and traffi cking in narcotic and psychotropic drugs, money laundering, and precursor chemical diversion, and the progressive elimination of the illicit cultivation of the applicable crops. Recently, the elimination of related narco-terrorism has been included. This program can include the purchase of defense articles, services, and training. There are similar authorized and funded programs within DoD and the Departments of Justice and Homeland Security. The administration requested $795 million for FY 2007 INCLE programs with $472 million being initially appropriated with a later supplemental of $252 million. The request for FY 2008 is $635 million. A similar State Department grant program, the Andean Counterdrug Initiative (ACI), was recently established for the Andean Ridge countries using the same FAA authority and objectives to be jointly administered by USAID and the DoS INCLE Bureau. This program is often referred to as Plan Colombia since the program emphasis and funding go primarily to Colombia. The requests and funding for FY 2005, FY 2006, and FY 2007 have been annual $725 million annually. Nonproliferation, Anti-Terrorism, Demining, and Related Programs The nonproliferation, anti-terrorism, demining, and related (NADR) programs is an appropriated grant program administered by DoS authorized by Part II, Chapters 8 and 9 of the FAA; Section 504, the FREEDOM Support Act; and Section 23, AECA, for demining activities, the clearance of unexploded ordnance, the destruction of small arms, border security, and related activities. Related defense articles, services, and training can be provided through this program. U.S. funding support for the International Atomic Energy Agency and the Comprehensive Nuclear Test Ban Treaty Preparatory Commission is provided through this program. The DoD signifi cance of this program is that DoS can purchase demining, unexploded ordnance clearance, and anti-terrorism systems with this funding. The administration's FY 2007 request for NADR funding was $449 million with $405 million being initially appropriated and $58 million later appropriated as a supplemental. The request for FY 2008 is $464 million. The fi nal NADR total for FY 2006 was $406 million. Direct Commercial Sales DCS are commercial exports of defense articles, services, and training licensed under the authority of Section 38, AECA made by U.S. defense industry directly to a foreign government. Unlike the procedures employed for FMS, DCS transactions are not administered by DoD and do not involve a government-to-government agreement. Rather, the U.S. governmental control procedure is accomplished through licensing by the Directorate of Defense Trade Controls (PM/DDTC) in the DoS. The day-to-day rules and procedures for these types of sales are contained in the International Traffi c in Arms Regulations (ITAR) [22 CFR 120-130]. DCS licenses (as opposed to new sales agreements) for delivery in FY 2006 and FY 2007 are estimated to total about $31,604 million and $8,875 million respectively. The DCS delivery projection for FY 2008 is $17,482 million. Of note, not all license approvals will result in signed contracts and actual deliveries. And like FMS, DCS deliveries are likely to take place years after the commercial contract is signed and the export license is obtained by U.S. industry from PM/DDTC. 1-7 Introduction to Security Cooperation Other Security Assistance Programs While these two programs are not identifi ed by DSCA in the SAMM as one of the twelve security assistance programs, they are very much related to the duties of the security assistance community both in the U.S. and recipient foreign governments. Excess Defense Articles Excess defense articles (EDA) identifi ed by the MILDEP or DoD agency are authorized for sale using the FMS authority in Section 21, AECA, and FMS processes identifi ed within the SAMM for property belonging to the USG. Prices range from fi ve to fi fty percent of original acquisition value, depending on the condition of the article. Additionally, Section 516, FAA, authorizes the President to transfer EDA on a grant basis to eligible countries for which receipt of such articles was justifi ed, usually in the annual CBJ. While EDA can be transferred at no-cost, the recipient must typically pay for any transportation or repair charges. Under certain circumstances, the transportation charge can be waived, with the cost absorbed by DoD. Third-Country Transfers Section 3(d), AECA, authorizes the President to manage and approve the transfer of U.S.-origin defense articles from the original recipient country to a third country. Requests for third-country transfers are normally approved if the USG is willing to conduct a direct transfer to the third country. Third-country transfer authority must be obtained in advance of the proposed transfer and in writing from the DoS. This applies to all U.S.-origin defense articles regardless of the method of original transfer from the USG or U.S. industry. SECURITY COOPERATION Though not delineated in any one source, the following is a list, by category, with a brief description along with references of DoD-authorized security cooperation programs. It should be noted that the previously described seven FAA and AECA-authorized security assistance programs administered by DoD in accordance with the SAMM are also to be included in the broad defi nition of security cooperation. Other sources for identifying DoD security cooperation programs include the Theater Security Cooperation (TSC) Activities Handbook used within the U.S. European theater of operations and the Army International Activities Plan (AIAP) published by the U.S. Army. Another method of identifying the difference between security assistance and security cooperation is the source of authority within the U.S. Code (U.S.C.) for the program. The U.S.C. is the codifi cation of the general and permanent U.S. laws which is divided into 50 titles by subject matter. 22 U.S.C., or Title 22, pertains to U.S. foreign relations matters to include FAA and AECA security assistance. 10 U.S.C., or Title 10, pertains to U.S. armed forces matters to include DoD security cooperation. It should be noted that certain DoD security cooperation program authorities are also with Title 22. FAA and AECA-Authorized Programs Administered by DoD This includes the seven security assistance programs previously identifi ed and described in Table C1.T1, SAMM: FMS, foreign military construction services, FMFP, leases, MAP, IMET, and drawdowns. 1-8 Introduction to Security Cooperation Combined Operations Combined operations is an older term normally to describe U.S. operations with other countries. Newer terms include coalition or joint operations or warfare. The original term joint generally meant two or more U.S. services in operations or exercises. Counter-Drug Support Section 1004 counter-narcotics support to include providing defense services and training in support of loaned DoD-loaned equipment to U.S. and foreign counter-drug agencies is authorized by the National Defense Authorization Act for Fiscal Year 1991, P.L. 101-510, Section 1004, as amended. Pseudo-FMS case procedures are used by DoD agencies to provide support as required to the offi ce of the assistant secretary of defense for special operations and low intensity confl ict-interdependent capabilities ASD(SOLIC-IC). The FMS procedures are at Section C11.3, SAMM. The provision of counter-drug boats, non-lethal equipment and support of previously provided equipment for specifi ed countries is often referred to as Section 1033 support. Section C11.3, SAMM, pseudo-FMS case procedures are likewise used in support of OASD(SOLIC-IC). The authority for this support is the National Defense Authorization Act for Fiscal Year 1998, P.L.105-85, Section 1033, as amended. Acquisition and Cross-Servicing Agreements Acquisition and cross-servicing agreements (ACSA) are initiated and negotiated by a combatant commander to allow U.S. logistics support of a designated military unit of another country. Lethal signifi cant military equipment (SME) or support reasonably available from U.S. commercial sources may not be provided under an ACSA. The Joint Chiefs of Staff, OSD, and the DoS, to include a thirty day advance notifi cation to Congress, must approve the proposal before the agreement is negotiated and concluded by the COCOM. The authority for an ACSA is 10 U.S.C. 2341-2350, with procedures provided in DoDD 2010.9, and Section C11.1, SAMM. However, the John Warner National Defense Authorization Act, Fiscal Year 2007, P.L.109-364, 17 October 2006, Section 1202, authorizes through FY 2008, the loan of certain categories of SME defense articles for up to one year to countries participating in coalition operations in Iraq or Afghanistan. It must be determined by the secretaries of state and defense that it is in the U.S. national security interest to provide this loan and there are no unfi lled U.S. in-theater requirements for the loaned articles. Warsaw Pact Initiative In 1994, the North Atlantic Treaty Organization (NATO) initiated the Partnership-for- Peace (PfP) program for countries seeking cooperative military and peacekeeping relations with NATO. In the U.S. support of PfP, DoD and DoS combined to establish the Warsaw Initiative Fund (WIF). DoS uses FMFP in providing support while DoD uses its own Title 10 appropriations, administered by DSCA, to support WIF. The authorities used by DSCA are 10 U.S.C. 168 for the later described military- to-military contact program, 10 U.S.C. 1051 to provide funding assistance in attending bilateral or regional meetings or seminars, and 10 U.S.C. 2010 to fund participation in combined exercises. SAMM, C11.15, provides DSCA policy guidance in executing the DoD portion of WIF. WIF cannot be the primary source of exercise funding, used to fund course attendance, or fund activities normally defi ned as material assistance. 1-9 Introduction to Security Cooperation Global Peace Operations Initiative The global peace operations initiative (GPOI) is a recent fi ve-year presidential initiative in coordination with the other G-8 countries to increase the capacity of selected countries to deploy in support of international peace operations. The goal is to train 75,000 peace support troops worldwide with emphasis in the Africa region and building an African command headquarters capability. GPOI would support the deployment of peacekeepers by providing equipment, transportation, and sustainment in the fi eld. Remaining a DoS program requiring DoD support, GPOI subsumed the previous security assistance-funded PKO African contingency operations training and assistance (ACOTA) program and FMFP-enhanced international peacekeeping capabilities (EIPC) program. The term ACOTA is still used when referring to the Africa training component of GPOI. The authorities would remain with Chapter 6 of Part II of the FAA and Section 23, AECA. Train and Equip Afghanistan and Iraq Security Forces Title IX of the DoD appropriations act for FY 2007, P.L.109-289, initially appropriated $1,500 million and $1,700 million respectively for the Afghanistan Security Forces Fund (AFSF) and Iraq Security Forces Fund (ISFF) to provide, inter alia, defense articles and services for the Afghanistan and Iraq security forces. Title I of the emergency supplemental appropriations act for FY 2007, P.L.110- 28, 25 May 2007, provides DoD an additional $5,906 million and $3,842 million for AFSF and ISFF assistance respectively. The transfers are often implemented using pseudo-FMS case procedures. Support of Coalition Forces in Combined Operations P.L.109-148, Section 9009, authorizes the use of FY 2006 DoD funding to support coalition forces supporting military and stability operations in Afghanistan and Iraq. The National Defense Authorization Act for Fiscal Year 2007, P.L.109-364, 17 October 2006, Section 1201, provided for a new 10 U.S.C. 127(c) authorizing up to $100 million in DoD funding annually for the logistics, supply, and services to allied forces to support their participation in combined operations. Reimbursement to Countries for U.S. Expenses The National Defense Authorization Act, Fiscal Year 2006, P.L.109-163, Section 1208, authorizes the use of not more than $1,500 million in FY 2006 DoD funding to reimburse key cooperating countries for logistical and military support provided by that nation to or in connection with U.S. military operations in Iraq, Afghanistan, and the Global War on Terrorism. P.L.109-234 authorizes the use of not more than $740 million in DoD funding to similarly reimburse Pakistan, Jordan, and other key cooperating countries for support provided to U.S. military operations. The emergency supplemental appropriations act for FY 2007, P.L.110-28, appropriated $200 million for similar reimbursement. Combatant Commander Initiative Fund Combatant Commander (COCOM) nominated special interest programs and is authorized by 10 U.S.C.166a. P.L.109-148 appropriated $25 million for the combatant commander initiative fund (CCIF). P.L.109-234 later appropriated an additional $25 million for CCIF in support of Operation Iraqi Freedom and Operation Enduring Freedom. P.L.109-289 and P.L.110-28, likewise, appropriated similar amounts for FY 2007. 1-10 Introduction to Security Cooperation Grant Excess Defense Articles for Afghanistan and Iraq During FY 2006, P.L.109-163, Section 1209, authorizes the grant transfer of excess defense articles to the military and security forces of Afghanistan and Iraq of a total value not to exceed $500 million. DoD funds may used to fund the transfer to include transportation. This authority was not renewed for FY 2007. Security and Stabilization Assistance During FY 2006 and FY 2007, up to $100 million in DoD funding, defense articles, and defense services may be transferred annually to the DoS for reconstruction, security, and stabilization assistance to a foreign country. These transfers shall be subject to the authorities and limitations of the FAA, AECA, and any other law making appropriations. This pilot program is authorized by P.L.109-163, Section 1207. Building Partner Capacity of Foreign Militaries During FY 2006 through FY 2008, up to $300 million in DoD funding may be used annually to equip, supply, and train a foreign military force to conduct counterterrorism operations or participate in or support military and stability operations in which U.S. forces are participating. Any country prohibited by law from receiving such assistance may not receive such assistance. This pilot program was initially authorized by P.L.109-163, Section 1206, and later extended P.L.109-364, Section 1206, include FY 2008 with the annual value increased to $300 million. Former Soviet Union Threat Reduction Account Sometimes referred to as the Nunn-Lugar program with the goals for the elimination and the safe and secure transportation and storage of nuclear, chemical and other weapons of mass-destruction in the republics of the former Soviet Union. For FY 2006, both P.L.109-148 and P.L.109-163, Section 1302, respectively appropriates and authorizes the use of $415 million in DoD funding by the under secretary of defense for acquisition, technology, and logistics [USD(AT&L)] for such a program. P.L.109-234 appropriates an additional $44 million in FY 2006 DoD funding for this program fi rst authorized by the National Defense Authorization Act for Fiscal Year 1991. P.L.109-289 appropriated $372 million for FY 2007. Combined Exercises Joint Combined Exchange Training Joint combined exchange training (JCET) includes the deployment by U.S. special operations forces (SOF) with the dual purpose of training themselves and foreign counterparts. 10 U.S.C. 2011 provides the authority for the use of DoD funding for JCET. This funding can be used for the training of the foreign counterpart, expenses for the U.S. deployment, and, for developing countries, the incremental expenses incurred by the country for the training. The JCET program is carefully followed by Congress because of concerns about inadequate civilian oversight and fears that such training might benefi t units or individuals who have committed human rights violations. Exercise Related Construction The exercise related construction (ERC) program is authorized by 10 U.S.C. 2805 with policy guidance provided within Chairman of the Joint Chiefs of Staff Instruction (CJSCI) 4600.01A to allow 1-11 Introduction to Security Cooperation overseas construction by the U.S. military in locations where there is no permanent U.S. presence. The construction is to enhance exercise effectiveness, enhance troop quality of life, and increase operational readiness. The construction is typically used by U.S. forces during an exercise to remain intact for host nation use after departure. Projects may include new construction, conversion of existing facilities (e.g., warehouses into exercise operations centers), and restoration of deteriorating facilities. U.S. and/or host nation engineers units and construction contracts may be used to accomplish projects. When construction is accomplished with partner nation engineers, interoperability benefi ts are also obtained. The Joint Staff logistics engineering division (J4/ED) manages the program through the engineer divisions of the area COCOMs. Developing Country Combined Exercise Program The developing country combined exercise program (DCCEP) is authorized by 10 U.S.C. 2010 to use DoD funds to pay for incremental expenses for a developing country to participate in a combined exercise with U.S. forces. Such expenses normally include rations, fuel, training ammunition, and transportation. The Joint Staff in coordination with the combatant commander manages DCCEP. Defense Health Program P.L.109-148 appropriates $5.3 million in FY 2006 DoD funding for human immunodefi ciency virus (HIV) prevention educational activities undertaken in connection with U.S. training, exercises, and humanitarian assistance activities conducted in African countries. Combined Intelligence Operations Not unlike any other DoD agency, the U.S. intelligence community also has combined operations, exercise, and exchange relationships with other countries and international organizations as a part of the overall DoD security cooperation strategy. It has been determined that this publication is not the correct forum to describe this cooperation. International Armaments Cooperation This security cooperation effort by the DoD acquisition community has many programs authorized by the AECA (Title 22) and DoD Title 10 codes of law, and the annual DoD appropriations act. Many U.S. DoD scientists and engineers are assigned overseas in an SAO as the eyes and ears of U.S. acquisition community looking for good ideas in the foreign defense industrial complex. Chapter 13, "International Armaments Cooperation," provides a more detailed description of many of these problems. Information Exchange Program 10 U.S.C. 2358 authorizes the DoD acquisition community to enter into international agreements for the reciprocal exchange of research and development (R&D) data with a country with the goal of saving both DoD R&D funding and time in the U.S. research development, test, and evaluation (RDT&E) process. The OSD administrator for this program is under secretary of defense for acquisition, technology, and logistics (USD(AT&L)) with the MILDEP and DoD agency acquisition communities being the implementers. 1-12 Introduction to Security Cooperation Exchange of Engineers and Scientists P.L.104-201 authorizes the DoD acquisition community, among others, to enter into international agreements for the reciprocal exchange of engineers and scientists with the objective of cooperative research and training. It is not to be an information collection program. Likewise, the USD(AT&L) provides oversight to this program with the MILDEP and DoD agency acquisition communities being the implementers. Foreign Comparative Testing 10 U.S.C. 2360(a) authorizes the DoD acquisition community to enter into international agreements for the test and evaluation of already operational weapons systems in other countries with the objective of determining if the foreign weapon system is a candidate for U.S. acquisition. Again, the USD(AT&L) provides oversight to this program with the MILDEPs and DoD agencies being the implementers. Cooperative Research, Development, Test, Evaluation and Production Section 27, AECA, authorizes the DoD acquisition community to enter into international agreements with countries for the mutually benefi cial development and possible later production of weapons systems. USD(AT&L) provides the general oversight for this complex program with other countries. The often referred to Nunn Amendment provided the initial authority and funding for this cooperative program with NATO allies. The later Quayle Amendment expanded the Nunn Amendment to also include Australia, Japan, and South Korea and referring to them as major non-NATO allies. P.L.99-661 later further expanded eligibility for this program beyond NATO and major non-NATO allies to include friendly countries. No-Cost Equipment Loans Section 65, AECA, authorizes the loan by international agreement of a U.S defense article at no- cost to a country for the expressed purpose of furthering a cooperative RDT&E program. Again, this program is managed within the DoD acquisition community by USD(AT&L). Arrow Missile For several years, DoD has been provided annual authority and funding for the early development and now current production of the Israeli Arrow missile defense system to include production both in the U.S. and in Israel. For FY 2006, $60 million in DoD funding is provided by Section 8088, P.L.109- 148, Section 8088, for the continued support of this program. P.L.109-289, Section 8079, expanded this program appropriation to $138 million for FY 2007. International Training and Education Department of Defense Regional Centers for Security Studies Over the course of time, a variety of Title 10 authorities and DoD appropriations were used to develop the fi ve regional centers for security studies. The centers serve as a mechanism for communicating U.S. foreign and defense policies to international students and a means for countries to provide feedback to the U.S. concerning these policies and communicating country policies to the U.S. The regional centers' activities include education, research, and outreach. They conduct multi-lateral courses in residence, seminars within their region, and conferences that address global 1-13 Introduction to Security Cooperation and regional security challenges, such as terrorism and proliferation. Participants are drawn from the civilian and military leadership of allied and partner nations. Security assistance funding is not used to pay for the centers or the students attending them. However, under certain circumstances, DoD funds may be used to fund foreign attendance at the centers. The under secretary of defense for policy (USDP) in coordination with the affected combatant commander provides oversight for the fi ve centers. DoDD 5200.41 provides policy and management guidance. Beginning in FY 2006, DSCA began administering the DoD centers under the direction of the USDP. The fi ve centers include: Africa Center for Strategic Studies (ACSS), located at the National Defense University in Fort McNair, Washington, D.C. was established in 1999. Asia-Pacifi c Center for Security Studies (APCSS), located in Honolulu, Hawaii, was established in 1995. Center for Hemispheric Defense Studies (CHDS), located at the National Defense University in Fort McNair, Washington, D.C. was established in 1997. George C. Marshall European Center for Security Studies (MC), located in Garmisch, Germany, was established in 1993. Near-East South Asia Center for Strategic Studies (NESA Center), located at the National Defense University in Fort McNair, Washington, D.C. was established in 2000. Section 904 of the NDAA for FY 2007 codifi ed the authority for these regional centers with a new 10 U.S.C 184. Regional Defense Combating Terrorism Fellowship Program The post-September 11, 2001 regional defense combating terrorism fellowship program ( CTFP) was established in 2002 fi rst with DoD funding, later DoD authorizations, and now 10 U.S.C. 2249c. The purpose of the program is to help key partner nations cooperate with the U.S. in the fi ght against international terrorism by providing related education and training on a grant basis to foreign military and civilian personnel. It is to bolster the capacity of friends and allies to detect, monitor, interdict, and disrupt the activities of terrorist networks ranging from weapons traffi cking and terrorist-related fi nancing to actual operational planning by terrorist groups. The assistant secretary of defense for global security affairs [ASD (GSA)] is the OSD manager of CTFP in coordination with the COCOMs. The day-to-day administration of the program is performed by DSCA. $20 million was appropriated to DoD for CTFP. The management of quotas is very similar to that of IMET. Section 1204, P.L.109- 364, amended the annual funding authority to $25 million. Senior War College 10 U.S.C. 2111 authorizes DoD and the MILDEPs to provide quotas to international students to attend the various senior offi cer war colleges. Military Academies The MILDEP secretaries each may provide up to sixty quotas at any one time to foreign military students to attend the three military academies. The secretary of defense may waive all or any part of the requirement to reimburse any cost for attendance. The invitations to attend the academies are offered by the MILDEP secretaries usually through the DAO. The authorities for attending the 1-14 Introduction to Security Cooperation military academies are 10 U.S.C. 4344(a)(1) for the U.S. Military Academy; 10 U.S.C. 6957(a)(1) for the U.S. Navy Academy; and 10 U.S.C. 9344(a)(1) for the U.S. Air Force Academy. These programs are not considered security assistance. Military Academy Student Exchanges By international agreement, the MILDEP secretaries each may authorize up to 24 students annually to participate in the reciprocal exchange of cadets to attend the appropriate military academies. The authorities for this exchange program are 10 U.S.C. 4345 for the U.S. Military Academy; 10 U.S.C. 6957a for the U.S. Navy Academy; and 10 U.S.C. 9345 for the U.S. Air Force Academy. Professional Military Education Student Exchanges Section 544(a), FAA, authorizes by international agreement no-cost, reciprocal professional military education (PME) student exchanges. PME usually includes attendance at the MILDEP leadership and management education institutions but not to include the service academies. The U.S. participant in this program will attend the equivalent institution in the foreign country and be administratively managed by either the local DAO or SAO. Flight Student Exchanges Section 544(b), FAA, authorizes by international agreement no-cost, reciprocal fl ight, to include test pilot schools, training student exchanges. This may include military or civilian defense personnel. Again, the U.S. students in a country may be administratively managed by either the DAO or SAO. Aviation Leadership Program Section 544(c), FAA, authorizes the cooperative participation of foreign and U.S. military and defense civilian personnel in post-under-graduate fl ying training and tactical leadership programs at locations in Southwest Asia without charge to participating foreign countries. IMET funds are not to be used in support of this program. U.S. participation is to be funded by the MILDEP. A presidential national interest waiver may be used to allow a country to participate on a no-cost basis with the U.S. MILDEP absorbing the charge. Latin America Training Waiver 10 U.S.C. 1050 authorizes the waiving of training and education costs for a Latin American student to attend a U.S. military training institution. The applicable MILDEP will absorb the waived costs. Humanitarian Assistance and Mine Action Programs These programs were the fi rst DoD-funded programs to be administered by DSCA under the new security cooperation term. It should be noted that the DoS has parallel programs. Much of this assistance is provided in coordination with the U.S. embassy, the combatant commander, DoS, ASD(SOLIC), and U.S. Transportation Command (USTRANSCOM). P.L.109-148 appropriates and P.L.109-163 authorized $62 million for use during FY 2006 for expenses related to DoD overseas humanitarian, disaster, and civic aid (OHDACA) programs. P.L.109-289 appropriated a similar amount of $63 million for FY 2007. Requests for OHDACA funds for any of these programs generally begin in country with the SAO and are consolidated and prioritized at the COCOM level before forwarding to 1-15 Introduction to Security Cooperation DSCA. P.L.109-148 additionally authorizes the emergency supplemental appropriation of $40 million in DoD humanitarian assistance for victims of the northern Pakistan earthquake. Humanitarian and Civic Action during Military Operations 10 U.S.C. 401 authorizes military forces to carry out humanitarian and civic action (HCA) projects and activities in conjunction with military operations. The combatant commander nominates such action for OSD staffi ng primarily within (ASD/SOLIC) and DSCA for approval and funding. DoDD 2205.2 and SAMM, C12.3.4, provide policy guidance and DoD component responsibilities for the DoD HCA program. Humanitarian Assistance Transportation 10 U.S.C. 2561 authorizes DoD to fund transportation of humanitarian relief world-wide for non- profi t, non-government, and private volunteer organizations. SAMM, C12.3.5, provides guidance for this transportation program. 10 U.S.C. 402 authorizes DoD to provide transportation on a space-available basis of humanitarian relief supplies furnished by a non-government organization. SAMM, C12.3.6, provides guidance for this transportation program. This program is often referred to as the Denton Program. Foreign Disaster Relief 10 U.S.C. 404 authorizes DoD to assist countries in its response to man made or natural disaster when necessary to prevent the loss of life. This program enables the combatant commanders to respond quickly and effectively to disasters in their area of operations and to manage the humanitarian dimensions of security crises. The COCOM engage in foreign disaster relief and emergency response (FDR/ER) activities only when directed by the president, with the concurrence of the secretary of state, and in emergency situations to save lives. Activities may include services and supplies, logistical support, search and rescue, medical evacuation, and refugee assistance. The FDR/ER program allows for the delivery of humanitarian daily rations (HDR) for use in foreign countries to alleviate hunger after man made or natural disasters. SAMM, C12.3.8 provides guidance for this emergency humanitarian assistance. Humanitarian Daily Rations 10 U.S.C. 2561 authorizes DoD funding and provision of low cost, nutritional, easily deliverable, daily rations for alleviating hunger in countries after a man made or natural disaster. SAMM, C12.3.7, provides guidance for this emergency assistance program. Excess Property Humanitarian Assistance 10 U.S.C. 2557 authorizes DoD to provide excess non-lethal supplies to foreign governments and civilian organizations for humanitarian relief purposes when requested by the U.S. embassy. DoD processes, refurbishes, stores, and transport the property to the country for distribution by the U.S. embassy. SAMM, C12.3.1, provides guidance for this humanitarian relief program. Humanitarian Demining Assistance 10 U.S.C. 407 authorizes DoD in conjunction with military operations to assist countries in the detection of landmines, and to train partner nations in the procedures of landmine clearance, mine risk education, and victims' assistance. The humanitarian demining assistance (HDA) program also 1-16 Introduction to Security Cooperation develops indigenous leadership and organizational skills to sustain the effort after the departure of U.S. trainers. Except for the concurrent purpose of supporting U.S. military operations, no DoD personnel may engage in the physical detection, lifting, or destroying of landmines. 10 U.S.C. 407 authorizes the annual use of $10 million by DoD for humanitarian mine action activities. SAMM, C12.3.3, provides guidance regarding this humanitarian mine action (HMA) program. DSCA manages this program through the U.S. Army's Humanitarian Demining Training Center at Fort Leonard Wood, Missouri. Commander's Emergency Response Program Section 9007, P.L.109-148, authorized the use of up $500 million in FY 2006 DoD funding for the commander's emergency response program (CERP). The purpose of this program is to enable commanders in Iraq to respond to urgent humanitarian relief and reconstruction requirements. This funding is also for a similar program in Afghanistan. Section 9006, P.L.109-289, provides for the same funding level for CERP during FY 2007. Military-to-Military Contact Programs These cooperative programs have been around for a long time and continue today as a general program to establishing and strengthening professional (and personal) relationships between two country counterparts. In addition to learning new ideas, personal insights and cultural understandings are gained by all participants which often prove to be deciding factors in successful future diplomatic and military interfaces. Traditional Combatant Commander Activities 10 U.S.C. 168 authorizes DoD, normally the COCOM, to conduct military-to-military contacts and comparable activities with allied and friendly countries designed to encourage a democratic orientation of defense establishments and military forces. Some functions include traveling contact teams, military liaison teams, exchange of military and civilian personnel, seminars, and conferences within the COCOM area of responsibility. Funding for the traditional COCOMer activities (TCA) program is provided to the COCOM by the MILDEPs that act as executive agents. Developing Country Attendance at Bilateral Meetings 10 U.S.C. 1051 authorizes the use of DoD funds to support the attendance of representatives from developing countries to attend usually COCOM-sponsored bilateral and multilateral meetings. State Partnership Program The National Guard State Partnership Program (SPP) links U.S. states with partner countries for the purpose of supporting the national security objectives and goals of the combatant commander and the partnered country's U.S. ambassador. The National Guard's involvement refl ects an evolving international affairs strategy using the unique civil-military nature of the National Guard to interact with both civil and defense personnel of foreign countries. The state partners actively participate in a host of engagement activities ranging from bilateral familiarization and training events, emergency management, environmental remediation exercises, fellowship-style internships, educational exchanges, and civic leader visits. All activities are coordinated through the geographic combatant commander and the U.S. ambassador's country team, and other agencies as appropriate, to ensure that National Guard support is tailored to meet both U.S. and country objectives. 1-17 Introduction to Security Cooperation The SPP was established following the National Guard Bureau's (NGB) 1993 proposal to pair state National Guards with the Baltic countries of Estonia, Latvia, and Lithuania. The NGB proposal was prompted by CINCEUR's earlier decision to staff the Military Liaison Teams (MLTs) in the Baltics with reserve component personnel. The SPP thus began as a bilateral military-to-military contact program to engage the countries of Central and Eastern Europe, and is a direct outgrowth of EUCOM's Joint Contact Team Program (JCTP). It since has grown to include 47 U.S. states, two territories, and the District of Columbia partnered with 63 countries in the EUCOM, AFRICOM, CENTCOM, PACOM, and SOUTHCOM areas of responsibility. Figure 1-1 illustrates the partnerships. All state National Guards have an SPP coordinator who manages the program from the state National Guard headquarters. Many partnerships also include a National Guard offi cer, known as a bilateral affairs offi cer (BAO), who is assigned to the SAO in country to manage SPP activities and events. Details are available at the web site of the National Guard Bureau, Offi ce of International Affairs (J5-IA), at http://www.ngb.army.mil/ia/Default.aspx. 1-18 Introduction to Security Cooperation Defense Personal Exchange Program The National Defense Authorization Act for Fiscal Year 1997, P.L.104-201, Section 1082, authorizes DoD and the MILDEPs to enter into international agreements for the reciprocal, no-cost exchange of already qualifi ed military or defense civilian personnel with allied or friendly countries. This personnel exchange program (PEP) is widely subscribed to throughout DoD to include the 63 Countries linked to 47 states, 2 territories and Washington, D.C. Alabama / Romania Minnesota / Norway Alaska / Mongolia Mississippi / Bolivia Arizona / Kazakhstan Missouri / Panama Arkansas / Guatemala Montana / Kyrgyzstan California / Ukraine Nevada / Turkmenistan California / Nigeria New Hampshire / El Salvador Colorado / Jordan* New Jersey / Albania Colorado / Slovenia* New Mexico / Costa Rica Connecticut / Uruguay New York / South Africa Delaware / Trinidad-Tobago North Carolina / Moldova District of Columbia / Jamaica North Dakota / Ghana Florida / Venezuela* Ohio / Hungary Florida / Guyana* Ohio / Serbia Florida / Eastern Caribbean Islands Oklahoma / Azerbaijan Georgia / Georgia Pennsylvania / Lithuania Hawaii / Guam** / Philippines Puerto Rico / Honduras* Hawaii / Indonesia Puerto Rico / Dominican Republic* Illinois / Poland Rhode Island / Bahamas Iowa / Russia South Dakota / Suriname Indiana / Slovakia Tennessee / Bulgaria Kansas / Armenia Texas / Nebraska* / Czech Republic Kentucky / Ecuador Utah / Morocco Louisiana / Belize* Vermont / Macedonia Maine / Montenegro Virginia / Tajikistan Maryland / Estonia Washington / Thailand Maryland / Bosnia* West Virginia / Peru Massachusetts / Paraguay Wisconsin / Nicaragua Michigan / Latvia Wyoming / Tunisia Minnesota / Croatia * States with two countries ** Countries with two States Figure 1-1 State Partnership Partners 1-19 Introduction to Security Cooperation administrative, intelligence, acquisition, training and education, and operational and reserve unit and staff communities. A sample of these programs includes: Foreign counterpart visits for the service chiefs of the Army, Air Force, and Navy Personnel exchange programs managed by each of the four military services The Army's reciprocal unit exchange program The DoD reserve offi cers foreign exchange program SUMMARY Security assistance has been part of our nation's history ever since the Revolutionary War. Since World War II, security assistance has become an institutionalized and continuing program used to advance U.S. interests in a global environment. The term security assistance itself is subject to differing interpretations. The SAMM lists twelve programs within security assistance of which seven are administered by DSCA. Within the annual CBJ, there are seven major security assistance programs requiring appropriated funds as well as several others which are discussed in some detail. The relatively recent development and use of the term security cooperation which incorporates the DoD-managed security assistance programs has become the standard to describe all DoD international activities. If the past is any predictor of the future, security assistance is not just a short-range program; rather, it will be in existence for many years to come. In this regard, the words of former Deputy Secretary of Defense, William P. Clements, Jr., are as appropriate today as when they were spoken several years ago. Many contend that such a program [as security assistance] has outlived its usefulness and is an anachronism in these days of a trend towards detente. To do so is not only to misread the history of the past twenty-fi ve years but to misinterpret the signs of the times. The record is open to all who care to consult it. That record fully substantiates the conclusion that the world situation in which we currently fi nd new hope for the future would not exist if the people of the United States had earlier refused to concern themselves with the common defense of the Free World. Had we not become involved and, for more than two decades, supported and encouraged the efforts of allied and friendly countries to protect themselves against threats to their territorial integrity and internal security, the complexion of the globe might be dangerously different today, and the international climate far more hostile. [Commander's Digest, July 12, 1973] The broad defi nition of security cooperation to include all DoD international programs and those seven FAA/AECA-authorized programs administered by DSCA has signifi cantly increased the playing fi eld within DoD ranging from the secretary of defense to the COCOM to the in-country DAO/SAO. No one community within DoD is not affected by security cooperation and its use in achieving U.S. foreign policy and national security objectives. REFERENCES Organization of the Joint Chiefs of Staff. United States Military Posture for FY (year). 1-20 Introduction to Security Cooperation Organization of the Joint Chiefs of Staff. Department of Defense Dictionary of Military and Associated Terms, as amended through 9 June 04, Joint Publication 1-02, 12 April 2001. Stockholm International Peace Research Institute. World Armaments and Disarmament: SIPRI Yearbook (year), New York: Crane, Russak & Co., Inc. U.S. Department of Defense. Security Assistance Management Manual (SAMM), DoD 5105.38-M, Chapters 1, 11, and 12. U.S. Department of State. Congressional Budget Justifi cation for Foreign Operations (fi scal year). U.S. Congress, Foreign Operations, Export Financing, and Related Programs Appropriations Act (fi scal year). 2-1 Security Assistance Legislation and Policy INTRODUCTION The United States (U.S.) security assistance program has its foundation in the U.S. public laws which provide security assistance authorizations and appropriations. The purpose of this chapter is to examine and highlight some of the key provisions of these security assistance-related statutes. CONGRESSIONAL AUTHORIZATIONS AND APPROPRIATIONS Certain security assistance programs must be authorized and appropriated. Four such programs include the international military education and training (IMET) program, the foreign military fi nancing program (FMFP), the economic support fund (ESF), and peacekeeping operations (PKO). Foreign military sales ( FMS), commercial exports or direct commercial sales (DCS), drawdowns, and leasing are also addressed in security assistance legislation, not from a funding standpoint, since U.S. appropriated dollars are not involved, but from a reporting, control, and oversight perspective. Authorization Acts With respect to the current U.S. security assistance program, two basic laws are involved. They are: Foreign Assistance Act of 1961 (FAA), as amended Arms Export Control Act (AECA), as amended Both the FAA and AECA follow a succession of earlier acts which served as the basis for many of the current provisions in the FAA and AECA. The FAA, originally enacted on 4 September 1961, contains many provisions which were formerly in the Mutual Security Act of 1954, as amended. Today, the FAA is the authorizing legislation for IMET, ESF, PKO, overseas security assistance program management, grant transfer of excess defense articles, emergency drawdowns, and a wide variety of other foreign assistance programs. Although the FAA contains well over 700 sections, much of the Act refers to programs outside the purview of security assistance for example: Development assistance Famine prevention International organizations The Support for East European Democracy Act of 1989 (SEED) Freedom for Russia and Emerging Eurasian Democracies and Open Markets (FREEDOM) Support Act International Counter Narcotics and Law Enforcement (INCLE) The AECA came into being under a different title, the Foreign Military Sales Act of 1968 (FMSA). Before 1968, the basic authority for FMS was the FAA. The FMSA served to incorporate the FMS program under a new and separate act. The International Security Assistance and Arms Export Control SECURITY ASSISTANCE LEGISLATION AND POLICY Chapter 2 2-2 Security Assistance Legislation and Policy Act of 1976 changed the title of the FMSA to the current AECA. This 1976 Act also repealed Section 414 of the Mutual Security Act of 1954 which provided authority for commercial licensing through the International Traffi c in Arms Regulations ( ITAR). The commercial licensing DCS authority was placed in a new Section 38, AECA, Control of Arms Exports and Imports, which governs the licensing and sale of items through direct commercial channels. The AECA is the statutory basis for the conduct of FMS, funding for FMFP, and the control of commercial sales of defense articles and services. Figure 2-1 addresses the various acts discussed above in the context of their relationships to one another. Figure 2-1 Major Security Assistance Authorization Acts Since 1954 The FAA and the AECA may be amended by annual or biennial security assistance authorization acts. However, recently Congress has used annual Department of Defense (DoD) and Department of State (DoS) legislation along with any stand-alone legislation such as P.L. 104-164, 21 July 1996, and various functional laws such as the International Narcotics Control Act (INCA) or the Afghanistan Freedom Support Act (AFSA) of 2002 to amend the FAA or AECA. Congress was temporarily successful in the authorization process by legislating the Security Assistance Act of 2000, P.L. 106- 280, 6 October 2000, and the Security Assistance Act of 2002, P.L. 107-228, 30 September 2002, for fi scal years (FYs) 2000 through 2003. No security assistance authorizations were specifi cally enacted for FYs 2004 through 2007. In the absence of an authorization act, the appropriations committee has included program authorization language to the affected annual appropriations act. The Senate Foreign Relations Committee (SFRC) and the House Foreign Affairs Committee (HFAC) are responsible for foreign assistance and security assistance program authorization legislation. The Senate Armed Services Committee (SASC) and the House Armed Services Committee (HASC) are Foreign Assistance Act of 1961 Foreign Military Sales Act of 1968 (Name Change, 1976) Arms Export Control Act FMFP FMS Commercial Exports Mutual Security Act of 1954 FMS Aid/Other FMS Commercial Exports (Munitions List) FMS Grant Aid/Other (e.g., EDA, IMET, ESF, PKO) Foreign Assistance Acts of 1962, 1963, 1964, etc. International Security Assistance and Arms Export Control Act of 1976 International Security Assistance Acts of 1977, 1978, and 1979 International Security and Development Cooperation Acts of 1980, 1981, and 1985 Examples of Annual Amendatory (Authorization) Acts Security Assistance Acts of 2000 and 2002 2-3 Security Assistance Legislation and Policy responsible for defense programs authorization legislation which has included DoD authorities related to security assistance and authorities for the broadly defi ned security cooperation programs. Both security assistance and security cooperation authorized programs were addressed in earlier Chapter 1, "Introduction to Security Cooperation." Appropriations Acts Security assistance appropriations are included in the annual Foreign Operations, Export Financing, and Related Programs Appropriations Act (FOAA) for (year). As its title suggests, this act is the appropriation authority for several foreign relations programs, including security assistance. This act is one of twelve appropriations acts required every FY. Should a new FY begin before an appropriation act has been approved, Continuing Resolution Authority (CRA) is essential to keep the funded foreign assistance programs from coming to a standstill. The CRA is the authority to obligate funds against the FMFP, IMET, ESF, PKO, or other related security assistance appropriations for the new FY under a CRA granted by Congress in a Joint Resolution making temporary appropriations prior to passage of the regular appropriations act, or in lieu of such an act. Normally, the CRA is for a designated period less than a FY, and such a CRA does not usually allow funding for the start of any new programs. The FY 2007 appropriations process was a different but not unprecedented use of a CRA. With exception of the already enacted appropriations for Departments of Defense and Homeland Security, the fourth CRA for FY 2007, P.L.110-5, 15 February 2007, provided for the remaining ten required appropriations, to include the FOAA, for the rest of the FY. Unless otherwise indicated in the CRA, program requirements, authorities, prohibitions, limitations, conditions, and appropriations for FY 2006 are to apply likewise for FY 2007 [Sec. 104, P.L.110-5]. The House Appropriations Committee (HAC) and the Senate Appropriations Committee (SAC) are the committees responsible for the timely legislating of all twelve annual bills. The 11 September 2001 (9/11) terrorist attack at the end of FY 2001 and military operations in Afghanistan and Iraq, coupled with domestic and world-wide natural disasters requiring vast amounts humanitarian and reconstruction assistance, further complicated the legislative appropriations process with the requirement for annual emergency supplemental appropriations, often including security assistance funding, in addition to the standard appropriations. The emergency supplemental for FY 2007 was U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, P.L.110-28, 25 May 2007. Chapter 1, "Introduction to Security Cooperation" provides information on recent appropriations legislation for FY 2007 and proposals for FY 2008. Federal Statutes, Regulations, and Federal Register on the Internet The publication of U.S. law and regulations and announcement of offi cial determinations, certifi cations, or notifi cations can be located in a timely manner at several different open U.S. government (USG) web sites on the internet. Slip Laws The fi rst offi cial publication of a law is often referred to as a "slip law" because of how it was once printed and bound for distribution. Because of wide internet access and the printing expense, slip laws are rarely used today. The best source for these now electronic slip laws is the Library of Congress (LOC) "Thomas" web site: http://thomas.loc.gov/. This site provides public access to the legislative process ranging from the fi rst introduction of a bill, to committee and conference reports, to passage by both houses, to enactment by the president, and fi nally to the assignment of a public law 2-4 Security Assistance Legislation and Policy (P.L.) number by the archivist of the U.S. within the offi ce of the federal register before paper printing by the government printing offi ce (GPO). Public law numbers are assigned based on the convening congress; e.g., P.L.109-145 is the 145th law of the 109th Congress. An extension of this example is the 109th Congress had two sessions: the fi rst being calendar year (CY) 2005 and the second being CY 2006. The session numbering and time period of the congress coincide with the term of the just elected House of Representatives. The enacted laws for the fi rst session CY 2005 of the 109th Congress included P.L.109-1 through P.L.109-318. The second session CY 2006 laws of the 109th Congress included P.L.109-319 through P.L.109-482. All laws, including the annual appropriations and authorization acts, are initially slip laws that are compiled for each session of Congress into bound volumes, in order of enactment, referred as "statutes at large." Every six years, the statutes at large are incorporated into the United States Code (U.S.C.) in a process referred to as codifi cation. However, a supplement is published during each interim year until the next comprehensive U.S.C. volume publication. United States Code The U.S.C. is the codifi cation of the general and permanent laws of the U.S. by the offi ce of the law revision counsel of the House of Representatives. The U.S.C. divides the laws into fi fty general subject areas and published by the offi ce of the law revision center. Maintaining an up-to-date copy of the lengthy U.S.C. is very costly and diffi cult to administer; however, it can be accessed within the GPO database via the internet at http://www.gpoaccess.gov/uscode/index.html. The general subject areas are referred as "titles." Most security assistance laws can be viewed under Title 22, "Foreign Relations and Intercourse." Certain security assistance related and security cooperation law can be viewed under Title 10, "Armed Forces." These titles are often referred to when differentiating between authorities and appropriations for the DoS and its responsibility for foreign affairs, and the DoD and its responsibility for national defense. Legislation on Foreign Relations Through (year) As a more timely reference, the SFRC and HFAC will annually publish a multi-volume set of documents to refl ect new and amending legislation enacted from the previous calendar year to also include any related executive orders. Volume 1-A provides an up-to-date printing of the FAA and the AECA as well as any relevant still in effect portions of prior year appropriations and authorizations acts. As with the slip laws, a printed copy of this publication is diffi cult to come by and the January 2006 edition can be viewed on the internet at http://www.dsca.mil/programs/LPA/2006/faa_aeca.paf. The section footnotes of this document provide the tools in determining the slip law and U.S.C. section cross-referencing relationship. Both the Defense Security Cooperation Agency (DSCA) and Defense Institute of Security Assistance Management (DISAM) web pages provide URL links to this useful document. Slip Law and U.S.C. Relationship Once the slip law is codifi ed into the appropriate general subject title, it can be referred to as its original enactment title, public law number, original section numbers, and date of passage with any subsequent amendments. Or it can be referred to as its U.S.C. title number with section numbers but different from those in the slip law. For example, Section 21, Sales from Stocks, of the AECA, P.L.90-629, 22 October 1968, as amended, is codifi ed as Title 22 U.S.C. Section 2761 with the same section title. 2-5 Security Assistance Legislation and Policy A security cooperation law example of this relationship is the initial funding, authority, and later codifi cation of the now combating terrorism fellowship program (CTFP). Funding for this program was fi rst provided in 2002 by DoD appropriations and annually thereafter. Subsequent DoD authorizations also provided for this program with Section 1221 of the National Defense Authorization Act for Fiscal Year 2004, P.L.108-136, 24 November 2003, fi nally amending Title 10 U.S.C. with a new Section 2249c authorizing CTFP on a permanent basis. Code of Federal Register The Code of Federal Register (CFR) is the codifi cation of general and permanent rules published in the Federal Register (FR) by the executive branch and its agencies. Using the same U.S.C. organization procedure, the CFR is arranged into fi fty general subject areas. Using administrative law authority and procedures, CFR regulations generally have the same authority as the law authorizing the regulation. A security assistance example of this procedure is the ITAR, 22 CFR Parts 120-130, which by delegation of authority is maintained by the deputy assistant secretary of state for defense trade controls (PM/DDTC). The authorizing authority for the ITAR is Section 38(a)(1), AECA [22 U.S.C. 2778]. The offi cially published ITAR can be viewed at the GPO site: http//ww.gpoaccess. gov/cfr/index.html or in a timely manner, at the Bureau of Political-Military Affairs, Directorate of Defense Trade Control (PM/DDTC) site: http://www.pmddtc.state.gov/consolidated.itar.htm. Both the DSCA and DISAM webs provide convenient uniform resource locator (URL) links to these sites. Using administrative law procedures, any proposed changes to the CFR are generally available for public comment along with notice of fi nal changes in the daily Federal Register also maintained by GPO. Federal Register The FR is a daily publication of rules, proposed rules, notices by federal agencies, executive orders, and other presidential documents. Though paper printed twice each year, a more timely access to the FR is through the GPO web site in either text or adobe portable document (PDF) at: http://www. gpoaccess.gov/fr/index.html. Both the printed document and the web site have the announcements arranged on a daily basis for each agency (in alphabetical order) with a calendar year making a volume; e.g., CY 2007 is volume 72. There are no entries or announcements on weekends or federal holidays. A security assistance example in the use of the FR is the 30 May 2007 public notice on the Federal Register, volume 72, number 103 at: http://a257.g.akamaitech.net/7/257/2422/01jan2007/1800/ edocket.access.gpo.gov/2007/pdf/07-2637.pdf. by DoD/DSCA of a proposed 36(b)(1) FMS sale to Iraq. Section 36(b)(1), AECA [22 U.S.C. 2776(b)(1)] requires this advance notifi cation to Congress. Section 155, P.L.104-164, 21 July 1996, amended the U.S.C. with a new Section 36(f), AECA [22 U.S.C. 2776(f)] requiring the full unclassifi ed text of any advance notifi cation of a sale to Congress be published in the FR. It should be noted that DSCA provided a routine and prompt public announcement of this proposed 36(b)(1) FMS sales notifi cation on 18 May 2007 on its web site specifi cally at http:// www.dsca.mil/PressReleases/36-b/2007/Iraq_07-30.pdf. Defense Institute of Security Assistance Management Web Page Selected security assistance legislation and other related policy documents listed below can be located and viewed through a series of URL links on the DISAM web site at http://www.disam.dsca. mil/pubs/USG/USGPubs.htm. DoS international affairs (function 150) budget requests Congressional budget justifi cations (CBJ) for foreign operations Current and recent past FOAAs 2-6 Security Assistance Legislation and Policy Current and recent past related Emergency Supplemental Appropriations Acts Current and recent past security assistance legislation articles from the DISAM Journal FAA/AECA DoS and USAID Strategic Plan for FY 2007 FY 2012 DoS active world map with security assistance information Conventional arms transfer policy (PDD-34) of 17 February 1995 Defense trade security initiative (DTSI) of 26 May 2000 The ITAR DoD/DSCA 36(b), AECA, congressional notifi cations for FMS letters of offer and acceptance (LOAs) DoS/PM/DDTC 36(c) and 36(d), AECA, congressional notifi cations for DCS licenses International Program Security (IPS) Handbook International Armaments Cooperation (IAC) Handbook LEGISLATED MANAGEMENT OF SECURITY ASSISTANCE FUNDING Funding Obligations and Reprogramming Section 653(a), FAA, requires a presidential notifi cation, delegated to the secretary of state, to Congress to allocate any funds appropriated by the annual FOAA. This funding allocation report must be made no later than thirty days after the enactment of a law appropriating funds to carry out any provision of the FAA or the AECA. Identifi ed in the report is each foreign country and international organization to which the USG intends to provide any portion of the appropriated funds, and the amount of funds, by category of assistance, that the USG intends to provide to each. Section 634(a), FAA, is the principal authority covering funding obligations and reprogramming actions. In general, special notifi cation to Congress is required fi fteen days in advance of any obligation of funds appropriated to carry out the purposes of the AECA or the FAA for any activities, programs, projects, types of material assistance, countries, or other operations which have not been justifi ed to Congress or which are in excess of the amount justifi ed to the Congress. This notifi cation must be provided to the congressional foreign relations and appropriations committees. Additionally, the notifi cation must be made whenever a proposed reprogramming of funds exceeds $1,000,000 and the total amount proposed for obligation for a country under the AECA in a FY exceeds by more than $5,000,000 the amount specifi ed for that country in the Section 653(a), FAA, report to Congress. The notifi cation to Congress of such proposed reprogramming must specify the nature and purpose of the proposed obligation and to the extent possible, the country for which such funds would otherwise have been obligated. Further statutory provisions regarding funding commitments for FMFP, IMET, ESF, and PKO are found in the annual FOAA. Under these provisions, special notifi cation to the two appropriations committees is required fi fteen days prior to the commitment of these security assistance funds when such funds are to be expended for the acquisition of specifi c types of defense articles which have not been previously justifi ed to Congress, or which exceed by twenty percent the quantities previously justifi ed 2-7 Security Assistance Legislation and Policy to Congress. This provision applies to the specifi ed defense articles of major defense equipment other than conventional ammunition, aircraft, ships, missiles, or combat vehicles [Section 515, P.L. 109- 102]. Availability of Funds FMFP and ESF are the only security assistance programs identifi ed specifi cally in law for which appropriated funds may be made available for obligation after the expiration of the FY for which they were appropriated [Section 511, P.L. 109-102]. Transfers of FMF funds to the FMS trust fund are expenditure transfers. Once transferred, FMF funds are expended and remain available indefi nitely for disbursement. The IMET program does not have a similar multi-year feature, and all IMET funds, with two important exceptions, must be expended within the FY for which they were appropriated. The fi rst exception involves what is termed an IMET FY fi fth quarter. This procedure permits uncommitted appropriated dollars to be committed no later than 30 September of a given FY, but to be spent in the subsequent three-month period (i.e., the fi fth quarter), through 31 December. The second exception began in FY 1999 when $1M of the total funding appropriated for IMET is to remain available until expended. This fi gure was changed to $3M for each FY beginning with FY 2002. This authority is to allow for the expenditure of all IMET funding without the loss of it at the end of the FY. [Title III, P.L.109-102 for FY 2006] Non-Refunded Security Assistance Programs The FMS and DCS components of the security assistance are fully funded by direct cash outlays of the purchasing countries. Consequently, these security assistance activities do not require congressional budget authorizations or appropriations. Nevertheless, the fi nancial activity generated by FMS cash purchases has a substantial impact on USG fi nancial programs. Special accounting procedures have been instituted for the management of these funds, and FMS cash activities are documented in the annual U.S. budget in terms of the FMS Trust Fund. This trust fund will be furthered addressed in later Chapter 12, "Foreign Military Sales Financial Management." BASIC POLICIES The remainder of this chapter discusses a broad variety of statutory provisions which govern the management of security assistance. These provisions have been selected from the FAA, the AECA, or other sources, as identifi ed, and are representative of the wide range of legislative rules which enable Congress to exercise its regulatory and oversight responsibilities. For ease of reference, applicable legislative references are cited either at the conclusion of the discussion of specifi c provisions or at the beginning of the discussion of a set of related provisions. Reaffi rmation of U.S. Security Assistance Policy The Congress reaffi rms the policy of the U.S. to achieve international peace and security through the United Nations so that armed forces shall not be used except for individual or collective self- defense. The Congress hereby fi nds that the efforts of the U.S. and other friendly countries to promote peace and security continue to require measures of support based upon the principle of effective self- help and mutual aid [Section 501, FAA]. Ultimate Goal The ultimate goal of the U.S. continues to be a world which is free from the scourge of war and the dangers and burdens of armaments; in which the use of force has been subordinated to the rule of 2-8 Security Assistance Legislation and Policy law; and in which international adjustments are achieved peacefully. To achieve that goal, remains the policy of the U.S. to encourage regional arms control and disarmament agreements, and to discourage arms races. It is the policy of the U.S. to exert leadership in the world community to bring about arrangements for reducing the international trade in implements of war [Section 1, AECA]. Purpose of Arms Sales Congress recognizes that U.S. and other free and independent countries have valid defense requirements. Because of the growing cost and complexity of defense equipment, it is increasingly diffi cult and uneconomical for any country to fi ll all of its legitimate defense requirements from its own design and production base. It is the policy of the U.S. to facilitate the common defense by entering into international arrangements which further the cooperative exchange of data, research, development, production, procurement, and logistics support. To this end, the AECA authorizes sales by the USG to friendly countries in furtherance of the security objectives of the U.S. and in consonance with the principles of the United Nations Charter [Section 1, AECA]. Defense articles and services shall be furnished or sold solely for: Internal security Legitimate self-defense Preventing or hindering the proliferation of weapons of mass destruction and the means of delivering such weapons Permitting the recipient country to participate in regional or collective arrangements consistent with the Charter of the United Nations Supporting economic and social development activities by foreign military forces in less developed countries [Section 502, FAA, and Section 4, AECA] Arms Sales and United States Foreign Policy It is the sense of the Congress that arms sales shall be approved only when they are consistent with U.S. foreign policy interests [Section 1, AECA]. The DoS and USAID Strategic Plan for FY 2007 through 2012 http://www.state.gov/documents/organization/82819.pdf includes fi ve overall strategic goals: Achieve peace and security Governing justly and democratically Investing in people Promoting economic growth and prosperity Providing humanitarian assistance The FAA and AECA provide various conventional arms transfer authorities to the president. The post-cold war era decision-making criteria used by the administration for determining FAA and AECA-authorized arms transfers was promulgated by the White House on 17 February 1995 as presidential decision directive (PDD) 34, U.S. Conventional Arms Transfer Policy (CATP) which can be viewed at http://www.disam.dsca.mil/pubs/USG/pressrelease/ ARMSTRAN95.htm. Though the CATP was promulgated in 1995, it continues to be used today by the USG for determining whether an arms transfer is to take place. 2-9 Security Assistance Legislation and Policy Effect on United States Readiness FMS sales which would have an adverse effect on U.S. combat readiness shall be kept to an absolute minimum. For such sales, special congressional reporting is required [Section 21(i), AECA]. Conventional Arms Restraint Congress encourages the president to continue discussions with other arms suppliers in order to restrain the fl ow of conventional arms to less developed countries. It is the sense of the Congress that the aggregate value of foreign military sales in any FY shall not exceed current levels [Section 1, AECA]. This provision was added to the AECA in June 1976. Accordingly, the base year for "current levels" was FY 1975, which had a combined total of FMS and foreign military construction sales of $15.8 billion. Security Assistance Surveys Security assistance surveys include any survey or study conducted in a foreign country by USG personnel for the purpose of assessing the needs of that country for security assistance. Defense requirement surveys, site surveys, general surveys or studies, and engineering assessment surveys all represent various types of security assistance surveys. It is the policy of the U.S. that the results of security assistance surveys do not imply a commitment by the U.S. to provide any military equipment to any foreign country. Recommendations in such surveys should be consistent with the arms export control policy provided in the AECA. As part of the quarterly report required by Section 36(a), AECA, the president shall include information on all such surveys authorized during the preceding calendar quarter [Section 26(b), AECA]. Civilian Contract Personnel The president shall, to the maximum extent possible and consistent with the purposes of the AECA, use civilian contract personnel in any foreign country to perform defense services sold through FMS [Section 42(f), AECA]. Prohibition on Performance of Combatant Activities Personnel performing defense services sold through FMS may not perform any duties of a combatant nature. This prohibition includes any duties related to training and advising that may engage U.S. personnel in combat activities. Within 48 hours of the existence of, or a change in the status of signifi cant hostilities or terrorist acts which may endanger American lives or property involving a country in which U.S. personnel are performing defense services, the president shall submit a report (in the format specifi ed) to the Congress. [Section 21(c), AECA] Limitation on Assistance to Security Forces No funding appropriated by the annual FOAA will be made available to any unit of the security forces of a country if the secretary of state has credible evidence that such unit has committed gross violations of human rights. Funding may be provided once the secretary determines and reports to Congress that the affected country is taking effective measures to bring the responsible members of the security forces unit to justice. [Section 551, P.L. 109-102]. This is commonly referred to as the Leahy Amendment. Annual DoD funding for U.S. exercises or training with foreign security force units are likewise restricted [Section 8060, P.L. 109-289 for FY 2007]. Proposed students and/or units are to be vetted using all available USG resources prior to any training or combined exercises. 2-10 Security Assistance Legislation and Policy Advisory and Training Assistance Advisory and training assistance conducted by military personnel assigned to overseas security assistance management duties shall be kept to an absolute minimum. Such advisory and training assistance shall be provided primarily by other U.S. military personnel not assigned under Section 515, FAA, and who are detailed for limited periods to perform special tasks. [Section 515(b), FAA] Prohibitions Regarding Police Training None of the funds appropriated under the authority of the FAA shall be used to provide training or advice, or to provide fi nancial support, for police, prisons, or other law enforcement forces of any foreign government. This prohibition does not apply to assistance and training in maritime law enforcement and other maritime skills nor shall apply to a country with long-standing democratic tradition, standing armed forces, and no consistent pattern of gross violations of internationally recognized human rights. [Section 660, FAA] This prohibition is not provided for AECA authorized programs. Personnel End-Strengths Military and civilian personnel performing security assistance under the FAA or AECA must be within the personnel levels authorized for the DoD. No additional personnel are authorized for security assistance. [10 U.S.C. Section 2751, and note Section 605(a), P.L. 94-329] Eligibility for Grant Aid No defense articles or defense service (including training) shall be furnished to any country on a grant basis unless it shall have agreed that: It will not, without the consent of the president, permit any use of such articles or services by anyone not an offi cer, employee, or agent of that country It will not, without the consent of the president, transfer (to another country) such articles or services by gift, sale, or other method It will not, without the consent of the president, use or permit the use of such articles or services for purposes other than those for which furnished It will provide substantially the same degree of security protection afforded to such rticles or services by the USG It will permit continuous USG observation and review with regard to the use of such articles or services It will return to the USG, for such use or disposition as the USG may determine, any articles or services no longer needed. [Section 505(a), FAA]. This often referred to as the 505 Agreement normally entered into via diplomatic channels prior to a grant transfer. Eligibility for Sales Similar to the 505 agreement conditions for grant transfers, no defense article or service shall be sold by the USG to any country or international organization unless: The president fi nds that it strengthens the security of the U.S. and promotes world peace 2-11 Security Assistance Legislation and Policy The country (or international organization) has agreed not to transfer title to, or possession of, any articles/services (including training) furnished to it by the U.S., unless the consent of the president has fi rst been obtained The country or international organization has agreed to not use or permit the use of such articles or related training or other defense service for purposes other than those for which furnished, unless the consent of the president has fi rst been obtained The country (or international organization) has agreed to provide substantially the same degree of security protection afforded to such article or service by the U.S. government The country (or international organization) is otherwise eligible to purchase defense articles or services. [Section 3(a), AECA] Beginning November 1999, all sales and lease agreements entered into by the U.S. govern-ment shall state that the U.S. retains the right to verify credible reports that such article has been used for a purpose not authorized under Section 4, AECA, or if such agreement provides that such article may only be used for purposes more limited than those authorized under Section 4, AECA, for a purpose not authorized under such agreement. [Section 3(g), AECA]. Effective May 2007, all FMS agreements shall state that the U.S. government will be permitted, upon request, to conduct end-use monitoring verifi cation with respect to the use, transfer, and security of all articles and services. This includes inspection or inventories of articles, as well as review of host nation inventory and accountability records. Presidential Determination In order for any security assistance to be provided to any country, it is required that such country fi rst be deemed eligible to participate in U.S. security assistance programs. Such eligibility must be established by the president, and is confi rmed in a written presidential determination (PD). This requirement is established in Section 503, FAA, and Section 3, AECA. The relevant provisions of these two laws require that grant military assistance or a sales program for any country may be authorized only when . . . the president fi nds that the furnishing of defense articles and defense services to such country or international organization will strengthen the security of the United States and promote world peace. . Consequently, annual budgetary planning and programming for security assistance is generally limited to those countries and international organizations for which such PDs of eligibility have been issued. All such written determinations, which authorize the purchase of defense articles and services, are signed by the president and take the form of a memorandum for the secretary of state. Each determination is published in the Federal Register at the time of approval. A list of all such determinations approved to date can be found in the annual Congressional Budget Justifi cation (CBJ) for Foreign Operations, Fiscal Year 20XX. This budget justifi cation document was once referred to as the Congressional Presentation Document (CPD). Such a determination is only a preliminary fi nding of eligibility, and it does not guarantee the approval of any specifi c requests for arms transfers or other assistance. A determination for a specifi c country needs to be made only once, and subsequent determinations for any country for which a determination was previously made are treated as amendments. Although budgetary 2-12 Security Assistance Legislation and Policy planning considerations may include certain countries which are awaiting a favorable determination, no budgetary implementation for security assistance for such countries may occur until such determinations have been made. Other Restrictions Except where the president fi nds national security or U.S. interests require otherwise, no assis- tance shall be provided to countries that: Repeatedly provide support to international terrorists [Section 620(a), FAA] Is communist, to include, but not limited to: Democratic People's Republic of Korea, Peoples Republic of China, Republic of Cuba, Socialist Republic of Vietnam, and Tibet. [Section 620(f), FAA] Are indebted to any U.S. citizen for goods or services (where legal remedies are exhausted, the debt is not denied or contested, etc.) [Section 620(c), FAA] Nationalize, seize, or expropriate (without proper compensation) property owned or controlled by U.S. citizens, corporations, etc. [Section 620(e), FAA] Are in default on any FAA-authorized loan to the USG in excess of six months. [Section 620(q), FAA] Are engaged in illicit drug production or drug transiting and have failed to take adequate steps to include preventing such drugs from being produced or transported, sold to USG personnel or their dependents, or from being smuggled into the U.S. (50 percent of assistance is suspended.) [Section 490(a), FAA] Deliver or receive nuclear enrichment or reprocessing equipment, material, or technology [and have not entered into an agreement with the International Atomic Energy Agency (IAEA) to place all such equipment under an IAEA safeguards system], or transfer a nuclear device to a non-nuclear-weapon state. [Sections 101- 03, AECA] This is often referred to as the Symington-Glenn Amendment. Which is in default to the USG for a period of more than one calendar year on any foreign assistance or security assistance loan (e.g., a development assistance, FMFP, or ESF loan), [Section 512, P.L.109-102]. This prohibition is renewed in the annual FOAA, and is generally referred to as the Brooke-Alexander Amendment. Prohibit or otherwise restricts, directly or indirectly, the transport or delivery of U.S. humanitarian assistance. [Section 620I, FAA] Grants sanctuary from prosecution to any individual or group which has committed an act of international terrorism or otherwise supports international terrorism. [Section 527, P.L.109-102] Does not comply, or make signifi cant efforts for compliance, with minimum standards for combating the traffi cking of people (TIP). [Section 110, P.L. 106-386] Is a party to the 17 July 1998 Rome Statute of the International Criminal Court and refuses to sign an Article 98 waiver exempting USG civilian, military, and contracted personnel. [Section 2007, Title II, P.L.107-206] Taxes U.S. goods and services being imported as U.S. assistance. [Section 506, P.L.109-102] 2-13 Security Assistance Legislation and Policy Does not pay any accumulated automobile parking fi nes or property taxes in New York City or the District of Columbia. [Section 543, P.L.109-102] Knowingly transfers man-portable air defense systems (MANPADs) to a government or organization that supports terrorism. [Section 12, P.L.109-472] Additional Restrictions The following restrictions, unlike those noted above, do not provide specifi c statutory authority for a presidential waiver. They require suspension/termination of assistance to any government: That is engaged in a consistent pattern of acts of intimidation or harassment directed against individuals in the U.S. [Section 6, AECA] That severs diplomatic relations with the U.S. or with which the U.S. severs such relations [Section 620(t), FAA] That prevents any U.S. person from participating in the provision of defense articles or services on the basis of race, religion, national origin, or sex [Section 505(g), FAA]. A similar provision prohibits military sales, sales credits, or guarantees [Section 5, AECA] Whose duly elected head of government is deposed by military coup or decree [Section 508, P.L. 109-102] Pakistan Waivers To combatant the war on international terrorism, the president is authorized to exempt Pakistan from the military coup restrictions of Section 508, P.L. 109-102; Pakistani persons from missile technology control regime (MTCR) restrictions of Section 73(e), AECA, and Section 11B(b)(5), Export Administration Act (EAA); and loan default restrictions of Section 620(q), FAA, and Section 512, P.L. 109-102, during FY 2006. [Sections 1-6, P.L. 107-57, 27 October 2001, as recently amended by Section 534(j), P.L.109-102] Human Rights The U.S. shall, in accordance with its international obligations as set forth in the Charter of the United Nations and in keeping with the constitutional heritage and traditions of the U.S., promote and encourage increased respect for human rights and fundamental freedoms throughout the world without distinction as to race, sex, language, or religion. Accordingly, a principal goal of U.S. foreign policy shall be to promote the increased observance of internationally recognized human rights by all countries. Furthermore, in the absence of a presidential certifi cation to the Congress that extraordinary circumstances exist warranting the provision of such assistance, no security assistance may be provided to any country the government of which engages in a consistent pattern of gross violations of internationally recognized human rights. [Section 502B, FAA] The secretary of state shall transmit to the Congress, as part of the presentation materials for security assistance programs proposed for each FY, a full and complete report, prepared with the assistance of the assistant secretary of state for human rights and humanitarian affairs, with respect to practices regarding the observance of and respect for internationally recognized human rights in each country proposed as a recipient of security assistance. [Section 502B, FAA] SECURITY ASSISTANCE ORGANIZATIONS OVERSEAS The following is an overview of legislated authorities and limitations regarding the overseas security assistance organization (SAO), e.g., offi ce of defense cooperation (ODC), U.S. military 2-14 Security Assistance Legislation and Policy assistance group (MAG), etc. A more in-depth description of the duties of an SAO is provided in Chapter 4, "Security Assistance Organizations Overseas," and Chapter 17, "Resource Management for the Security Assistance Organization." Security Assistance Organization Functions The president may establish and assign members of the U.S. armed forces to an SAO to perform one or more of the following seven functions: Equipment and services case management Training management Program monitoring Evaluation and planning of the host government's military capabilities and requirements Administrative support Promoting rationalization, standardization, interoperability, and other defense cooperation measures Liaison functions exclusive of advisory and training assistance [Section 515(a), FAA] Advisory and training assistance conducted by SAO personnel shall be kept to an absolute minimum. [Section 515(b), FAA] Such assistance, rather, shall be by other personnel detailed for limited periods to perform specifi c tasks. Security Assistance Organization Size The number of members of the armed forces assigned to a foreign country may not exceed six unless specifi cally authorized by the Congress. The president may waive this limitation if he determines and reports to the congressional foreign relations committees, thirty days before the introduction of the additional military personnel, that U.S. national interests require that more than six members of the armed forces be assigned to a particular country not designated in the statute to exceed six. Countries designated to have more than six U.S. military personnel are identifi ed in Section 515(c)(1), FAA. The total number of U.S. military personnel assigned to a foreign country in a FY may not exceed the number justifi ed to the Congress in the annual congressional budget justifi cation materials, unless the congressional foreign relations committees are notifi ed thirty days in advance. Sales Promotion by the Security Assistance Organization The president shall continue to instruct U.S. diplomatic and military personnel in U.S. missions abroad that they should not encourage, promote, or infl uence the purchase by any foreign country of U.S.-made military equipment, unless they are specifi cally instructed to do so by an appropriate offi cial of the executive branch [Section 515(f), FAA]. Chief of U.S. Diplomatic Mission The president shall prescribe appropriate procedures to assure coordination among representatives of the USG in each country, under the leadership of the chief of the U.S. diplomatic mission. [Section 622, FAA, and Section 2, AECA]. U.S. military personnel assigned to security assistance organizations shall serve under the direction and supervision of the chief of the U.S. diplomatic mission in that country [Section 515(e), FAA]. 2-15 Security Assistance Legislation and Policy MILITARY SALES In general, the AECA authorizes two ways a country or international organization can purchase U.S. defense articles, services, or training. The fi rst method is FMS through a government-to- government contract or the FMS LOA case. This FMS case can be fi lled by sale from U.S. stock, a USG purchase from industry, or by providing credit to fi ll the requirement either by sale from stock or by purchase from industry. The FMS process, procedures, and policies will be addressed in detail in later beginning in Chapter 5, "Foreign Military Sales Process." The second purchasing method is DCS by allowing, with an export license issued by the DoS, the country or international organization to purchase directly from U.S. industry. The DCS process and policies will be further addressed in later Chapter 15, "A Comparison of Foreign Military Sales and Direct Commercial Sales." Sales from Stock The country agrees to pay the USG for defense articles and defense services sold from DoD and U.S. Coast Guard stocks as follows: The actual (stock-list) value for defense articles not intended to be replaced at the time of agreement to sell The replacement cost for defense articles intended to be replaced, including contract of production costs less any depreciation in value The full cost to the USG for defense services; in the case of a country which is concurrently receiving IMET assistance, only those additional costs that are incurred by the USG in furnishing such assistance will be charged The sales price shall also include appropriate charges for: Administrative services (surcharge) A proportionate amount of any nonrecurring costs of research, development, and production of major defense equipment (does not apply to FMS cases which are wholly fi nanced with U.S. provided grant funds) The recovery of ordinary inventory losses associated with the sale from stock of defense articles that are being stored at the expense of the purchaser Unless the president determines it to be in the national interest, payment shall be made in advance of delivery or performance [Section 21, AECA] There are situations where certain costs may be waived or reduced. Many of these are addressed later in this chapter under the heading, Additional Provisions Relating to North Atlantic Treaty Organization (NATO), NATO Members, Japan, Australia, New Zealand, and Other Eligible Countries. Procurement Sales The USG may procure defense articles and services for sale to an FMS purchaser if the purchaser provides the USG with a dependable undertaking by which it agrees to pay the full amount of such contract. This will assure the USG against any loss; to make funds available in such amounts and at such times as may be required by the contract (and to cover any damages/termination costs). Such foreign purchaser payments shall be received in advance of the time any payments are due by the USG. Interest shall be charged on the net amount by which such foreign purchaser (country 2-16 Security Assistance Legislation and Policy or international organization) is in arrears under all of its outstanding unliquidated dependable undertakings, considered collectively. [Section 22, AECA] Credit Sales The USG is authorized to fi nance procurements of defense articles, defense services, and design and construction services by friendly foreign countries and international organizations [Section 23, AECA]. This fi nancial assistance is FMFP either as a grant or loan. With a couple of exceptions, recent FMFP has been all grant requiring no repayment. Repayment of loans in U.S. dollars is required within twelve years, unless a longer period is authorized by statute. [Section 23(b), AECA] The FMFP loans authorized under Section 23, AECA, shall be provided at rates of interest that are not less than the current average market yield on outstanding marketable obligations of the U.S. of comparable maturities. [Section 31(c), AECA] Foreign Military Construction Sales The president may sell design and construction services using the FMS process to any eligible foreign country or international organization if such country or international organization agrees to pay in U.S. dollars the full cost to the USG of furnishing such services. Payment shall be made to the USG in advance of the performance of such services. [Section 29, AECA] Sales to United States Companies The president may sell defense articles [e.g., government furnished equipment (GFE) or material (GFM)] to a U.S. company for incorporation into end items (and for concurrent or follow-on support) that are, in turn, to be sold commercially DCS to a foreign country or international organization under Section 38, AECA, and to sell defense services in support of such sales of defense articles, provided that such services may be performed only if: The end item to which the articles apply is procured for the armed forces of a foreign country or international organization The articles would be supplied to the prime contractor as GFE or GFM if the article was being procured for the use of the U.S. armed forces The articles and services are available only from USG sources or are not available to the prime contractor directly from U.S. commercial sources at such times as may be required to meet the prime contractor's delivery schedule [Section 30, AECA] Direct Commercial Sales The president, delegated to the secretary of state, is authorized to control the DCS of U.S. defense articles and services by U.S. industry. [Section 38(a)(1), AECA] Procedures for U.S. industry to obtain export licenses for DCS are codifi ed by the DoS within the ITAR, 22 C.F.R. 120-130. Section 121.1, ITAR, is the U.S. Munitions List (USML) defi nes by category what constitutes a defense article, services, and related technical data. This arms control authority by the president is similarly extended to include the import defense articles and services and has been delegated to the attorney general. Chapter 7, "Technology Transfer, Export Controls, and International Program Security," provides further discussion on the export licensing of DCS. 2-17 Security Assistance Legislation and Policy DRAWDOWN AUTHORITIES Special Emergency Drawdown Authority If the president determines and reports to Congress that an unforeseen military emergency exists and that such emergency requirement cannot be met under the AECA or any other authority, the president may direct the drawdown of defense articles, services, or training from DoD of an aggregate value not to exceed $100 million in any FY. [Section 506(a)(1), FAA] A second special drawdown authority of $200M in defense articles, services, and training for each FY also has been established [Section 506(a)(2), FAA]. The authorized purposes for the latter drawdown authority include counter-narcotics, anti-terrorism, non-proliferation, disaster relief, migration and refugee assistance, and support of Vietnam War era missing-in-action/prisoners of war (MIA/POW) location and repatriation efforts. Restrictions in the annual Section 506(a)(2) drawdown include not more than $75M may come from DoD resources, not more than $75M may be provided in support of counter-narcotics, and not more than $15M may be provided in support of Vietnam War era MIA/POW location and repatriation. While all Section 506 drawdown actions require notifi cation to Congress, drawdowns in support of counter-narcotics or anti-terrorism assistance require at least fi fteen days advance notifi cation before taking place. Section 576, P.L. 105-118, amended the FAA to provide the authority for the use of commercial transportation and related services acquired by contract for the drawdown if the contracted services cost less than the cost of using USG resources to complete the drawdown [Section 506(c), FAA]. The use of commercial rather than USG transportation assets to complete the drawdown is to be reported to Congress to include any cost savings realized [Section 506(b)(2), FAA]. In the period FY 1990 through FY 2005, a total of $1,182.6 million in drawdown authority was used incrementally by the president to provide emergency assistance under the authorities of Section 506, FAA. Section 506(c), FAA, provides authority for appropriations to reimburse DoD and the military departments (MILDEPs) for costs in providing emergency drawdown defense articles, services, and training; however, this authority is rarely provided. Likewise, because of the negative impact of this type of drawdown on the military departments, it has become a tool of last resort and reluctantly directed. Peacekeeping Emergencies The drawdown of commodities and services is authorized from the inventory and resources of any agency of the USG of an aggregate value not to exceed $25M in any FY to meet an unforeseen emergency requirement for peacekeeping operations. The authority for reimbursement is rarely provided. [Section 552(c)(2), FAA] War Crimes Tribunals Drawdown The FY 2006 FOAA authorizes the FY 2006 drawdown of up to $30M in commodities and services in support of the United Nations War Crimes Tribunal established with regard to the former Yugoslavia for the just resolution of changes regarding genocide or other violation of international humanitarian law [Section 545, P.L. 109-102]. Drawdown Policy and Procedures The following general guidelines and policies have evolved for execution of drawdowns: Equipment to be provided must be physically on hand (excess or non-excess) 2-18 Security Assistance Legislation and Policy No new contracting is authorized to support drawdowns-may use commercial contracts for transportation services only if scope of existing contracts encompass drawdown requirement Services must reimburse the Defense Logistics Agency (DLA) for any working capital fund material or services provided in support of drawdowns Service tasked with providing specifi c equipment will fund transportation to fi nal destination Airlift and sealift can only be provided using military air or sealift military aircraft (MILAIR/MILSEA) or appropriate time-charter contracts if the scope of existing contracts cover the proposed use Where possible, complete support packages are normally provided for any major end items In general, equipment and spare parts now being provided under drawdown are increasingly coming from units, prepositioned equipment storage, or operational logistics stocks. Residual equipment that is excess and can be released without adverse operational impact is increasingly in very poor condition requiring signifi cant repair or refurbishment. Where such repair can be legally performed under drawdown authority, it only adds to the DoD operational and maintenance (O&M) funding impact on the services in supporting the drawdown effort. Drawdowns do not provide additional budget authority to DoD. The military services (MILSVCs) are required to use currently allocated O&M funds to provide training services, packing, crating, and handling services, transportation services, repair/refurbishment services, and the provision of spare parts or support services from the working capital fund-operated DLA activities. SPECIAL PRESIDENTIAL WAIVER AUTHORITY In accordance with Section 614, FAA, the president may authorize the furnishing of limited assistance and sales, without regard to any other laws, when determined and reported to Congress that to do so is important to U.S. national security interests. In addition, the president may make sales, extend credit, and issue guarantees under the AECA without regard to any other laws when determined and reported to Congress that to do so is vital to U.S. national security interests. The following limitations apply in a given FY: The use of up to $250 million of funds made available under the FAA (grants) or the AECA (grants or loans), or $100 million of foreign currencies accruing under the FAA or any other law. However, not more than $50 million of the $250 million limitation may be allocated to any one country, unless such country is a victim of active aggression Not more than $750 million in sales under the AECA Not more than $500 million of the aggregate limitation of $1 billion (i.e., $250 million assistance and $750 million sales) may be allocated to any one country CONGRESSIONAL REVIEW OF PROPOSED TRANSFERS Foreign Military Sales The president (delegated to the secretary of defense) shall submit a numbered certifi cation (with justifi cation, impact, etc.) to the Congress before issuing an LOA to sell defense articles or services 2-19 Security Assistance Legislation and Policy for $50 million or more, or any design and construction services for $200 million or more, or major defense equipment for $14 million or more. The dollar thresholds for notifi cation for NATO countries, Japan, Australia, and New Zealand are $100 million, $300 million, and $25 million respectively. Major Defense Equipment (MDE) means any item of signifi cant military equipment (SME) on the USML having a nonrecurring research and development cost of more than $50 million or a total production cost of more than $200 million. SME is defi ned in Section 47(9), AECA, as a defense article identifi ed on the USML for which special export controls are warranted because of the capacity of such articles for substantial military utility or capability. The USML is required by Section 38, AECA, and is maintained by the DoS within Section 121.1 of the ITAR which can be viewed at http:// www.pmddtc.state.gov/reference.htm#regs. The LOA shall not be issued if the Congress, within thirty calendar days after receiving such certifi cation, adopts a joint resolution stating it objects to the proposed sale. However, such action by Congress does not apply if the president states in his certifi cation that an emergency exists which requires such sale in the national security interests of the U.S. [Section 36(b)(1), AECA]. In order to provide the Congress with suffi cient time to review such cases, the Defense Security Cooperation Agency has agreed to provide Congress with a 20-day informal notifi cation of such cases prior to the formal submission of the thirty-day statutory notifi cation. [The Security Assistance Management Manual (SAMM), Section C5.6.3]. Additionally, while the law does not address this, policy has been established that notifi cations will not be provided unless Congress is in session to receive the notifi cation. An exception to the above procedure exists for NATO, NATO member countries, Australia, Japan, and New Zealand. For these exempted countries, the formal statutory notifi cation period is only fi fteen days. Furthermore, the twenty days informal, advance notifi cation period is not required for these countries. Direct Commercial Sales Thirty days before the issuance of any export license for MDE in excess of $14 million or other defense articles or services in excess of $50 million, the president (delegated to the secretary of state) shall submit a numbered certifi cation to the Congress. Dollar thresholds for notifi cation for NATO countries, Japan, Australia, and New Zealand are $25 million and $100 million respectively. Unless the certifi cation states that an emergency exists, an export license for the items shall not be issued within a thirty-calendar day congressional review period. The twenty-day informal advance notifi cation required for FMS does not apply to the DCS licensing process. Further, such license shall not be issued if the Congress, within such thirty-day period, adopts a joint resolution objecting to the export. The congressional review period for NATO, NATO members, Australia, Japan, and New Zealand is fi fteen days as in the FMS process [Section 36(c), AECA]. The licensing of any USML category I small arms (.50 caliber or less) valued at $1 million or more for any country must be also be notifi ed to Congress and is subject to the fi fteen or thirty-day joint resolution objection process [Section 36(c), AECA]. It should be noted that this small arms notifi cation does not apply to the FMS process. Normally, it is the country's decision to purchase FMS or DCS. However, the president (delegated to the secretary of defense) may require that any defense article or service be sold under FMS in lieu of commercial export channels. [SAMM, C4.5.9] The president may also require that persons engaged in commercial negotiation for the export defense articles and services keep the president fully 2-20 Security Assistance Legislation and Policy and currently informed of the progress and future prospects of such negotiations [Section 38(a)(3), AECA]. Third Country Transfers The recipient country, as a condition of sale, must agree not to transfer title or possession of defense articles or services (including training) to another country, unless the consent of the president has fi rst been obtained. This authority to transfer is normally provided in writing from the DoS. Furthermore, the Congress has a thirty-calendar day review period (fi fteen days for NATO, NATO members, Japan, Australia, and New Zealand) for proposed third country transfers of defense articles or services valued (in terms of its original acquisition cost) at $14 million or more for MDE, or $50 million or more for other defense articles, services, or training. The dollar thresholds for notifi cation for NATO countries, Japan, Australia, and New Zealand are $25 million and $100 million respectively [Section 3(d), AECA]. The following are exceptions to this congressional review process for third country transfers: The president states in the certifi cation submitted that an emergency exists which requires that consent to the proposed transfer becomes effective immediately Transfers of maintenance, repairs, or overhaul defense services or repair parts if such transfers will not result in any increase in military capabilities Temporary transfers of defense articles for the sole purpose of receiving maintenance, repair, or overhaul Cooperative cross-servicing arrangements or lead-nation procurement among NATO members. Note, however, that Section 36(b) notifi cations must identify the transferees on whose behalf the lead-nation procurement is proposed The Congress can adopt a joint resolution of disapproval of the proposed transfer during the fi fteen or thirty-day review period. However, presidential approval is not required for third country transfers or change in end-use if all the following conditions are satisfi ed: The U.S. article is being incorporated as a component within a foreign defense article The recipient is the government of a NATO country, Japan, Australia, or New Zealand The recipient is not a Section 620A, FAA-designated country [supports inter- national terrorism] The U.S.-origin component is not SME, an article requiring Section 36(b), AECA notifi cation, and identifi ed by regulation as an MTCR item The country or organization provides notifi cation to the USG within thirty days after the transfer [Section 3(b), AECA] Leases of Defense Articles The president may lease defense articles in the stocks of the DoD to an eligible foreign country or international organization if: He determines there are compelling foreign policy and national security reasons for providing such articles on a lease basis rather than on a sales basis under the AECA 2-21 Security Assistance Legislation and Policy He determines that the articles are not for the time needed for public use The country or international organization has agreed to pay in U.S. dollars all costs incurred by the USG in leasing such articles, including reimbursement for depreciation of such articles while leased, and the replacement cost of the articles are lost or destroyed while leased [Sections 61-64, AECA] The above cost reimbursement requirements do not apply to leases entered into for purposes of cooperative research or development, military exercises, or communications or electronics interface projects. With a presidential national security interest determination, the requirement for reimbursement of depreciation of any leased article which has passed three-quarters of its normal service life can also be waived. This waiver authority cannot be delegated below the secretary of defense and is to be used sparingly. [Section 61(a), AECA] Replacement cost of any leased item lost or destroyed would be either: In the event the USG intends to replace the item, the replacement cost of the item In the event the USG does not intend to replace the item, the actual value (less any depreciation in the value) specifi ed in the lease agreement [Section 61(a)(4), AECA] Each lease agreement shall be for a fi xed duration, not to exceed fi ve years, and shall provide that, at any time during the duration of the lease, the president may terminate the lease and require the immediate return of the leased articles. The maximum fi ve year period for a lease would begin at the time of delivery to the country if the item being leased requires an extended modifi cation or overhaul period exceeding six months before delivery. An extension of a lease is permitted, but must be reported to Congress as described below. Defense articles in the stocks of the DoD may be leased or loaned to a foreign country or international organization under the authority of Chapter 6, AECA, or Part II, Chapter 2, FAA, but may not be leased to a foreign country or international organization under the authority of 10 U.S.C. 2667. For any lease for a period of one year or longer, the Congress must be given a thirty-day advance notifi cation. Further, if the lease is for one year or longer, and is valued at $14 million or more for MDE, or $50 million or more for other defense articles, the Congress may adopt a joint resolution during the thirty-day notifi cation/review period prohibiting the proposed lease. The dollar thresholds for notifi cation for NATO countries, Japan, Australia, and New Zealand are $25 million and $100 million respectively. The congressional advance notifi cation period for leases to NATO, NATO members, Japan, Australia, and New Zealand is fi fteen days. Both the fi fteen and thirty-day periods can be waived by the president in the event of an emergency. Congressional Joint Resolutions As just described, the AECA contains provisions for the congressional rejection of proposals for FMS and direct commercial sales, as well as for third country transfers and leases of U.S. defense articles. The mechanism for such congressional action is a joint resolution. This is a statement of disapproval of a proposed sale, transfer, or lease, which is passed by simple majority votes in both the Senate and the House of Representatives. This joint resolution must be then sent to the president 2-22 Security Assistance Legislation and Policy for review and approval by enactment. Since the president is unlikely to approve the rejection of an action which his administration originally proposed to Congress, the president will likely veto such a joint resolution, returning it to Congress. Unless Congress is able to override the president's veto by obtaining a two-thirds majority vote in each house in support of the original resolution of rejection, the sale, transfer, or lease will be permitted. Should Congress, however, muster suffi cient votes to override the president's veto, the proposed sale, transfer, or lease would not be authorized. Other Reports to Congress There are numerous other reports provided to Congress concerning security assistance programs. The following list, which is by no means inclusive, is representative of such reports. A comprehensive listing of security assistance reports submitted to Congress by DoD elements can be found DoD 5105.38-M, SAMM, Appendix 5, "Congressional Reports and DSCA Reports Control System." Quarterly Reports to Congress A listing of all unaccepted/uncanceled LOAs by country for major defense equip- ment valued at $1 million or more [Section 36(a)(1), AECA] A listing of all LOAs accepted during the FY [Section 36(a)(2), AECA] The cumulative dollar value of sales credit agreements during the FY [Section 36(a)(3), AECA] A listing of all commercial export licenses issued during the FY for major defense equipment valued at $1 million or more to also include USML category I small arms [Section 36(a)(4), AECA] A listing of all security assistance surveys authorized during the preceding quarter; Congress shall be authorized access to such survey reports upon request [Section 26, AECA] Annual Reports to Congress Arms Sales Proposal On or before 1 February of each year, the president shall transmit to the Congress the annual "Arms Sales Proposal" covering all sales, including FMS and DCS of major weapons or weapons- related defense equipment for $7 million or more, or of any other weapons or weapons-related defense equipment for $25 million or more, which are considered eligible for approval during the current calendar year. This report is required by Section 25(a), AECA, and is generally referred to as the Javits Report, named for its principal sponsor, former Senator Jacob Javits (D-NY). By policy, no sales or licensing notifi cations will take place for the FY until the Javits Report is received by and briefed to Congress, which of course must be in session to receive the report. End-Use Monitoring With the annual Congressional Budget Justifi cation for Foreign Operations, FY 20XX, submitted not later than 1 February to the Congress [Section 634, FAA], a report regarding the implementation of end-use monitoring to include costs and numbers of personnel associated with the program shall be included. Additionally, the report will include numbers, range, and fi ndings of end-use monitoring of U.S. transfers of small arms and light weapons [Section 40A(c), AECA]. 2-23 Security Assistance Legislation and Policy Possible Excess Defense Articles Beginning with FY 2003, like the Javits Report for sales, the president shall transmit to the Congress not later 1 February annually a report a list of weapons systems that are SME, and numbers thereof, that are believed likely to become available for transfer as excess defense articles (EDA) during the next twelve months [Section 25(a)(13), AECA]. Agent Fees The secretary of state shall require reporting on political contributions, gifts, commissions, and fees paid, offered, or agreed to be paid in connection with FMS or DCS; such information shall be made available to Congress upon request [Section 39, AECA]. Foreign Training Report A joint secretary of state and secretary of defense report is to be submitted to Congress not later than 31 January each year to include training provided the previous and current FYs. For each training activity, it is to include foreign policy justifi cation and purpose plus number of foreign personnel trained, their units, and the location. For each country, it is to include aggregate number of students and costs. With respect to the U.S. personnel, it is to include operational benefi ts derived and what units were involved. Beginning 30 September 2002, unless notifi ed in writing ninety calendar days in advance for a specifi ed country, this report is not to include any training provided to NATO countries, Australia, Japan, or New Zealand [Section 656, FAA]. Anti-Boycott Determination The Anti-Economic Discrimination Act of 1994 [Sections 561-565, P.L.102-236] states that, effective 30 April 1995, the sale or lease of any defense article or service is prohibited to any country or international organization that maintains a policy or practice of: . . . sending letters to U.S. fi rms requesting compliance with, or soliciting in- formation regarding the secondary or tertiary Arab economic boycott of Israel. The president can annually waive this transfer prohibition for one year on the basis of national interest and promotion of U.S. objectives to eliminate the Arab boycott, or on the basis of national security interest. On 24 April 1997, the president delegated the annual report and waiver authority to the secretary of state. For the 2006 report, the secretary waived the prohibition against Kuwait, Lebanon, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen until 1 May 2007 on the basis of national interest and the promotion of U.S. objectives to eliminate the boycott. The countries of Algeria, Bahrain, Bangladesh, Djibouti, Egypt, Iraq, Jordan, Mauritania, Morocco, Nigeria, Oman, Pakistan, Somalia, Sri Lanka, Tanzania, Tunisia, and Uganda were determined to have no current boycott policy of practice. ADDITIONAL PROVISIONS RELATING TO NATO, NATO MEMBERS, JAPAN, AUSTRALIA, NEW ZEALAND, AND OTHER ELIGIBLE COUNTRIES Reduction or Waiver of Nonrecurring Cost Charges The president may reduce or waive nonrecurring cost (NC) charges required by Section 2l(e)(1)(B), AECA, [e.g., a proportionate amount of any nonrecurring costs of research, development, and production of major defense equipment] for particular sales that, if made, would signifi cantly advance USG interests in NATO standardization; standardization with Japan, Australia, or New Zealand in furtherance of the mutual defense treaties between the U.S. and those countries; or foreign procurement in the U.S. under co-production arrangements. [Section 21(e)(2)(A), AECA] 2-24 Security Assistance Legislation and Policy Beginning in FY 1997, nonrecurring costs for research and development (R&D) may also be waived for an FMS sale to any eligible country if: Applying the cost would result in the loss of a sale The waived costs would be substantially offset in lower realized unit cost to the USG through increased production resulting from the FMS sale [Section 21(e)(2)(B), AECA] Further, the president may waive the charges for administrative services under Section 21(e)(1)(A), AECA, in connection with any sale to the NATO Maintenance and Supply Agency in support of a weapon system partnership agreement or NATO/SHAPE project. [Section 21(e)(3), AECA] Cooperative Furnishing of Training The president may enter into NATO standardization agreements and may enter into similar agreements with Japan, Australia, New Zealand, and major non-NATO allies for the cooperative furnishing of training on a bilateral or multilateral basis, if such agreement is based on reciprocity. Such agreements shall include reimbursement for all direct costs but may exclude reimbursement for indirect costs, administrative surcharges, and costs of billeting of trainees [Section 21(g), AECA]. Major Non-North Atlantic Treaty Organization Allies For many years, 10 U.S.C. 2350a(i)(3) identifi ed Australia, Egypt, Israel, Japan, and Korea as major non-NATO allies (MNNA) as a DoD authority for cooperative research and development. In 1996, P.L. 104-164 amended the FAA to add New Zealand and, perhaps more importantly, provided the president with authority to designate a country as a MNNA for the purposes of the FAA and the AECA, or terminate such a designation, with a thirty-day advance notifi cation to Congress (Section 517, FAA). Subsequently, Argentina, Jordan, Bahrain, Kuwait, Morocco, Pakistan, Philippines, and Thailand have been added using the notifi cation procedure. The country of Taiwan is also to be treated as though it is a MNNA [Section 1206, P.L. 107-228]. The statutory benefi ts in the FAA and the AECA of being designated a MNNA include eligibility for: Priority delivery of excess defense articles, only to include Egypt, Jordan, and Israel, [Section 516 (c)(2), FAA] Stockpiling of U.S. defense articles [Section 514 (c)(2), FAA] Purchase of depleted uranium anti-tank rounds [Section 620G, FAA] With a reciprocity agreement, be exempted of indirect costs, administrative charges, and billeting costs for training [Section 21(g), AECA] Use of any allocated FMFP funding for commercial leasing of defense articles [Section 510, P.L. 109-102] Incremental Tuition Pricing for International Military Education and Training - For Designated Countries The president is authorized to charge only those additional costs incurred by the USG in furnishing training assistance to countries concurrently receiving IMET. While Section 546(a), FAA, prohibits the high income countries of Austria, Finland, Korea, Singapore, and Spain from receiving IMET assistance, they remain eligible for FMS-incremental tuition prices. [Section 21(a)(1)(c), AECA] Effective 14 November 2005, though not an IMET recipient and only receiving FMFP assistance, Israel is authorized the IMET tuition price for training when using FMFP. [Section 541(b), FAA] 2-25 Security Assistance Legislation and Policy Contract Administration Services and Catalog Data and Services The president is authorized to provide (without charge) quality assurance, inspection, contract administration services (CAS), and contract audit defense services in connection with procurements by, or on behalf of, a NATO member or the NATO infrastructure program, if such government provides such services in accordance with an agreement on a reciprocal basis (without charge) to the USG. A similar provision applies with respect to cataloging data and cataloging services [Section 21(h), AECA]. Effective 14 November 2005, these authorities were extended to Australia, Japan, New Zealand, and Israel [Section 534(l)(1), P.L.109-102]. Section 27, Arms Export Control Act, Cooperative Projects Under a cooperative project pursuant to Section 27, AECA, the president may enter into a written agreement with NATO, NATO members, and other eligible countries for a jointly managed program of cooperative research, development, test and evaluation (RDT&E) and joint production including follow-on support or concurrent production. Congress must receive a certifi cation not less than 30 days prior to USG signature of a proposed cooperative project agreement [Section 27, AECA]. For additional information on international armaments cooperation, Chapter 13, "International Armaments Cooperation." Special Defense Acquisition Fund The special defense acquisition fund (SDAF) was authorized by Section 108(a), International Security and Development Cooperation Act of 1981, P.L.97-113, 29 December 1981, to provide DoD the authority to procure defense articles and services in anticipation of future foreign government military requirements. By permitting such advance procurements, the SDAF enabled DoD to reduce customer waiting times for selected items and to improve its responses to emergency foreign requirements, as well as to reduce the need for meeting normal FMS requirements through drawdowns or diversions of defense equipment from U.S. stocks or new production. The SDAF was established as a revolving fund which was initially capitalized through three sources: Collections from FMS sales of DoD stocks not intended to be replaced Asset use collections and contractor payments for the use of U.S.-owned facilities and equipment Recouped non-recurring research, development, and production charges from both FMS and DCS. By 1987, the SDAF reached its maximum authorized capitalization level of $1.07 billion [10 U.S.C. 114(c)] which represented a total of the value of articles on hand and on order, as well as all unobligated funds. Although appropriated funds were authorized, no appropriations were necessary as the fund was maintained on a self-supporting basis, with Congress annually providing an obligational authority for SDAF expenditures. DSCA served as the overall DoD manager of the SDAF, while the military departments retained custody of those articles awaiting sale. The SDAF provided a very viable method for effecting advance procurements to reduce customer waiting time as well as a source of urgently needed articles. Operation Desert Storm forces were able to use over $130 million of articles from the SDAF stocks, to include AIM-9, STINGER, and TOW missiles, plus various types of vehicles, ammunition, night vision devices, and communications equipment. 2-26 Security Assistance Legislation and Policy Although the SDAF was widely viewed as an important security assistance program, a major DoD budget tightening effort begun in 1991 led to the decision in March 1993 to close down the program. For FY 1994, no new budget authority was sought for the SDAF, although Congress agreed to extend $160 million in obligational authority (OA) into FY 1994 from the $225 million FY 1993 budget authority. For FY 1995, $140,000,000 in obligational authority was carried over from FY 1994, plus an added OA of $20,000,000 extending through FY 1998 for the purpose of closing the SDAF. Section 536, P.L. 105-118, extended the obligational authority to FY 2000. Collections in FY 1994 and thereafter from SDAF sales in excess of the obligational authority provided in prior year appropriations acts must be deposited in the miscellaneous receipts account of the U.S. Treasury. Since prior year funds remain available in the SDAF account for obligation, and since numerous items remain on order, the SDAF account should be operational for several more years before all contracts are closed. With SDAF drawing to a close, Section 145, P.L. 104-164, repealed a variety of recurring status reports required by Congress under Sections 51 and 53, AECA. [DoD 5105.38-M, SAMM, C11.14] EXCESS DEFENSE ARTICLES The term EDA is applied collectively to U.S. defense articles which are no longer needed by the U.S. armed forces. Such defense articles may be made available for sale under the foreign military sales program [Section 21, AECA] or as grant (no cost) transfers to eligible foreign countries under the provisions of Section 516, FAA, which are described below. The following formal defi nition of EDA is provided in Section 644(g), FAA, and it establishes the guidelines for determining which defense articles may be treated as excess equipment. EDA means the quantity of defense articles other than construction equipment, including tractors, scrapers, loaders, graders, bulldozers, dump trucks, generators, and compressors, owned by the United States government, and not procured in anticipation of military assistance or sales requirements, or pursuant to a military assistance or sales order, which is in excess of the Approved Force Acquisition Objective and Approved Force Retention Stock of all DoD Components at the time such articles are dropped from inventory by the supplying agency for delivery to countries or international organizations under this Act. [Section 9(b), P.L. 102-583] The National Defense Authorization Act for FY 1993 amended 10 U.S.C. by adding a new Section 2552 which restricts the sale or transfer of excess construction or fi re equipment. Such transfers or military sales in the future may only occur if either of the following conditions apply: No department or agency of the USG (excluding DoD), and no state, and no other person or entity eligible to receive excess or surplus property submits a request for such equipment from the Defense Reutilization and Marketing Service (DRMS) during the period for which such a request may be accepted by the DRMS The president determines that such a transfer is necessary in order to respond to an emergency for which the equipment is especially suited [Section 4304(a), P.L. 102-484]. For the purpose of this new provision, the term construction or fi re equipment includes the following: Tractors, scrapers, loaders, graders, bulldozers, dump trucks, generators, pumpers, fuel and water tankers, crash trucks, utility vans, rescue trucks, ambulances, hook and ladder units, compressors, and miscellaneous fi re fi ghting equipment [Section 4304(c), P.L. 102-484]. 2-27 Security Assistance Legislation and Policy The intent of this change is to permit federal agencies and the states the opportunity to request and receive such items before they are made available for sale or grant transfer to foreign countries or international organizations. Although this provision applies to construction equipment as well as fi re equipment, the earlier exclusion above of construction equipment from the defi nition of excess defense equipment essentially limits the defense authorization act's restrictions to fi re equipment. As defense articles actually become excess, they are screened to determine whether they may be sold to eligible countries through FMS procedures or transferred as grant-provided items under the various provisions of the FAA, as discussed below. The ultimate responsibility for determining if an item should be identifi ed as excess rests with the military department having cognizance over the item. Military department recommendations for the allocation of EDA to specifi c countries are reviewed and staffed by an EDA coordinating committee, chaired by DSCA, and comprised of representatives from the DoS, OSD, Joint Staff, commerce department, and military departments. Once a decision is made to furnish EDA to a particular country, DSCA prepares any required congressional notifi cation. Sales of Excess Defense Articles EDA sold through FMS procedures are priced on the basis of their condition as described in DoD 7000.14-R, Financial Management Regulation (FMR), Volume 15. Prices range from a high of 50 percent of the original acquisition value for new equipment, to a low of 5 percent for equipment in need of repairs. Before allowing the FMS sale of EDA, the president shall determine that the sale will not have an adverse impact on the U.S. technology and industrial base and, particularly, will not reduce the opportunities of the U.S. technology and industrial base to sell new or used equipment to the recipient country. [Section 21(k), AECA] Charges must be levied on such sales as well as on grant transfers (with certain exceptions) for the costs of packing, crating, handling, and transportation (PCH&T). Charges for any requested spares support, training, repair work, or any upgrades will also be levied. Grant Transfer of Excess Defense Articles P.L. 104-164, 21 July 96, rationalized the cumbersome grant EDA program by combining the fi ve different EDA authorities into one. The new authority, a revised Section 516, FAA, authorizes the president to transfer EDA on a grant basis to countries for which receipt of such articles was justifi ed pursuant to the annual Congressional Budget Justifi cation for Foreign Operations, FY 20XX, for counter-narcotics programs submitted under Section 634, FAA, or for which receipt of such articles was separately justifi ed to Congress, for the FY in which the transfer is authorized. Grant EDA transfer limitations include: Item must be drawn from existing DoD stocks No DoD procurement funds are to be used during the transfer Transfer is to have no adverse impact on U.S. military readiness Transfer is preferable to a transfer on a sales basis, after taking into account the potential proceeds from, and likelihood of, such sales and comparative foreign policy benefi ts that may accrue to the U.S. as the result of a transfer on either a grant or sales basis Transfer has no adverse impact on U.S. technology and industrial base, and particularly, will not reduce the opportunity for the sale of a new or used article 2-28 Security Assistance Legislation and Policy Transfer is consistent U.S. policy for the eastern Mediterranean (Turkey, Greece, and Cyprus) established under Section 620C, FAA. [Section 516(b), FAA] DoD funds may not be used for packing, crating, and handling, and transportation during a grant EDA transfer, except when: Determined to be in the national interest to do so Recipient is a developing country receiving less than $10M in IMET and FMFP during the FY of the transfer Total transfer does not exceed 50,000 pounds Transfer is accomplished on a space-available basis [Section 516(c)(2), FAA] During FY 2006/2007, DoD funds may be used for PCH&T in the transfer of grant EDA to the countries of Afghanistan, Albania, Bulgaria, Croatia, Estonia, Georgia, India, Iraq, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Mongolia, Pakistan, Romania, Slovakia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. [Section 571, P.L. 109-102] Congressional notifi cation thirty days prior to the transfer of EDA, whether by sale or grant, is required if the item is categorized as SME or valued (original acquisition cost) at $7M or more. [Section 516(f)(1), FAA] Additionally, beginning in FY 1997, not more than $425M (current value) in defense articles may be transferred in one FY as grant EDA [Section 516(g), FAA]. The grant transfer of excess naval vessels invariably exceeds this annual ceiling and therefore must be separately authorized. Grant Excess Defense Articles for NATO, Major Non-NATO Allies, and Others A priority in delivery of grant EDA will be given to NATO member countries on the southern and southeastern fl ank (Portugal, Greece, and Turkey) and to major non-NATO allies (Israel, Egypt, and Jordan) on the southern and southeastern fl anks of NATO [Section 516(c)(2), FAA]. The Philippines is also included in this priority group. [Section 1234, P.L.107-228] After priority in delivery of grant EDA to NATO countries and major non-NATO allies on the southern and southeastern fl anks, priority in delivery of grant EDA will be afforded next to countries eligible for assistance authorized by the NATO Participation Act (NPA) of 1994. [Section 609, P.L. 104- 208] Initially, the latter group of eligible countries included Poland, Hungary, the Czech Republic, and Slovenia [Section 606, P.L. 104-208]. In July 1997, an invitation for NATO membership was extended to Poland Hungary, and the Czech Republic. FY 1999 legislation added Romania, Estonia, Latvia, Lithuania, and Bulgaria to the NPA eligible country list. [Section 2703, P.L. 105-277] Section 4 of the Gerald B.H. Solomon Freedom Consolidation Act of 2002, P.L. 107-187, 10 June 2002, amended the NPA to also include the country of Slovakia. This same act also endorsed the admission of the seven countries into the NATO Alliance. An invitation was extended in November 2002 to these same countries for entry into NATO in May 2004. The Senate promptly ratifi ed the April 2003 presidential proposal for these countries. Recently enacted NATO Freedom Consolidation Act of 2007, P.L.110-17, 9 April 2007, Section 4(b)(1), added the non-NATO countries of Albania, Croatia, Georgia, Macedonia (FYROM), and the Ukraine to NPA EDA priority delivery list. This same legislation stated the sense of Congress that these countries be admitted to NATO as they become willing and able with a clear national intent to meet the responsibilities of membership. 2-29 Security Assistance Legislation and Policy WAR RESERVES STOCKPILES FOR ALLIES Section 514(b) of the FAA sets an annual ceiling on the value of additions to stockpiles of U.S. defense articles located abroad that may be set aside, earmarked, reserved, or otherwise intended for use as war reserve stocks for allied or other foreign countries (other than those for NATO purposes or in the implementation of agreements with Israel). From 1979 until 1988, the Republic of Korea was the only country outside of NATO where such war reserve stockpiles were authorized to be maintained. For FY 1988, Congress approved an Administration request to establish a new stockpile in Thailand, and $10 million in defense articles was authorized to be transferred for this purpose. Then, for FY 1990, at the initiative of Congress, $100 million in defense articles was authorized to establish a stockpile in Israel. For FY 1991, Congress authorized stockpiles in the major non-NATO allies' countries, and $378 million in stockpile additions, of which not less than $300 million was designated for stockpiles in Israel, with the remainder divided between Korea ($68M) and Thailand ($10M). For FY 1993, Congress authorized a total of $389M worth of U.S. defense equipment to be transferred to the war reserves stockpiles for allies (WRSA) in FY 1993; not less than $200,000,000 was designated for stockpiles in Israel, and up to $189,000,000 was available for stockpiles in Korea [Section 569, P.L. 102-391]. Beginning in FY 1996, the president can also designate any country for such stockpiling [Section 541(c)(2), FAA] with a fi fteen-day notifi cation to Congress. However, the value of the stocks to be set aside each year for any country (other than NATO or Israel) must be approved by annual security assistance authorizing legislation [Section 541(b)(1), FAA]. It should be understood that no new procurements are involved in establishing and maintaining these stockpiles. Rather, the defense articles used to establish a stockpile and the annual authorized additions represent defense articles which are already within the stocks of the U.S. armed forces. The stockpile authorizing legislation simply identifi es a level of value for which a stockpile may be established or increased. Moreover, the defense articles which have been placed in these stockpiles remain U.S. military service-owned and controlled stocks. As the term "war reserve" implies, these stocks are intended only for use in emergencies. Any future transfer of title/control of any of these stocks to an allied or friendly country would require full reimbursement by the purchaser under FMS procedures, or from military assistance funds made available for that purpose under security assistance legislation prevailing at the time the transfer was made. An example of the requirements to transfer WRSA material is illustrated in Section 509(a)(1) of the Foreign Relations Authorization Act FY 1994 and 1995 [P.L. 103-236] with respect to Korea. The secretary of defense in coordination with the secretary of state was permitted to transfer to Korea obsolete or surplus items in the DoD inventory which are in the WRSA for the Republic of Korea in return for concessions by the Republic of Korea. The authority expired on 29 April 1996 and required congressional notifi cation thirty days prior to the transfer which identifi es the items transferred and the concessions to be given. Section 112, P.L. 106-280, provided a similar transfer authority with the government of Israel that expired 6 October 2003. Section 13(a)(1) of the Department of State Authorities Act of 2006, P.L.109- 472, 11 January 2007, extended this transfer of WRSA for concessions authority to expire 5 August 2008. Section 13(a)(2) of P.L.109-472 also amended Section 514(b)(2), FAA, authorizing up to $200 million annually in WRSA stocks for Israel during FY 2007 and FY 2008. COUNTRY-SPECIFIC LEGISLATION Numerous legislative provisions are enacted annually which apply only to one specifi c country, or which may apply, on occasion, to a specifi ed group of countries. Such statutes may range from a total prohibition on the provision of any form of U.S. assistance to a particular country, to a limited 2-30 Security Assistance Legislation and Policy ban on furnishing certain types of assistance (e.g., a provision which prohibits military assistance but permits economic assistance). Thus, the FOAA for FY 2006 (and FY 2007) [Section 507, P.L. 109- 102] prohibited any direct assistance to Cuba, Iran, Libya, North Korea, and Syria. Additionally, Title III, P.L. 109-102 prohibited FMFP assistance in FY 2006 to Sudan and Guatemala. A corresponding legislative prohibition on FY 2006 IMET assistance was applied also to Guatemala to receive expanded IMET funding only. The statutory provisions setting forth such a prohibition generally (but not always) include the required conditions under which a specifi c ban may be removed. The statutory language usually calls for a determination by the president, and a presidential report to Congress, that the subject country has taken appropriate action (as required by Congress) to resolve the issue which led to the original prohibition (e.g., improved its human rights practices, eliminated corruption involving the management of U.S. grant funds, cracked down on illicit drug traffi cking, etc.). WEAPONS-SPECIFIC LEGISLATION A related regulatory provision involves what may be termed weapons-specifi c legislation. Such statutory provisions serve to restrict the sale of specifi c types of weapons to particular countries. Depleted Uranium Anti-Tank Shells The fi rst such weapons-specifi c provision was introduced in FY 1987 when Congress placed a ban on the sale of depleted uranium (DU) anti-tank shells to any country other than the NATO member countries and the major non-NATO allies. This prohibition has been renewed annually through FY 1995 by Congress; and in FY 1992, Taiwan was added to the list of exempted countries. FY 1996 legislation did not renew DU round restriction. However, P.L. 104-164 amended the FAA to refl ect the DU round sales restriction and permanently exempting the NATO countries, MNNAs, Taiwan, and any country the president determines that such a sale is in the U.S. national security to do so. [Section 620G, FAA] STINGER Missiles A second weapons-specifi c statute was introduced in FY 1988 when Congress prohibited the U.S. from selling or otherwise making available STINGER man-portable, air defense missiles to any country in the Persian Gulf region, other than Bahrain. This provision has also been renewed annually by Congress through FY 1999 [Section 530, P.L. 106-113]. However, effective with enactment on 6 October 2000, Section 705, P.L. 106-280, provides an exception to the prohibition. A one-for-one transfer of STINGERs is authorized to any Persian Gulf country if the missile to be replaced is nearing the scheduled expiration of its shelf life. Missile Technology Control Regime Another type of armaments regulation was introduced in the National Defense Authorization Act for Fiscal Year 1991, P.L. 101-510, Section 1703, which added to the AECA a new Chapter 7, entitled, "Control of Missiles and Missile Equipment or Technology." This legislation refl ects the provisions of a 16 April 1987 international statement, referred to as the missile technology control regime (MTCR) in which seven countries, U.S., U.K., Germany, France, Italy, Canada, and Japan, agreed to restrict the international transfer of sensitive missile equipment and technology. Under the provisions of Chapter 7, sanctions may be applied against persons, defi ned to include individuals, corporations, and countries, which unlawfully transfer such equipment or technology. The sanctions range from the denial of USG contracts relating to missile equipment or technology, to the denial of all USG contracts to the denial of all U.S. export licenses and agreements involving items on the USML. A waiver of 2-31 Security Assistance Legislation and Policy these sanctions may be granted if the president determines and notifi es Congress that such a waiver is either Essential to the national security of the U.S. The offender is a sole source supplier of the product or service, and the product or service is not available from any alternative reliable producer, and the need for the product or service cannot be met in a timely manner by improved manu- facturing processes or technological developments [Sections 73(e) and (f), AECA] Chemical and Biological Weapons A similar regulatory program involving the transfer of chemical and biological (C/B) weapons was introduced in 1991 with the passage of the Foreign Relations Authorization Act for Fiscal Years 1992 and 1993. This legislation added a new Chapter 8 to the AECA, entitled, "Chemical or Biological Weapons Proliferation," and it mandates a variety of sanctions which the U.S. may take against persons, companies, and countries which unlawfully aid in the transfer of C/B weapons or the illegal use of such weapons. The sanctions range from the denial of USG procurement contracts for a company which knowingly and materially contributed to the unlawful transfer of C/B weapons/technology to the termination of all U.S. foreign assistance to a government that has used such weapons. A presidential waiver of such sanctions is authorized when such a waiver is either essential to U.S. national security interests or there has been a fundamental change in the leadership and policies of the foreign government. [Section 505(b), P.L. 102-138]. Anti-Personnel Landmines In a unique action, the National Defense Authorization Act for Fiscal Year 1993 established a one year moratorium on the transfer of anti-personnel landmines [Section 1365, P.L. 102-484]. This legislation was proposed to serve as an interim step in obtaining an international agreement for prohibiting the sale, transfer, or export of these weapons and for limiting their use, production, possession, and deployment. This legislation specifi cally prohibits sales, the fi nancing of sales, commercial exports, the issuing of licenses for the export of such landmines, or the furnishing of any foreign assistance related to the transfer of such landmines during the period 23 October 1992 through 22 October 1993. [Section 1365(d), P.L. 102-484] Subsequent annual legislation extended the moratorium to 22 October 2008, and provided the authority for the grant transfer of demining equipment available from USAID or DoS. [Section 547, P.L. 109-102] The command-activated claymore mine has been legislatively defi ned as not an antipersonnel landmine. [Section 580(b)(2), P.L. 104-107] Of interest are some of the statistics cited in the statute regarding anti-personnel landmines: over thirty-fi ve countries are known to manufacture these weapons, and during the ten years from 1983 through 1992, the DoD approved the sale of 108,852 anti-personnel landmines and the DoS approved ten licenses for the commercial export of such landmines valued at a total of $980,000. [Section 1423(a)4, P.L. 103-160] This unilateral U.S. moratorium is seen by Congress to serve as a model for adoption by other countries, and diplomatic efforts are well underway, both through the United Nations and other multilateral means, to achieve an international use or transfer ban similar to the chemical and biological (C/B) weapons prohibition. SUMMARY Security assistance, like other USG programs, is governed by U.S. statute. The primary or basic laws are the FAA of 1961, as amended, and the AECA, as amended. Funds are appropriated for security assistance in the annual Foreign Operations, Export Financing, and Related Programs Appropriation 2-32 Security Assistance Legislation and Policy Act (FOAA), FY 20XX. Notwithstanding certain security assistance sales programs, such as foreign military cash sales and commercial sales which do not involve funding authorizations or appropriations, the Congress still has an interest in these programs and has, over the years, incorporated certain control and reporting measures in the law affecting these as well as appropriated programs. Given the wide variety and complex details of these country-specifi c and weapons specifi c provisions, for additional information the reader is encouraged to consult the various legislative sources cited herein. Additionally, a useful source of such information appears in the analytical reports of new security assistance legislation published annually in the winter or spring issue of The DISAM Journal, depending on the passage of the annual legislation. REFERENCES Executive Offi ce of the President. Budget of the United States (documents for the current FY). The Congressional Budget Process-An Explanation. Committee on the Budget, U.S. Senate. Washington, D.C.: U.S. Government Printing Offi ce, December 1996. How Our Laws Are Made. Washington, D.C.: U.S. Government Printing Offi ce. Legislation on Foreign Relations Through (Current Year). Washington, D.C.: U.S. Government Printing Offi ce. Martin, Kenneth W., "Fiscal Year 2006 Security Assistance Legislation and Funding Allocations," The DISAM Journal,. Vol. 27 No. 2, pp. 9-72. Martin, Kenneth W., T "Fiscal Year 2005 Security Assistance Legislation and Funding Allocations," The DISAM Journal, Vol. 27 No. 3, pp. 65-132. Martin, Kenneth W., "Fiscal Year 2004 Security Assistance Legislation and Funding Allocations," The DISAM Journal, Vol. 26 No. 3, pp. 1-59. Martin, Kenneth W., "Fiscal Year 2003 Security Assistance Legislation and Funding Allocations," The DISAM Journal, Vol. 25 No. 3, pp. 22-83. Martin, Kenneth W., "Fiscal Year 2002 Security Assistance Legislation," The DISAM Journal, Vol. 24 No. 2, pp. 15-51. Martin, Kenneth W., "Fiscal Year 2001 Security Assistance Legislation," The DISAM Journal, Vol. 23 No. 2, pp. 57-110. Brandt, Craig M., and Martin, Kenneth W., "Fiscal Year 2000 Security Assistance Legislation," The DISAM Journal, Vol. 22 No. 2, pp. 7-50. Brandt, Craig M., and Martin, Kenneth W., "Fiscal Year 1999 Security Assistance Legislation," The DISAM Journal, Vol. 21 No. 4, pp. 15-52. U.S. Department of State. Congressional Budget Justifi cation for Foreign Operations, FY 20XX. Washington, D.C., (issued annually). 2-33 Security Assistance Legislation and Policy 2-34 Security Assistance Legislation and Policy 3-1 U.S. Government Organizations for Security Assistance Introduction The United States (U.S.) security assistance program has its roots in U.S. public laws, which contain security assistance authorizations, appropriations, restrictions, and reporting requirements. To understand how this legislation is welded into a coherent, operational foreign policy program, it is appropriate to briefl y discuss the roles of the three branches of the U.S. federal government with respect to security assistance. The majority of this chapter is based on material extracted from the United States Government Manual 2006/2007, Washington, D.C.: Offi ce of the Federal Register, National Archives and Records Administration, revised 1 June 2006. This manual can also be viewed at: http://www.gpoaccess.gov/gmanual/browse-gm-06.html. LEGISLATIVE BRANCH: THE CONGRESS Role of Congress The Congress of the United States, as provided by Article I, Section 1, of the U.S. Constitution, is vested with all legislative powers. In terms of security assistance, congressional power and infl uence are exercised in several ways: Development, consideration, and action on legislation to establish or amend basic security assistance authorization acts Enactment of appropriations acts Passage of joint continuing resolutions to permit the incurrence of obligations to carry on essential security assistance program activities until appropriation action is complete Conduct hearings and investigations into special areas of interest, to include instructions to the Government Accountability Offi ce (GAO), the Congressional Budget Offi ce (CBO), and Congressional Research Service (CRS) to accomplish special reviews Review of proposed arms transfers, foreign military sales (FMS), direct commercial sales (DCS), third country transfers, and leases Ratifi cation of treaties which may have security assistance implications A major dimension of the U.S. security assistance framework is conventional arms transfers and sales. The ultimate authority for such sales resides in Article I, Section 8, of the Constitution, which assigns Congress the power to regulate commerce with foreign nations. Article IV, Section 3, grants Congress the power to dispose of and make all necessary rules and regulations regarding the transfer of property belonging to the U.S. government (USG). U.S. GOVERNMENT ORGANIZATIONS FOR SECURITY ASSISTANCE Chapter 3 3-2 U.S. Government Organizations for Security Assistance Committee Structure The work of receiving and preparing legislation is performed largely by committees in both houses of Congress. The primary committees of Congress with security assistance responsibility for authorizations are the House of Representatives Committee on Foreign Affairs (HFAC), and the Senate Committee on Foreign Relations (SFRC). Security assistance appropriations legislation, or the annual foreign operations appropriations acts (FOAAs), are handled by the House of Representatives Committee on Appropriations (HAC) Subcommittee on Foreign Operations (HACFO) and the Senate Committee on Appropriations (SAC) Subcommittee on Foreign Operations (SACFO). At times, special topics in security assistance will be addressed by other committees such as the Armed Services, Banking, and Finance Committees. Most security cooperation authorities have been generated by the Senate Armed Services Committee (SASC) and the House Armed Services Committee (HASC) with the annual National Defense Authorization Acts (NDAAs). Special Congressional Offi ces Within the legislative branch, three offi ces have a signifi cant impact on the conduct and management of the U.S. security assistance program. The most prominent activities of the GAO are its audits and evaluations of USG programs and activities, conducted in response to requests from Congress, its committees, members, and staffs. The GAO is under the control and direction of the Comptroller General of the U.S. The audit authority of the GAO extends to all departments and other agencies of the federal government. Among other functions, the GAO also has statutory authority to prescribe accounting principles and standards, and settle claims by and against the U.S. The CBO is tasked with the collection of data and with the analyses of alternative fi scal, budgetary, and programmatic policy issues. The CRS within the Library of Congress accomplishes special studies for the Congress. Often, these studies are concerned with security assistance issues and policies. One such annual report is entitled Conventional Arms Transfers to the Developing Nations, which covers a fi ve-year period. JUDICIAL BRANCH: THE COURTS Article III, Section 1 of the U.S. Constitution provides for the federal court system. Federal courts are responsible for interpreting federal laws and determining the constitutionality of U.S. law. Historically, the courts have had limited involvement in the day-to-day activities of security assistance. Judicial involvement is also possible should a contractor, who is providing materials or services under a Department of Defense (DoD) contract, decide to pursue legal remedy in the event of a dispute through an appropriate federal court. EXECUTIVE BRANCH: THE PRESIDENT Article II, Section 1, of the United States Constitution establishes the president as the nation's chief executive and, by implication, the chief arbiter in matters of foreign policy. Furthermore, Section 2 of this same article empowers the president, by and with the consent of the Senate, to make treaties and appoint ambassadors and other public ministers. Section 3 of Article II authorizes the president to receive ambassadors and other public ministers-all essential facets of carrying out U.S. foreign policy. It is the president who presents the recommended annual U.S. security assistance program and budget to the Congress for its consideration, and executes this program once it becomes law. As the chief executive, the president is responsible for all of the activities of the executive branch. The president has numerous assistants, cabinet offi cers, and other subordinate offi cials to oversee the conduct of the U.S. security assistance program (Figure 3-1). 3-3 U.S. Government Organizations for Security Assistance Figure 3-1 United States Government Organization for Security Assistance Offi ce of the President The National Security Council (NSC) and the Offi ce of Management and Budget (OMB) are two organizations within the Executive Offi ce of the President which impact security assistance. The NSC is chaired by the president. The function of the Council is to advise the president with respect to the integration of domestic, foreign, and military policies relating to national security. The NSC is also involved in the review of the annual security assistance budget proposal, as well as many proposed major arms transfers. The OMB assists the president in the preparation of the annual USG budget and the formulation of the nation's fi scal program. Since security assistance programs are part of the U.S. budget, OMB is interested in the impact the security assistance programs have on DoD military and civilian manpower, facilities, and performing accounts, as well as the amounts of the appropriations themselves. The OMB also controls the apportionment of appropriated funds for obligation and expenditure in support of security assistance activities. !! ! " # $ %" & $ ' ( ( ' ( ) * + , ( % $+ ( - + . ("! / $ . 0 # ( ! . (! 0 $+ (( " + % " + !! ' ! !! " $+ . & $ 1 ( +2 + 33 (! . & $+ (! 3-4 U.S. Government Organizations for Security Assistance Department of State The statutory role of the secretary of state is contained in Section 622, of the Foreign Assistance Act (FAA), and Section 2, Arms Export Control Act (AECA). Under the direction of the president, the secretary of state shall be responsible for: The continuous supervision and general direction of economic assistance, military assistance, military education and training, and sales and export programs Determining whether there shall be a security assistance program, and whether there should be a sale, lease, or fi nancing for a country and the value thereof Determining whether there will be a cooperative project and the scope thereof Determining whether there will be a delivery or other performance under the sale, lease, cooperative project, or export Insuring such programs are effectively integrated with other U.S. activities, both at home and abroad, and that the foreign policy of the U.S. is best served thereby The under secretary of state for arms control and international security (T) is the senior adviser to the president and secretary of state for arms control and is the focal point within Department of State (DoS) for security assistance matters. Approval of routine defense articles, services, and technology transfers has been delegated to the under secretary. Coordination of recommendations for signifi cant defense transfers is prepared within this offi ce. Responsibilities include active participation in the security assistance review process. In accordance with Section 36(b)(1), AECA, for those proposed FMS agreements meeting the dollar threshold for advance notifi cation of Congress, the preparation of an elevation (in consultation with the secretary of defense) of the manner in which the proposed sale might contribute to an arms race, increase the possibility of confl ict, prejudice the negotiation of any arms control agreements, must be completed. A similar review is required for commercial arms exports licensed under Section 38, AECA. The Bureau of Political-Military Affairs (PM), headed by the assistant secretary of state for political-military affairs (State/PM), has four principal security assistance functions: Advise the secretary on issues and policy problems arising in the areas where foreign policy and defense policy of the U.S. impinge on one another Serve as the principal channel of liaison and contact between the DoS and DoD Take the lead in developing the positions of the DoS on political-military questions, including those under consideration within the NSC Assist the secretary in carrying out his responsibility for supervision of the military assistance and sales programs, and for licensing the commercial export of military equipment Various offi ces within the bureau are concerned with general military strategic planning, policy development for the foreign policy aspects of nuclear energy and weapons, and matters concerning arms control and disarmament. Two offi ces within the bureau are specifi cally concerned with security assistance. 3-5 U.S. Government Organizations for Security Assistance The Directorate of Defense Trade Controls (PM/DDTC) is responsible to the State/PM for the licensing of commercial exports of arms and materiel on the U.S. Munitions List (USML). The PM/DDTC prepares the International Traffi c in Arms Regulations (ITAR) and the commercial sales reports which are required by Congress. The Offi ce of Regional Security and Arms Transfer Policy (PM/RSAT), responsible to State/ PM, promulgates and oversees export control policy and coordinates government-to-government arms transfer authorization and denial decisions for the secretary of state. It works closely with the DoD offi ces as described later in this chapter. The assistant secretary of state for democracy, human rights, and labor is responsible for reviewing proposed security assistance programs and sales requests with respect to their impact on human rights in the country concerned. Additionally, in accordance with Sections 116(d) and 502(B), of the FAA, the secretary of state is required to submit to Congress by 25 February of each year a detailed analysis entitled Country Reports on Human Rights Practices for 20XX. The Country Reports on Human Rights Practices web site is http://www.state.gov/g/drl/rls/hrrpt/. This compilation of reports describes the status of internationally recognized human rights in countries that receive U.S. assistance and in all other countries that are members of the United Nations (U.N.). The report is to be submitted as part of the presentation materials for security assistance programs proposed each fi scal year. With direct input starting from the country teams, the Democracy, Human Rights, and Labor Bureau puts this required report together for the secretary of state. During August and September the secretary promulgates formal human rights reporting instructions to the country teams for submissions no later than 1 October, with subsequent updating of signifi cant events as they occur. Within thirty days after submitting the annual human rights report, the secretary of state must submit a listing of countries that engage in a consistent pattern of gross violations of internationally recognized human rights. Also, in a separate but related annual report, the secretary must describe how the foreign military fi nance program (FMFP) budget proposal will be used to promote and advance human rights and how the U.S. will avoid identifi cation with activities that are contrary to internationally recognized standards of human rights. The under secretary of state for political affairs directs the activities of the geographic bureaus, which are responsible for U.S. foreign affairs activities in the major regions of the world. These seven bureaus are shown in Figure 3-2. They have a direct role in the security assistance budget formulation process and other day-to-day security assistance matters. 3-6 U.S. Government Organizations for Security Assistance Figure 3-2 United States Department of State United States Agency for International Development The U.S. Agency for International Development (USAID) carries out a variety of economic assistance programs designed to help the people of certain less developed countries develop their human and economic resources, increase productive capacities, and improve the quality of human life as well as to promote economic and political stability in friendly countries. USAID performs its functions under the direction and foreign policy guidance of the secretary of state. The agency is charged with central direction and responsibility for the U.S. foreign economic assistance program. The agency consists of a central headquarters staff in Washington, D.C., and ' * # * ! ' / $ 1 4 !+ + # . ' / 0 ,5 '!* * . ( * + ,& $ " 0 . %& ' ! " + / ("! ( (! ! % + , " ) ! $!! 0 " + 6" + + ' ' ' (! ( % + " ( ' . /! 7 '7 . '& '& (! '& , " (! * * + & + * ( $ 1 * ' * ' $+ 8 ! . ' 3-7 U.S. Government Organizations for Security Assistance missions and offi ces overseas. The FAA authorizes the agency to administer two kinds of foreign economic assistance: Development assistance, which focuses on assistance programs in critical problem areas that affect the majority of the people in the developing countries, like providing food and agricultural development The economic support fund (ESF) Beginning in 2006, the administrator for USAID was also appointed as the director for foreign assistance (DFA) to include the appropriated security assistance programs. DFA is responsible to the secretary of state for the development of U.S. foreign assistance program strategy and objectives and the preparation of annual funding request to Congress to achieve these objectives. Once the con- gressional appropriation process is completed, DFA is also responsible for the allocation of funding, by programs and countries, which is communicated to Congress via the Section 653(a), FAA, report. United States Diplomatic Missions Diplomatic missions located overseas have important roles in security assistance. The ambassador (or chief of the U.S. diplomatic mission) is either a career member of the foreign service or a non-career political appointee, depending upon the desires of the president, and is the personal representative of the president. The ambassador reports to the president through the secretary of state. The ambassador heads the country team, which may include the defense attach offi cer (DAO), the chief of the U.S. security assistance organization (SAO), the political and economic offi cers, and any other embassy personnel desired by the ambassador. The U.S. diplomatic mission, the SAO, and the DAO will be further addressed in Chapter 4, "Security Assistance Organizations Overseas." Department of Treasury The Department of Treasury is involved in security assistance through its role as fi nancial agent for the USG and as a member of the NSC. The FMS trust fund is a U.S. Treasury account, therefore Treasury is interested in the overall cash fl ow of this account. If a country's FMS account goes into a defi cit or delinquent cash position, this is of special interest to Treasury. The Treasury has a fi duciary interest in the appropriated or credit programs of security assistance as well. Department of Justice Although the thrust of this text is toward the export of defense articles and services in support of the U.S. security assistance program, the AECA also confers upon the president the function of controlling the import of arms, ammunition, and implements of war, including technical data, into the U.S. This function has been delegated by the president to the attorney general and the Department of Justice. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the law enforcement agency controlling the import of defense articles. Designation by the attorney general of items as defense articles or services subject to import control must have the concurrence of the secretaries of state and defense [Executive Order No. 11958]. Department of Homeland Security Duties of the former U.S. Customs Service within the Department of Treasury were transferred to the Department of Homeland Security (DHS) by the Homeland Security Act of 2002. DHS customs enforcement is divided between two agencies: U.S. Customs and Border Protection (CBP) 3-8 U.S. Government Organizations for Security Assistance U.S. Immigration and Customs Enforcement (ICE) CBP is responsible for reviewing DoS-issued munitions control export licenses at the U.S. port of departure and for the reporting of any irregularities. This bureau also collects and compiles international trade statistics, some of which are security assistance related, and forwards them to the Bureau of the Census for compilation. The Homeland Security Act of 2002 also transferred the U.S. Coast Guard (USCG) from the Department of Transportation (DoT) to the DHS. The USCG is a signifi cant security assistance partner especially in the areas of maritime security, law enforcement, navigation, and safety. In keeping with its long tradition with the U.S. Navy, the USCG works closely with the Navy International Program Offi ce (Navy IPO) in providing security assistance overseas. Department of Commerce The Department of Commerce (DoC) is involved with the U.S. security assistance program in several ways. One way is through its interface with the DoS and DoD with respect to civilian items with the potential for military application (i.e., dual-use items). These items are on Commerce's Commerce Control List (CCL) and a DoC license issued by the Bureau of Industry and Security (BIS) is required for their export. In other instances, technology transfer implications are an issue. Commerce also manages export administration and related activities, including advice and assistance on regulating exports through the licensing of U.S. goods and technology for purposes of national security and foreign policy. Chapter 7, "Technology Transfer, Export Controls, and International Program Security," will provide further information. Department of Transportation The Maritime Administration (MARAD), which is part of the DoT, is also involved in security assistance. It has a responsibility to determine if foreign countries, through their freight forwarder agents, are properly using U.S. fl ag shipping for U.S.-funded security assistance programs. Chapter 11, "Foreign Military Sales Transportation Policy" provides additional information on U.S. fl ag shipping. Department of Defense The DoD, from the standpoint of overall effort measured in man-years, has the greatest involvement in security assistance of any department within the executive branch. When the full and part-time workloads are considered, the annual result is about 20,000 man-years. As prescribed by Section 623, FAA, and Section 42(d), AECA, the secretary of defense is charged with primary responsibility for carrying out the following security assistance functions: The determination of military end-item requirements The procurement of military equipment in a manner that permits its integration with service programs The supervision of end-use of U.S.-origin articles by recipient countries The supervision of the training of foreign military and related civilian personnel The movement and delivery of military end-items 3-9 U.S. Government Organizations for Security Assistance The establishment of priorities in the procurement, delivery, and allocation of military equipment Within the DoD, the performance of any other functions with respect to the furnishing of military assistance, education, training, sales, and guarantees Offi ce of the Secretary of Defense The under secretary of defense for policy USD (P) serves as the principal adviser and assistant to the secretary for all matters concerned with the integration of departmental plans and policies with overall national security objectives, and exercises overall direction, authority, and control over security assistance matters through the various assistant secretaries of defense (ASDs) The offi ce within DoD that is responsible for supervising security assistance programs with all foreign governments is the assistance secretary of defense for global security affairs [ASD (GSA)]. This offi ce is concerned with much more than just security assistance and includes a specifi c DoD agency that interprets executive policy and develops DoD security assistance policies and programs. This agency is designated the Defense Security Cooperation Agency (DSCA). In accordance with DoDD 5111.7, ASD (GSA) provides direction and control over the Director, DSCA. The role of DSCA will be discussed later in this chapter. Relating to security assistance, the deputy under secretary of defense for technology security policy and national disclosure policy [DUSD (TSP & NDP)] is responsible to the ASD (GSA) for the coordination of technical data transfer decisions within DoD by using procedures established by NDP-1 National Disclosure Policy. This is performed by the National Disclosure Policy Committee (NDPC) which also includes DoS and Joint Staff representatives in its general membership. The offi ce of the NDPC also manages the international program security (IPS) education and oversight programs within DoD. DUSD (TSP & NDP) is also director, defense technology security administration (DTSA). DTSA is responsible for the DoD coordination of the proposed export of defense technology items through DCS to be licensed by the DoS and dual-use technology commercial sales to be licensed by the DoC. Chapter 7, "Technology Transfer, Export Controls, and International Program Security", will discuss NDP, international program security, and DTSA processes and programs. The USD(P) also includes four other assistance secretaries to include: The assistant secretary for international security affairs [ASD (ISA)] responsible for DoD policy within Europe, the Middle East, and Africa The assistance secretary for Asian and Pacifi c security affairs [ASD (APSA)] responsible for DoD policy with the Asian Pacifi c, South Asia, and Central Asia The assistant secretary for homeland defense and Americas, security affairs responsible DoD policy regarding homeland defense, civil support, crisis management, and the Western Hemisphere The assistant security for special operations/low intensity confl ict and interdependent capabilities [ASD (SOLIC-IC)] responsible DoD policy regarding special operations, strategic capabilities, stability operations, and forces transformation The offi ce of the under secretary of defense (acquisition, technology and logistics) [USD (AT&L)] is responsible for the coordination of all international defense cooperative issues, to include cooperative 3-10 U.S. Government Organizations for Security Assistance research, development, production, acquisition, and logistics support programs. USD(AT&L) promulgates policies and procedures on a variety of security assistance functional areas, to include international coproduction agreements. The Defense Threat Reduction Agency (DTRA) reports to this offi ce, with responsibilities for reducing the threat to the U.S. and its allies from weapons of mass destruction and special weapons. USD (AT&L) also provides oversight to the Defense Contract Management Agency (DCMA) described later in this chapter. The director for international cooperation is responsible to USD (AT&L) for establishing policies for industrial base, dual-use technology, and international armament cooperation programs. Refer to Chapter 13, "International Armaments Cooperation Programs," for further information regarding these programs. The director for defense research and engineering (DDRE) assures considerations of rationali- zation, standardization, and interoperability in security assistance programs with North Atlantic Treaty Organization (NATO) allies, provides analysis of the risks of compromise of U.S. weapons systems, and participates in the technology transfer review process. The under secretary of defense (comptroller) [USD (C)] is the DoD chief fi nancial offi cer (CFO) responsible for establishing policy and procedures involving fi nancial management, fi scal matters, accounting, pricing, auditing, and international balance of payments as these matters relate to security assistance. The Director of the Defense Finance and Accounting Service (DFAS) is the focal point for security assistance matters within the Offi ce of the comptroller. Described later in this chapter, is the Defense Contract Audit Agency (DCAA) within the USD (C) organization responsible for the fi nancial audit of DoD contracts to include those awarded in support of the FMS community. The directorate for security assistance of the Defense Finance and Accounting Service (DFAS-IN) serves as the central bank of FMS. Its responsibilities include the operation of the DoD centralized FMS billing, collecting, and trust fund accounting system. The Indianapolis center is a component of the DFAS, Washington, D.C. which is responsible to the under secretary of defense (comptroller). Refer to Chapter 5, "The Foreign Military Sales Process," for further information regarding the tasks performed by DFAS-IN. The under secretary of defense for intelligence [USD (I)] is responsible for the management of intelligence processes within the DoD to include participation in the technology disclosure process and supervision of the Defense Security Service (DSS). DSS is responsible to the USD (I) for security issues within the U.S. defense industry. This also includes validating transportation plans in support of export licenses to be issued by the DoS for direct commercial sales. DSS also assists the NDPC when validating and assisting foreign defense industries' participation regarding international armaments cooperation. Refer to Chapter 7, "Technology Transfer, Export Controls, and International Programs Security," for further information regarding the DSS role in security assistance. Joint Chiefs of Staff The chairman of the Joint Chiefs of Staff (Joint Staff) is the principal military adviser to the president. The Joint Staff constitutes the immediate military staff of the secretary of defense, serving as a coordinating agency in the chain of command that extends from the president through the secretary of defense to the commanders of combatant commands (COCOMs). The Joint Staff communicates instructions to the COCOMs from the secretary of defense, and furnishes the secretary with information from the COCOMs. 3-11 U.S. Government Organizations for Security Assistance The Joint Staff organization is a key participant in the security assistance program development and review process. The Joint Staff coordinates security assistance with U.S. military plans and programs, and provides the secretary of defense with military advice concerning security assistance programs, actions, and activities to include: Recommending the selection, introduction, or redistribution of weapons systems in and among recipient countries, considering rationalization, standardization, and interoperability Recommending military force objectives, requirements, and priorities for actual or potential security assistance recipients Determining the impact of security assistance programs on U.S. programs and defense readiness Recommending security assistance organizational and manpower requirements for SAOs and security assistance personnel augmentations to defense attach offi ces Recommending the designation of military services responsible for furnishing chiefs of SAOs other than defense attachs assigned security assistance responsibilities For other than defense attachs assigned security assistance responsibilities, recommending the nominations of individuals to serve as chiefs of SAOs and recommending tour extensions or curtailment for such individuals Assigning force activity designators to determine priorities in the allocation of defense articles among recipient nations and between recipient nations and the U.S. armed forces within guidelines established by the offi ce of the secretary of defense The Joint Staff reviews certain proposed FMS cases for their impact on national security and insures that security assistance factors are included in the joint planning process. The focal point for security assistance matters within the Joint Staff is the Weapons Technology Control Division, Politico- Military Affairs, Asia Directorate, with the Director for Strategic Plans and Policy (J-5/DDPMA-A/ WTC). This offi ce also represents the Joint Staff on the NDPC. Combatant Commands Six of the COCOMs have responsibilities for the conduct of the U.S. security assistance program within their respective geographical regions. The following is a list of the COCOMs: The U.S. European Command (USEUCOM) The U.S. African Command (USAFRICOM) [now under USEUCOM 10-1-07 - will be a full command 10-1-08] The U.S. Southern Command (USSOUTHCOM) The U.S. Pacifi c Command (USPACOM) The U.S. Northern Command (USNORTHCOM) The U.S. Central Command (USCENTCOM) With regard to security assistance, the functions of the regional COCOMs include the following: 3-12 U.S. Government Organizations for Security Assistance Make recommendations to the Joint Staff and the Secretary of Defense on any aspect of security assistance programs, projections, or activities Keep informed on all security assistance matters, to include programs, projections, and activities Command, supervise, and support the SAOs in matters that are not functions or responsibilities of the chiefs of the U.S. diplomatic missions, including the provision of necessary technical assistance and administrative support to SAOs Coordinate and assist DoD components in the conduct of regional security assistance programs and activities when required and practical Develop and submit as directed by the Joint Staff, recommendations regarding organization, staffi ng, and administrative support of SAOs Keep the secretary of defense, Joint Staff, and military departments informed on matters that could have an impact on security assistance and on security assistance programs, or actions that could impact other DoD programs under their cognizance Ensure coordination of regional security assistance matters with U.S. diplomatic missions and DoD components, as appropriate Conduct activities as directed, and when required, to ensure the effi cient and effective administration of security assistance activities Provide evaluation, as required, of the effi ciency and effectiveness of DoD overseas SAOs Security Assistance Organizations The term SAO is the generic name for the DoD organization overseas with the primary responsibility for interfacing with the host nation on security assistance and security cooperation programs. The SAO is normally co-located with U.S. embassy in the country and is a part of the ambassador's country team. The SAO may be known by a variety of locally-specifi c titles such as offi ce of defense cooperation (ODC), military assistance advisory group (MAAG), etc. The chief of the SAO is responsible to three authorities: the ambassador, the commander of the COCOM, and the director, DSCA. A detailed discussion of the duties and functions of the SAO is presented in Chapter 4, "Security Assistance Organizations Overseas." Department of Defense Agencies Defense Security Cooperation Agency As noted in DoDD 5105.38, DoDD 5132.3, and DoD 5105.38-M, Security Assistance Management Manual (SAMM), DSCA is established as a separate agency of the DoD under the direction, authority, and control of the USD (P) and receives policy direction and staff supervision from ASD (GSA). The principal security assistance functions of DSCA include. Administering and supervising security assistance planning and programs Coordinating the formulation and execution of security assistance programs with other governmental agencies 3-13 U.S. Government Organizations for Security Assistance Conducting international logistics and sales negotiations with foreign countries Serving as the DoD focal point for liaison with U.S. industry with regard to security assistance activities Managing the credit-fi nancing program Developing and promulgating security assistance procedures, such as the SAMM Developing and operating the data processing system and maintaining the macro database for the security assistance program Making determinations with respect to the allocation of FMS administrative funds Administering assigned security cooperation programs In 1998, DSCA assumed the responsibility for administering the USD (P) security cooperation programs of humanitarian mine actions, humanitarian assistance, and Warsaw Initiatives. DSCA also has administrative management responsibilities for the DoD counter terrorism fellowship program (CTFP) and the fi ve regional centers for security studies. In accordance with DoD Directive 2140.5, the Defense Institute of Security Assistance Management, (DISAM) has the following responsibilities: The conduct of courses of study that will prepare military (U.S. and foreign) and civilian (USG, foreign, and U.S. contractor) personnel for assignments in security assistance management positions The conduct of research in defense security assistance concepts and methods The assembling and dissemination of information concerning new policies, methods, and practices The providing of consulting services to offi ce of secretary of defense (OSD) and the military departments (MILDEPs) DSCA is the executive agent and the U.S. provides logistic and administrative support on a reimbursable bases. DISAM is funded from the Security Assistance Administrative Trust Fund. The Defense Security Assistance Development Center (DSADC) was established in 1997 to develop the defense security assistance management system (DSAMS). DSADC is located in Mechanicsburg, Pennsylvania. Like DISAM, DSADC is organized as a directorate within DSCA. The Defense Institute of International Legal Studies (DIILS) provides expertise through resident courses and mobile education teams on over 250 legal topics, with an emphasis on disciplined military operations. DIILS, located in Newport, Rhode Island, is likewise organized as a directorate within DSCA. Defense Logistics Agency The Defense Logistics Agency (DLA) is a DoD agency within the USD (AT&L) organization, headquartered at Ft. Belvoir, Virginia, under the control of the deputy under secretary of defense for logistics and materiel readiness. The mission of DLA is to provide support to the military services, other DoD components, federal civil agencies, and foreign governments. Such support includes the 3-14 U.S. Government Organizations for Security Assistance providing of assigned materiel commodities and items of supply, logistics services, and other support services. To accomplish this mission, DLA has the following organizations: The DLA Customer Operations and Readiness Directorate, located at Ft. Belvoir, Virginia, oversees all materiel management missions, functions, and organizations, to include the following that support U.S. security assistance programs: Defense Logistics Information Service (DLIS), Battle Creek, Michigan, operates the federal catalog system for the entire USG. It also provides cataloging services to NATO and other foreign countries Defense Reutilization and Marketing Service (DRMS), also located at Battle Creek, is responsible for the conduct of FMS sales of DoD and other USG agency generated excess property The inventory control points (ICP), which include the various defense supply and support centers, provide supply management for items that are common among the U.S. services, and provide items to foreign purchasers based upon requests transmitted by the various U.S. services DLA is also responsible for what is referred to as the military standard logistics systems. These include the following: The defense automatic addressing system (DAAS) The military assistance program address directory (MAPAD) The military standard requisitioning and issue procedures (MILSTRIP) Defense Contract Management Agency The DCMA and its area offi ces administer, on behalf of defense and MILDEPs acquisition offi ces, FMS contracts at numerous contractor facilities throughout the U.S. It can also provide quality assurance for direct commercial procurements, if such service is requested and purchased by the foreign government from the Defense Contract Management District-International (DCMDI). Other services include pre-award surveys, price reviews, and production surveillance. DCMA is located within the USD (AT&L) organization. Defense Contract Audit Agency The DCAA is a separate agency under the control of the under secretary of defense (comptroller). Through its fi eld audit offi ces, it provides audit services for many FMS-related contracts. Defense Language Institute English Language Center The Defense Language Institute English Language Center (DLIELC), located at Lackland Air Force Base, Texas, operates under the command and control of Headquarters, Air Education and Training Command (AETC). The center is tasked by the Army, Navy, and Air Force, under provisions of a joint regulation. It is responsible for the conduct, supervision, and technical control of English language training programs for non-English speaking foreign and U.S. service personnel. 3-15 U.S. Government Organizations for Security Assistance National Geospatial-Intelligence Agency The National Geospatial - Intelligence Agency (NGA), offers support on matters of mapping, charting, and geodesy to foreign countries under the U.S. security assistance program. NGA components include: NGA Headquarters, Fairfax, Virginia NGA Aerospace Center, St. Louis, Missouri NGA Hydrographic/Topographic Center, Bethesda, Maryland The Defense Mapping School, Fort Belvoir, Virginia NGA Systems Center, Reston, Virginia Military Departments The secretaries of the MILDEPs serve as advisers to the secretary of defense on all security assistance matters impacting on, or related to, their departments and shall act for the secretary of defense where responsibility for actions is delegated. In carrying out their responsibilities, the secretaries: Provide the secretary of defense recommendations considered appropriate and necessary to ensure the successful conduct of security assistance, including its interface with and support of military department policies, objectives, plans, and programs Provide data, upon request, pertaining to price, source, availability, and lead time for use in developing and reviewing security assistance programs, including FMS cases Provide to elements of the OSD, Joint Staff, COCOMs, and SAOs, as appropriate, technical information as to weapons systems, tactics and doctrine, training, and pertinent logistic support Conduct training, and acquire and deliver defense articles and services included in approved programs Coordinate and establish delivery schedules and necessary internal procedures for follow-up, expediting, and related actions during the implementation of approved programs Provide such other technical assistance and facilities to elements of OSD as necessary to promote effi ciency and economy in security assistance matters Within policies and criteria established by the ASD (GSA), and under direction of the director, DSCA, make sales of defense articles and services to eligible countries and international organizations Integrate acquisition for security assistance with military service acquisition pro- grams in accordance with policy guidance provided by the director, defense research and engineering (DDR&E) Maintain appropriate records and furnish prescribed reports within the scope of their responsibilities 3-16 U.S. Government Organizations for Security Assistance Obtain from the COCOMs and SAOs such data as may be needed to carry out assigned responsibilities With respect to the area or areas assigned, provide administrative support needed to carry out security assistance functions, subject to the direction and policy guidance of ASD (GSA) In accordance with approved tables of distribution and other authorizations, directives, and requests, recommend and provide qualifi ed military personnel to carry out security assistance assignments Assist the ASD (GSA) and the director, DSCA, as requested, in government-to- government or interdepartmental discussion involving security assistance policies, plans, and programs Assist the ASD (GSA) and the director, DSCA, as requested, in government-to- government negotiations involving security assistance and the director for inter- national cooperation, or designee in government-to-government negotiations involving international logistics arrangements Department of the Army Security assistance policy and oversight for the Department of the Army is the responsibility of the deputy assistant secretary of the army for defense exports and cooperation (DASA/DE&C), located in Washington, D.C. This offi ce reports to the assistant secretary of the army for acquisition, logistics and technology [ASA (ALT)]. This offi ce was created in 2001 and consolidates security assistance policy with that of other international activities, programs, and affairs to provide the Army a single focal point for policy on international matters, similar to the Navy and Air Force. See Figure 3-3. The commander, U.S. Army Materiel Command (AMC) is the Department of the Army executive agent for implementing, administering, and managing Army FMS programs. The commander, U.S. Army Security Assistance Command (USASAC), performs the executive agent's functions for AMC. USASAC consists of three major elements, the directorate for plans and management located at Ft. Belvoir, Virginia, the directorate for operations located at New Cumberland, Pennsylvania, and the comptroller directorate with offi ces at both locations. The USASAC deputy for plans and management reviews Army letters of offer and acceptance (LOAs) and forwards them directly to DSCA for approval and countersignature as required. Certain LOAs still must go through the Army Staff, but these are few in number and usually involve high visibility, national policy, and readiness impact considerations. The Army has decentralized the preparation of LOAs. Cases involving material or services to be provided by AMC are prepared by the applicable life-cycle management command. Training cases that are the responsibility of the Training and Doctrine Command (TRADOC) are prepared by that command's Security Assistance Training Field Activity (SATFA), located at Ft. Monroe, Virginia. Cases may also be prepared by other commands. Even though the preparation of LOAs is decentralized, USASAC maintains overall control in that all cases are forwarded to USASAC for review and signature before going to DSCA, when required, and the purchaser. 3-17 U.S. Government Organizations for Security Assistance Figure 3-3 Department of the Army Functional Organization for Security Assistance Army Materiel Command (AMC): U.S. Army Security Assistance Command (USASAC), Ft. Belvoir, Virginia Communications/Electronics Command (CECOM), Ft. Monmouth, New Jersey Aviation and Missile Command (AMCOM), Redstone Arsenal, Alabama Joint Munitions and Lethality Command (JM&L), Rock Island Arsenal, Illinois Tank, Automotive, and Armaments Command (TACOM), Warren, Michigan Army Medical Command (MEDCOM) U.S. Army Medical Materiel Agency (USAMMA), Ft. Detrick, Maryland Army Corps of Engineers (USACE), Washington, D.C. PEO Simulation and Instrumentation (PEO-STRI), Orlando, Florida Department of the Navy The principal Navy organization for handling security assistance matters is the Navy International Programs Offi ce (Navy IPO), located at the Navy Yard, Washington, D.C. Under the direction of the deputy assistant secretary of the Navy for research, development, and acquisition (DASN-RD&A), Navy IPO formulates and implements Navy security assistance policy, and interfaces with other government agencies. Sales negotiations for all types of Navy service FMS requirements are carried out by Navy IPO (Figure 3-4). Detailed management of the Department of the Navy security assistance programs occurs at the systems commands and at the Naval Education and Training Security Assistance Field Activity (NETSAFA), which is located in Pensacola, Florida. Within each systems command and in NETSAFA, a security assistance coordination offi ce oversees and monitors the command's security assistance + ( (0 ( $+ ( $ + (! + , . $+ $! + % ! $+ " . $ 1 .$ , 7 . 33 ("! ! $" ( 6" ! ! !! " ! 3-18 U.S. Government Organizations for Security Assistance business. However, the program management offi ce or training activity that manages the U.S. Navy acquisition or school will be tasked with the execution of the FMS requirement for its product. Follow- on support FMS cases are managed at Navy Inventory Control Point for International Programs (NAVICP-OF) located both in Mechanicsburg, Pennsylvania, and Philadelphia, Pennsylvania. Figure 3-4 Department of the Navy Functional Organization for Security Assistance The U.S. Marine Corps is a component of the Department of the Navy. As such, Navy IPO handles all direct interfacing with foreign customers. The Marine Corps System Command (PLS-SA) provides LOA input data to Navy IPO on behalf of the commandant of the Marine Corps. Training management is provided by the Marine Corps Combat Development Center, Coalition and Special Warfare Division (MCCDC/C38) located at Quantico, Virginia. Although a component of the DHS, and not the DoD, the USCG participates in certain security assistance programs. The Headquarters, U.S. Coast Guard, international affairs staff for security assistance and international training (G-CI), located in Washington D.C., coordinates USCG security assistance policy and directs the performance of security assistance programs on behalf of the commandant of the USCG. USCG operating units, training centers, and inventory control points may provide U.S. defense articles and services to foreign customers through the security assistance program. Navy International Programs Office (Navy IPO) Overall Policy Coordination Commandant of the Marine Corps(CMC) DCS/S PP&O Marine Corps Combat Development Center (CG MCCDC) Commandant of the Coast Guard (G-CI) Providing Coast Guard Activities Navy Inventory Control Point Deputy for Int'l Programs (NAVICP-OF) Navy Inventory Control Point Program Managers Item Managers Item Managers Naval Supply Systems Command (NAVSUP) Other Providing Navy Commands Navy Training Activities Naval Education and Training Security Assistance Field Activity (NETSAFA) Other Systems Commands NAVAIR NAVSEA SPAWAR NAVFAC Coalition and Special Warfare Division (Code C38) Marine Forces LANT/PAC Coordination Marine Corps System Command Marine Corps Logistics Base 3-19 U.S. Government Organizations for Security Assistance Department of the Air Force The offi ce of the secretary of the Air Force, deputy under secretary for international affairs (SAF/ IA) develops, implements, and oversees security assistance activities assigned to the U.S. Air Force by OSD. It is the offi ce of primary responsibility for the central management, direction, guidance and supervision of the Air Force portion of security assistance programs for foreign nations and international activities. The assistant secretary of the air force for acquisition (SAF/AQ), by virtue of having responsibility for Air Force acquisition, has a coordinating role in the development of LOAs for major acquisition cases and an oversight role in their execution. For follow-on support that will be provided from Air Force Materiel Command (AFMC) assets, the Air Force Security Assistance Center (AFSAC) at Wright-Patterson Air Force Base, Ohio, prepares, processes, and oversees the performance of the applicable FMS cases. AFSAC has also absorbed from SAF/IA the writing of most system sales cases. Within a foreign military sales case, the Air Force directs the management of its FMS business on a line-by-line basis. SAF/IA or AFSAC, as applicable, assigns line management responsibility to the major command having cognizance over the article or service being provided and a security assistance program manager (SAPM) to oversee the coordination of the lines. (See Figure 3-5). Detailed management of USAF security assistance training cases is conducted by the Air Force Security Assistance Training Squadron (AFSAT), a component of the Air Education and Training Command (AETC). Both AFSAT and AETC are located at Randolph Air Force Base, Texas. Office of the Secretary of the Air Force Deputy Under Secretary for International Affairs (SAF/IA) Other SAF and HQ-USAF offices Assistant Secretary for Acquisition (SAF/AQ) Air Force Materiel Command Air Combat Command Air Mobility Command Air Education and Training Command Other Commands and Agencies Tactical Training Flight Ferrying Air Transport Tanker Support Assigned Products and Services Air Force Security Assistance Center (AFSAC) Product/ Logistics Center Air Force Security Assistance Training Squadron (AFSAT) Technical Training Center Flying Traininng Wings Other Schools Case/Line Management Systems Items Training Case/Line Management Figure 3-5 Department of the Air Force Functional Organization for Security Assistance 3-20 U.S. Government Organizations for Security Assistance SUMMARY The development and management of the U.S. security assistance program requires the active participation and cooperation of all branches of the USG. Within the executive branch, there are several departments that have a particularly active role. By law, the secretary of state is responsible for the continuous supervision and general direction of the security assistance program. Other departments and offi ces (e.g., DoD, DoT, DoC, OMB) have a supportive role as well. The DoD has the largest supportive role from a level-of-effort standpoint. REFERENCES Hodgkinson, David B. Captain (USA) and Jamison, Sandra L. Lieutenant JAGC, USN, 2001, "The Growing, Unlimited Mission of the Defense Institute of International Legal Studies," The DISAM Journal, Vol.23 No.3, pp. 1-9. Scott, Bruce K., Major General (USA), and Spalding Ken, 2000, "The U.S. Army Security Assistance Command," The DISAM Journal, Vol. 23 No.1, pp. 1-25. Zabielski, Kenneth P., 1997, "The Defense Logistics Agency, First Class Logistics for U.S. and Foreign Forces, DLA Around the Clock, Around the World," The DISAM Journal, Vol. 19 No. 2, pp. 2-31. Epstein, William H., 1994, "Navy International Programs Offi ce," The DISAM Journal, Vol. 17 No. 1, pp. 1-14. "The Deputy Under Secretary of the Air Force for International Affairs (SAF/IA): Poised for the Future," The DISAM Journal, Vol. 16 No. 1, pp. 1-6. U.S. Department of Defense. DoD Directive 5105.38, Defense Security Cooperation Agency. U.S. Department of Defense. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapters 3 and 4. U.S. Department of Defense. DoD Directive 5132.3, Department of Defense Policy and Responsibilities Relating to Security Assistance. Offi ce of the Federal Register. United States Government Manual (year), Revised Annually. 4-1 Security Assistance Organizations Overseas INTRODUCTION As indicated in Chapter 3, "U.S. Government Organizations for Security Assistance," the security assistance organization (SAO) is only one of numerous organizations within the United States government (USG) and the Department of Defense (DoD) which contribute to the security assistance mission. However, the role of the SAO is unique in that it acts as the primary interface with the host nation on security assistance issues. Equally important, the SAO is generally the lead agency within each area combatant command (COCOM) for the execution of most of DoD's security cooperation programs in the country assigned. A discussion of the relationship between security assistance and security cooperation is presented in Chapter 1, "Introduction to Security Cooperation." Normally located within the United States (U.S.) embassy in the host nation, the SAO by law is under the direction and supervision of the U.S. ambassador, also known as the chief of mission (COM). Additionally, the SAO by DoD policy (DoDD 5132.3) is under the command and supervision of the area combatant commander in matters that are not functions or responsibilities of the ambassador. This includes promotion and execution of the combatant commander's theater security cooperation strategy for that country. On security assistance and other issues, the SAO acts as an advocate for host nation concerns and interests to DoD and the USG. At the same time, the SAO recognizes its responsibility to advance U.S. foreign policy goals under the ambassador and promote theater security cooperation objectives under the area combatant commander. The SAO chief must accept direction from multiple "bosses," i.e., ambassador, combatant commander, and Director, Defense Security Cooperation Agency (DSCA), and anticipate or recognize the occasional need to reconcile confl icting guidance. Indeed, the SAO is the link which ensures compatibility of Department of State (DoS) and DoD policies and promotes synergy of their resources. This also requires the ability to work routinely and smoothly with host nation counterparts and to interpret or explain USG policies and procedures for a variety of programs. Finally, in the performance of these duties, the SAO must often bridge a so-called "culture gap" between the U.S. and the host nation. DEFINITION AND PURPOSE OF THE SECURITY ASSISTANCE ORGANIZATION The generic term " security assistance organization "encompasses all DoD organizations, regardless of actual title or size, located in foreign countries to carry out security assistance management functions under the Foreign Assistance Act (FAA) and the Arms Export Control Act (AECA). In many countries, the primary program is foreign military sales ( FMS), whether funded by host nation cash and/or by U.S.-appropriated foreign military fi nancing (FMF). The other security assistance programs available to most countries are international military education and training (IMET) and excess defense articles (EDA). In addition, the SAO is normally the key player in managing a range of security cooperation programs on behalf of the combatant commander, as discussed below. Throughout this textbook, the term "SAO" refers not only to the organization, but to each of its assigned personnel (i.e., security assistance offi cers). Although SAO is used as a generic name, each specifi c SAO has its own formal title or designation. Table 4-1 contains a list of the current SECURITY ASSISTANCE ORGANIZATIONS OVERSEAS Chapter 4 4-2 Security Assistance Organizations Overseas Table 4-1 U.S. Security Assistance Organizations Acronym Title and Locations JUSMAG Joint U.S. Military Assistance Group (Philippines) JUSMAG Joint U.S. Military Advisory Group (Thailand) JUSMAG-K Joint U.S. Military Affairs Group - Korea KUSLO Kenya U.S. Liaison Offi ce MAP Military Assistance Program (Jordan) MDAO Mutual Defense Assistance Offi ce (Japan) NLO Navy Liaison Offi ce (Bahamas) ODC Offi ce of Defense Cooperation (approximately 60 European, African, East Asian countries, and others) ODC Offi ce of Defense Coordination (Mexico) ODR Offi ce of Defense Representative (Costa Rica) ODRP Offi ce of Defense Representative Pakistan OMC Offi ce of Military Cooperation (Bahrain, Egypt, Oman, Yemen) OMC-K Offi ce of Military Cooperation - Kuwait OPM-SANG Offi ce of the Program Manager, Saudi Arabian National Guard (OPM SANG is not an SAO, but is chartered by the Secretary of the Army and reports to U.S. Army channels through the Commanding General USASAC. OPM SANG's mission is to advise and train the Saudi Arabian National Guard so that it can function in conjunction with other Saudi defense forces, including the Ministry of Defense and Aviation, which works with USMTM). SAO Security Assistance Offi ce (Ethiopia, Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan) USLO U.S. Liaison Offi ce (Djibouti, Eritrea, Qatar, United Arab Emirates) USMAAG U.S. Military Assistance Advisory Group (Dominican Republic, Peru) USMILGP U.S. Military Group (several South and Central American countries) USMLO U.S. Military Liaison Offi ce (several South and Central American countries) USMTM U.S. Military Training Mission (Saudi Arabia) * * * * * * * * * * Currently, the USG security assistance activities in Afghanistan and Iraq are conducted by the organizations listed below: CSTC-A Combined Security Transition Command - Afghanistan MNSTC-1 Multi-National Security Transition Command - Iraq CSTC-A reports to the Combined Forces Command - Afghanistan (CFC-A) and MNSTC-I reports to the Multi-National Force - Iraq (MNF-I), both of which are under the command and control of USCENTCOM. The organizations in Afghanistan and Iraq can loosely be termed "pseudo-SAOs" for a variety of reasons. First, their mission, including operational advice and training, exceeds that of a normal SAO under U.S. law. Secondly, the organizations are operational commands, rather than administrative offi ces. As such, they do not offi cially report to the U.S. ambassador, but only to the combatant command through channels. Finally, they have authority to train and equip the local police forces which, while permitted by the Arms Export Control Act, is severely constrained under normal circumstances. 4-3 Security Assistance Organizations Overseas organizational designations for DoD offi ces that manage security assistance and security cooperation programs in foreign countries. In most cases, these organizational titles were established through joint diplomatic agreement between the USG and the host nation. Regardless of the title or size of the organization, all are SAOs, and the individual names are not necessarily refl ective of anything more than local political sensitivities. Where no SAO is assigned in country, the security assistance functions are normally handled by the defense attach offi ce (DAO), either as an additional duty or with augmented personnel. In a small number of embassies (primarily in developing countries) where there is no defense attach representation, the security assistance program is managed by foreign service personnel from the DoS. SECURITY ASSISTANCE AND SECURITY COOPERATION The defi nitions of " security assistance" and " security cooperation" as per Joint Pub 1-02 are in the glossary of this textbook and are discussed in Chapter 1, "Introduction to Security Cooperation." The major security assistance programs were created by the FAA, the AECA, and other legislation. However, the key aspect of these programs is that their permanent legal authority stems from the United States Code, Title 22 (22 U.S.C.), entitled "Foreign Relations and Intercourse." (The U.S.C. is the codifi cation of the general and permanent laws of the U.S., divided into 50 titles by subject matter). As such, the primary responsibility for their implementation within the executive branch has been delegated to the DoS. The SAO thus administers security assistance programs offi cially on behalf of the ambassador, even though the bulk of the workload is performed by DoD personnel. On the other hand, DoD considers " security cooperation" as all DoD interactions with foreign defense establishments which promote U.S. security interests and enhance the military capabilities of our international partners. This clearly includes the long-established security assistance programs at its core. Separately, however, Congress has given DoD many legal authorities in its own right to pursue a wide range of cooperative military programs with other countries. Many of these authorities are codifi ed in Title 10 U.S.C., entitled "Armed Forces." In addition, DoD, often through its components, has taken other initiatives for international cooperation. Thus, " security cooperation" is an umbrella term that is loosely defi ned and encompasses a variety of programs, including security assistance. In a narrower sense, " security cooperation" is used to refer to only DoD programs with other nations under 10 U.S.C., thus distinguishing it from security assistance. The SAO administers security cooperation programs offi cially under DoD guidance, but ensures that those programs are compatible with ambassador's vision and goals for the host nation. Under the George W. Bush administration, " security cooperation" has replaced previously used terminology such as "peacetime engagement" and "mil-to-mil programs." In summary, the scope of security cooperation programs is quite broad and essentially includes almost any activity by which DoD interacts with foreign defense establishments. There is no single comprehensive list of security cooperation programs, although many DoD organizations have drawn up their own lists for internal use. For example, the European Command (EUCOM) maintains a Theater Security Cooperation (TSC) Activities Handbook and the military departments (MILDEPs) are required to publish their own security cooperation strategies. Individual security cooperation programs may be managed by the COCOM, a MILDEP, DSCA, or other DoD agency. Each program has its own authority in law and/or in DoD or agency policy. The more prominent programs are listed in Chapter 1, "Introduction to Security Cooperation." The term " security cooperation" thus encompasses a combination of legal authorities, annual appropriations, organizations, and initiatives from within DoD resources. It should be emphasized that the list in Chapter 1 is only a sample of the current security cooperation programs and is by no means complete. Note that some DoD programs, such as counternarcotics, are complemented by 4-4 Security Assistance Organizations Overseas similar DoS programs, which the SAO may help manage within any given embassy country team. Similarly, DoS receives an annual appropriation for non-proliferation, anti-terrorism, demining, and related programs (NADR), which supports a broad range of U.S. security interests, and which the SAO may help manage at the local level. The SAO plays a key role in implementing many (not necessarily all) of these security cooperation programs with the host nation. Some may be managed by the DAO, such as intelligence exchanges, and some may be managed through the host nation military attach in Washington or a liaison offi cer to a DoD organization. In any case, the SAO is generally considered the focal point for security cooperation and should be aware of the existence of all such programs. REFERENCES FOR SECURITY ASSISTANCE OFFICE FUNCTIONS AND RESPONSIBILITIES Legislative Provisions Since the end of the Vietnam confl ict, the U.S. Congress has maintained a keen interest in the activities of USG personnel assigned overseas to perform security assistance functions. Section 515 of the FAA outlines the legal functions of SAOs follows below: Equipment and services i.e., foreign military sales (FMS) case management Training management Program monitoring Evaluation and planning of the host government's military capabilities and requirements Administrative support Promoting rationalization, standardization, interoperability (RSI), and other defense cooperation measures Liaison functions exclusive of advisory and training assistance Department of Defense Directive Provisions In addition to legislative direction, guidance to SAOs is found in DoDD 5132.3, DoD Policy and Responsibilities Relating to Security Assistance (currently under rewrite). According to this directive, the SAO shall maintain liaison with DoD components, the U.S. diplomatic mission, and the partner nation's armed forces in order to: Enable the foreign government to acquire information needed to obtain defense articles and services from the U.S. through security assistance programs (keeping in mind that host countries are to be encouraged to establish and depend, to the extent possible, upon their own procurement missions in the U.S.). Obtain information to evaluate host military's capability to employ and maintain equipment being requested and to process the foreign government's security assistance proposals. Enable the U.S. to request the foreign government to take action in order to facilitate the timely, effi cient, and responsive implementation of approved programs. 4-5 Security Assistance Organizations Overseas Enable the U.S. to acquire information concerning potential future defense acquisitions by the foreign governments and anticipate demands on U.S. resources. Report on the use by the host country of defense articles and services provided as grant aid, as well as personnel trained by the U.S.. Assist U.S. MILDEPs and their subordinate elements in arranging for the receipt, transfer, and acceptance of security assistance materiel, training, and other services for recipient countries. Assist the host government in the identifi cation, administration, and proper disposition of security assistance materiel that is in excess of current needs. Perform secondary functions, such as advisory and training services and negotiation on non-security assistance military matters, so long as these activities do not detract from the primary functions. Keep ASD (GSA), DSCA, JCS, area COCOMs), and MILDEPs informed, through appropriate channels, of security assistance activities in country. Defense Security Cooperation Agency Provisions The DSCA DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapter 2, Table C2.T2, lists the following functions for SAOs but states that this is not an all-inclusive list. Provide interface for exchange of information and advice between the host nation's military establishment, the chief of mission, and the DoD components responsible for the security assistance programs. This includes promotion of rationalization, standardization, and interoperability and other armaments cooperation measures in connection with security assistance programs. Provide the host country information needed to make decisions concerning security assistance programs. Encourage the host country to establish and depend on its procurement mission in the U.S. Evaluate host military capability to employ and maintain requested equipment and assist, as required, in processing security assistance requests (referred to as the country team assessment on letters of request). Assist the National Disclosure Policy Committee in evaluating host country security programs and negotiating security agreements. Facilitate the timely and effi cient implementation of approved host country security assistance programs. Assist U.S. MILDEPs and the host country in the receipt, transfer, and accep- tance of security assistance materiel, training, and other services to include drawdowns, etc. Monitor the progress of security assistance programs and transactions, initiate appropriate remedial action, or advise the appropriate DoD components of problems and issues encountered. 4-6 Security Assistance Organizations Overseas Perform programming, planning, management, and implementation functions relating to FMS and IMET programs. Inform host country of U.S. security assistance laws, policies, and procedures. Monitor FMS billing statements and payments and inform the host country of fi nancial requirements. Engage the host military, to the extent practicable, in cooperative planning for total military acquisitions over a 3 to 5 year planning period. Acquire information on host country potential defense acquisitions and anticipate demands on U.S. resources. Report on the use of U.S.-origin defense articles, services, and training by the host country. These procedures vary from country to country; therefore, no standards are prescribed. The SAO should use available resources, e.g., country reporting or documentation, temporary duty personnel assigned in-country performing other duties, other elements of the U.S. diplomatic mission, and spot checks during the normal course of SAO duties and travel. The SAO should report on an exception basis through established security assistance channels and maintain records on fi le. See SAMM, Chapter 8, for more details on end use monitoring. Also, a discussion of the SAO responsibilities for equipment under the old military assistance program (MAP) can be found in SAMM, Chapter 11. Assist the host country to identify, administer, and properly dispose of excess security assistance materiel. Provide input to the COM for the mission strategic plan (MSP), formerly the mission performance plan. Coordinate and supervise activities of DoD personnel and elements that are in-country under DoD sponsorship excluding Defense Intelligence Agency (DIA) or other security assistance authority. See the SAMM, Section C11.13, "Security Assistance Teams," for more information on these responsibilities. Coordinate between U.S. defense industry representatives and the host nation defense establishment, and provide oversight, without limitation to any country or group of countries, for in-country RSI and defense industrial cooperation initiatives. Supervise C-12 aircraft activities where applicable. Perform SAO administrative functions to include budget preparation and execution and review of organizational and manning requirements. Administrative and Logistical Provisions Finally, SAOs have administrative and logistical guidance through a tri-service regulation, Administrative and Logistical Support of Overseas Security Assistance Organizations (SAOs), known as AR 1-75, SECNAVINST 4900.49, and AFJI 16-104. In part, this regulation provides the following guidance to SAO chiefs. 4-7 Security Assistance Organizations Overseas Submit administrative and logistical support requirements to the COCOM in accordance with this regulation and guidance issued by the COCOM, MILDEPs, and DSCA Represent all DoD activities assigned to the SAO for administrative support on the international cooperative administrative support services (ICASS) council; request only required administrative support; and, where required by the COCOM, negotiate ICASS agreements for non-security assistance DoD activities assigned to the SAO for administrative support and coordinate billing/reimbursement requirements between the DoS and DoD activities and parent commands Insure that ICASS fi nancial charges to SAOs are prepared according to Foreign Service Instructions CA-10025 and CA-10803 Provide the MILDEPs with current information on: Desired or required routing for travel and training for SAO and security assistance teams' personnel and their dependents Movement of household goods, personal baggage, and privately owned vehicles Chapter 17, "Resource Management for the Security Assistance Organization," provides details on these functions. ROUTINE SECURITY ASSISTANCE ORGANIZATION DUTIES Offi cial functions and responsibilities of the SAO are delineated in the four sources referenced above. While these documents provide overall policy and administrative guidance, the SAO tends to divide up its routine security assistance workload according to the major functions below. Foreign Military Sales Case Management The SAO assists the host nation military with obtaining information from DoD organizations, public sources, and U.S. vendors on military articles and services of interest. It may assist the host nation in documenting its requirements and articulating its requests in terms that DoD organizations can translate into an FMS case. It ensures that the concept of total package approach (TPA) is utilized as appropriate. Chapter 5, "The Foreign Military Sales Process," presents a detailed discussion on the FMS process and total package approach. The SAO serves as the intermediary between the DoD case manager and the host nation to ensure that each FMS case is both prepared and implemented in accord with host nation desires. It facilitates any requirement to change the original FMS case by either amendment or modifi cation. Finally, the SAO assists the host nation in planning for the receipt and integration of FMS materiel and services into its defense organization and force structure. This case management function, which is actually one of liaison and coordination, is the bread and butter of most SAOs and may comprise half or more of the workload in some SAOs. Concerning transportation, the SAO normally has no involvement in the actual receipt of articles shipped via the FMS process. In most cases, the host nation coordinates the movement of items through its freight forwarder, which is a commercial transportation agent under contract to the host nation. However, in some cases, whether by host nation choice or USG policy, items are moved through the Defense Transportation System (DTS). In such cases, the SAO may have responsibilities, particularly 4-8 Security Assistance Organizations Overseas if the materiel being shipped is classifi ed. Chapter 11, "Foreign Military Sales Transportation Policy," has a discussion of SAO responsibilities in this area. A recent new responsibility for SAOs concerns automation, specifi cally the Security Cooperation Information Portal (SCIP). This password-protected web site allows both U.S. and host nation personnel to review and input data on FMS cases as well as end-use monitoring (EUM) information. Host nation personnel and foreign service nationals (FSNs) (but not U.S. citizens) are required to be issued a secure electronic token for this access. The SAO is required to identify and maintain contact with the primary and alternate host nation administrators for SCIP tokens. Information and guidance for the SAO concerning SCIP access by the host nation is found at DSCA Policy Memorandum 03-11, Enrollment Process for the Security Cooperation Information Portal (SCIP), available on the DSCA web site. The DISAM web site and Appendix 3, "Security Assistance Automation," of this textbook, provide more information. Training Management The SAO manages all military training conducted, or contracted to be conducted, by DoD for the host nation. It assists the host nation in identifying, forecasting, and programming training requirements of all kinds, e.g., professional military education, tactical training, technical skills, etc. It helps ensure that properly qualifi ed candidates are chosen for training, especially by ensuring that prospective students have suffi cient English language skills. The SAO is responsible for management of training conducted under the foreign military sales program. In addition, if the country receives USG appropriated funding for training under IMET, the DoD-funded combating terrorism fellowship program (CTFP), or other sources, those are also managed by the SAO. The SAO cannot treat the training function as an independent task separate from FMS case management. Rather, the two functions should be smoothly integrated to ensure that training needs associated with the acquisition of equipment, whether by FMS or Direct Commercial Sales (DCS), are identifi ed early and appropriately addressed. Besides routine coordination between host nation counterparts and DoD agencies, this function requires specialized training in a software program called the training management system (TMS). A detailed discussion of international training and the role of the SAO is found in Chapter 10 of the SAMM and in Chapter 14, "International Training," of this textbook. End-Use Monitoring The SAO function in the FAA described as "program monitoring" refers to the requirement to monitor host nation's utilization of FMS and grant program materiel and training, as well as its eventual disposal of equipment. This includes the integration of U.S.-origin equipment, training, and services into the host nation force structure. Additionally, in rare cases, the host nation will lease rather than purchase articles under FMS. Because leased equipment remains the property of the USG, the SAO has a special responsibility for monitoring it. However, the most time-consuming aspect of program monitoring involves end use monitoring (EUM). In performing this function, the SAO is essentially determining the answers to four questions: Is the equipment accounted for? Is it adequately secured and safeguarded? Is it being used only for purposes for which it was transferred? Is the eventual transfer or disposal of the equipment in accord with U.S. guidelines? 4-9 Security Assistance Organizations Overseas Where possible, the SAO should integrate EUM into other routine duties, such as visits to military bases and depots, observation during combined exercises, etc. In some cases, however, EUM generates its own workload, such as with the requirement for a periodic inventory of specifi ed items or the need to observe the destruction of materiel. The SAO should recognize the sensitivity about this function on the part of the host nation, which may, incorrectly, view it as a lack of trust on the part of the USG, rather than a legislated requirement by Congress. A key challenge for the SAO is to cultivate a cooperative, rather than confrontational, atmosphere over this function. The DoD requirements for EUM are formalized by DSCA in the Golden Sentry program for articles transferred through government channels (e.g., FMS, excess defense articles, etc.). The SAO may occasionally be called upon to coordinate and host a DSCA-sponsored visit, under the Golden Sentry program, to assess compliance with EUM guidelines by the host nation. For those articles transferred through direct commercial sales, the guidelines are established by the DoS in its Blue Lantern program. An in- depth discussion of EUM is found in Chapter 8 of the SAMM and Chapter 18, "End-Use Monitoring and Third-Party Transfer," of this textbook. Rationalization, Standardization, and Interoperability As mentioned above, the FAA requires SAOs to promote RSI with the host nation. While this is not a task for the SAO per se, it remains a consideration in the course of accomplishing other duties. RSI is not limited to standardization of equipment and ammunition and interchangeability of repair parts. Rather, it covers the full spectrum of operations and logistics, including, for example, military terminology, doctrine, communications, medical, and mapping functions. DoD's policy is governed by CJCSI 2700.01A, International Military Agreements for Rationalization, Standardization, and Interoperability (RSI) between the United States, Its Allies, and Other Friendly Nations. The policy can be summarized as follows: Interoperability with partner nations is in the best interests of the U.S. The degree of RSI with any given partner is subject to fi nancial, technical, and policy considerations Worldwide standardization with friends and allies is a goal, but should not impede efforts at the regional or bilateral level In short, if the host nation is obtaining articles, services, and training from the U.S., RSI is being promoted at least to some degree. Security Cooperation Activities In addition to the traditional security assistance functions just described, the SAO also typically manages a variety of security cooperation programs, many of which are addressed in Chapter 1, "Introduction to Security Cooperation." Combined exercises, humanitarian assistance programs (with many developing countries), and armaments cooperation (with selected developed countries) are prime examples. No two countries will have the same combination of, or emphasis on, security cooperation activities. Where possible, the SAO chief should integrate security cooperation activities with traditional security assistance to advance the U.S. goals and objectives for the host nation. This is accomplished through the planning process, described below. SECURITY ASSISTANCE ORGANIZATION PLANNING Although not normally conducted on a daily basis, the planning function of the SAO remains the most critical. Planning is an SAO function per the FAA, as stated above, and is also required by the 4-10 Security Assistance Organizations Overseas annual planning and budget cycles of both DoD and DoS. Planning should normally be done by the SAO chief himself or, where delegated, should be closely scrutinized. The planning tasks of the SAO are identifi ed in SAMM Table C2.T2, but the process deserves further explanation. The SAO will draft, or provide input to, up to four planning documents on an annual basis, which, when approved, serve as country-specifi c policy guidance or funding authority. While each of these four documents has its own annual timeline, format, and approval process, they all begin with the SAO. As the SAO goes about its routine duties of FMS case management, training management, and other functions, it is critical to conduct an occasional "compass check" to ensure that the various programs and initiatives being pursued do in fact support the goals and objectives identifi ed on the planning documents. The four documents and processes are discussed below. Mission Strategic Plan First and foremost is the ambassador's mission strategic plan (MSP), drafted with input from the SAO and the rest of the embassy country team. The MSP, which replaced the now obsolete Mission Performance Plan (MPP), was utilized for the fi rst time in 2007 to feed the fi scal year (FY) 2009 foreign operations budget. The MSP is the primary planning document within the USG that defi nes U.S. national interests in a foreign country and coordinates performance measurement in that country among USG agencies. The MSP creates a framework for all federal agencies, including DoD, to defi ne priorities, to articulate the goals and objectives of their programs, and to relate program accomplishments to agency-specifi c and government-wide strategic goals. MSPs must refl ect the embassy's program to support the DoS and USAID Strategic Plan. Once approved by the ambassador, the MSP is sent to Washington for interagency review. For countries which receive appropriated foreign aid, including security assistance (FMF, ESF, IMET, etc.), the MSP also acts as the vehicle to transmit that request to DoS. The MSP focuses on out-year diplomatic and assistance planning, and is supplemented by the new Mission Operational Plan, which provides a current year game plan for execution of programs, expenditure of funds, and assessment of results. The remaining three planning documents for the SAO, submitted into DoD channels, must be consistent with the MSP in terms of goals and objectives. Theater Security Cooperation Strategy The second planning document for the SAO is the combatant commander's theater security cooperation strategy (TSCS), also termed a security cooperation guidance implementation strategy at the Offi ce of Secretary of Defense (OSD) level. Specifi cally, the SAO is concerned with the country- specifi c component of that document, variously called a country campaign plan, country security cooperation plan, etc., by the COCOMs. Although offi cially drafted by the COCOM staff, the SAO is normally the unoffi cial "point man" for the development and execution of the country-level security cooperation plan. It should draw on the ambassador's MSP, as well as regional guidance within the TSCS, and integrate the national security interests of the host nation. While not ignoring traditional security assistance, the country-level plan should focus on the DoD-sponsored security cooperation tools and indicate how they will support the combatant commander's TSCS and, of course, the ambassador's MSP. Beginning in 2006, fi nal TSCSs, including country-specifi c plans, should be published NLT August 1 for the following fi scal year. Additionally, during the fi rst sixty days of each new fi scal year, a formal assessment process will occur to evaluate the success of the plan for the previous year. Combined Education and Training Program Plan The SAO itself prepares the third annual plan, known as the combined education and training program plan (CETPP). This document focuses on the goals and objectives for international education 4-11 Security Assistance Organizations Overseas and training for the host nation. Guidance for preparation is contained in the SAMM, paragraph C10.4 and Figure C10.F1. The SAO uploads the draft plan electronically onto the security assistance network (SAN) for review and approval by the COCOM. The approved plan is utilized each spring during the COCOM's training program management review (TPMR). Further details are in Chapter 14, "International Training," of this textbook. Foreign Military Financing/International Military Education Training Budget Formulation and Submission Web Tool Finally, if the host nation receives, or is proposed to receive, appropriated funds through FMF or IMET, the SAO will also make an annual submission and justifi cation for these funds. This request is submitted electronically through the FMF/IMET budget formulation and submission web tool, managed by DSCA. This document is forwarded upward through channels for endorsement and comment, i.e., to COCOM, Joint Staff, DSCA and OSD policy offi ces, where a fi nal DoD position is developed for each country. This position is then used by DoD representatives in discussions with DoS in the development of an eventual congressional budget justifi cation to be submitted by the secretary of state to Congress. Note that the MSP also acts as a forum for submitting funding requests, but directly into DoS channels. However, unlike the MSP which is offi cially the ambassador's document, the FMF/IMET web tool submission refl ects the SAO chief's own views. SAOs take their guidance from the COCOM as to whether or not this last submission must be identical to the MSP submission. SECURITY ASSISTANCE ORGANIZATION PERSONNEL SELECTION Personnel are nominated to SAO positions in accordance with the following criteria established in DoDD 2055.3, Manning of Security Assistance Organizations and the Selection and USDP Training of Security Assistance Personnel: Those U.S. personnel serving overseas in . . . [SAOs] shall possess the demonstrated personal and professional qualifi cations necessary to carry out effectively the functions to which they are assigned. It is essential that personnel be screened carefully, to ensure that the selectee has the appropriate qualifi cations and experience. Personnel will not be selected for SAO duty if they, or their accompanying dependents, have a history of personal or fi nancial misconduct, or have medical, emotional, or educational problems that would adversely affect the individual's ability to perform assigned duties, considering the social and environmental situation of the locale to which they are being assigned. Consideration also shall be given, for an accompanied assignment, to family compatibility to the place and type of duty, to include size of family and age of children. Most SAO positions are nominative, joint duty billets. Requirements for nomination may entail slightly different criteria from the norm with respect to civilian education, training, language qualifi cations, military schooling, experience, area familiarity, health, and family considerations. A nomination, however, does not assure the job, because the area combatant commander, the ambassador, and the SAO chief retain fi nal selection rights. Chapter 17, "Resource Management for the Security Assistance Organization," contains an in-depth discussion of the human resources of the SAO, including personnel billets and manpower issues. 4-12 Security Assistance Organizations Overseas INTERACTION AND RELATIONSHIPS To be effective, the SAO must cultivate relationships with, and respond to, a variety of organizations, agencies, and individuals. Many organizations and individuals lay claim to SAO resources in furthering their own missions and agendas, occasionally giving rise to confl icts in priorities and competing interests. SAOs traditionally respond through two chains of command: one through the embassy and the other through the area COCOM. A key challenge for the SAO is to respond to the direction of the ambassador while at the same time satisfying requirements levied by the area combatant commander. The SAO chief acts as a key player within the embassy and the COCOM because of his infl uence, advice, and expertise, not because of his authority. The successful SAO chief knows how and when to leverage his infl uence with other players the ambassador, the COCOM, the host nation, and others to maximize the advancement of USG foreign policy and national security goals. Chief of Mission Authority The ambassador is the personal representative of both the president and the secretary of state. As the principal offi cer in the embassy, he oversees all USG programs and interactions with and in the host nation. The ambassador derives his authority and responsibilities from the Foreign Service Act of 1980 [P.L. 96-465], Section 207, which is summarized below: The ambassador (or other chief of mission in the ambassador's absence) has full responsibility for the direction, coordination, and supervision of all USG executive branch employees in country, except for employees under the command of a U.S. area military commander (i.e., normally a combatant commander or a subordinate commander). The ambassador must remain fully informed concerning all activities and operations of the USG within country and must ensure that all USG executive branch employees in country, except for employees under the command of a U.S. area military commander, comply fully with all applicable directives of the ambassador. In addition, the FAA, Section 515(e), states that members of the Armed Forces assigned to a foreign country for the conduct of security assistance shall serve under the direction and supervision of the ambassador or chief of mission to that country. Because security assistance programs by law are under the supervision and direction of the DoS, the SAO must seek guidance for their implementation from the ambassador. The president typically refers to these legal authorities and responsibilities in his letter of instruction to each ambassador. President George W. Bush's letter of instruction to his ambassadors is at Attachment 4-1, "Authorities and Responsibilities of Chiefs of Mission." Note that the president refers to the responsibility of the ambassador and the combatant commander to "keep each other currently and fully informed and cooperate on all matters of mutual interest." This is accomplished primarily through the continuous liaison of the SAO chief. The ambassador may be a career foreign service offi cer, having risen through the ranks at the DoS, or he may be a political appointee of the president. In either case, his authority under the law and under presidential directive is the same. 4-13 Security Assistance Organizations Overseas Country Team The country team is the principal means by which a diplomatic mission comes together as a cooperative, coordinated, and well-informed staff. In its broadest sense, the team is all elements and all USG employees of the American mission in a foreign country. More narrowly, it is a management tool, a council of senior offi cers, heads of the various sections of the mission, working together under the ambassador's direction, to pool their skills, resources, and viewpoints in the national interest. The country team has no legal standing and its composition and functions are not specifi cally delineated in any formal document. The ambassador determines the type of team that best suits his needs. In practice, the makeup of the embassy country team varies widely, depending not only on the ambassador's management style, but also on the country situation, the number of American programs, and the backgrounds of the senior offi cers of the different agencies attached to the diplomatic mission. In some posts, there may be no defi ned membership; the team changes its composition according to the kind of problem being considered. However, at most posts, typical membership includes the ambassador, the deputy chief of mission, the chiefs of the political and economic sections of the embassy, the chiefs of the security assistance organization and the defense attach offi ce, the regional security offi cer, and the management counselor. The country team may also include representatives from other embassy agencies as the ambassador desires. The country team coordinates with and advises the ambassador on the full range of issues and events facing the U.S. mission at any given time. Informal consultation among country team members occurs frequently and continually on issues and problems as they arise. Weekly collective meetings of the team, chaired by the ambassador, are the norm. The country team is also an executive organ that, under the ambassador's leadership, divides the tasks to be done, and supervises their accomplishment. It typically sees that jobs are assigned to those agencies that can best execute them, based on resources and expertise. Finally, the country team is the planning body, which analyzes the situation in country, formulates plans and strategies for executing U.S. foreign policy in country, e.g., through the MSP, and recommends policy to Washington. Close teamwork is critical, especially when time-sensitive issues are at stake. Offi cials of all agencies must work together at all levels, to speak with one voice and to accomplish the task at hand. The formal country team is thus an advisory body, a forum for consultation, and a means of promoting a coordinated effort. The Ambassador as Team Chief The ambassador, as personal representative of the president, is sole head of the country team. The ambassador uses his team as a tool for assembling the best information, ideas, and judgments of all USG offi cials in country and to produce effective action to reach his objectives. He must mold the entire staff into a cohesive unit, with a common sense of purpose and direction. The ambassador must keep in perspective all U.S. interests and activities in the country. He insures that recommendations of the country team are balanced and that the enthusiasm or partiality of employees for their own programs does not carry them astray. The ambassador must balance all the implications of proposed courses of action and decide what is best for American interests as a whole. Role of the Deputy Chief of Mission The deputy chief of mission (DCM) serves as the chief of staff of the embassy and manages the daily operations of the embassy staff. In matters that cross agency lines within the country team, the DCM normally coordinates and facilitates decisions or recommendations to the ambassador. In the 4-14 Security Assistance Organizations Overseas temporary absence of the ambassador, or during an interim period between ambassadors, the DCM assumes the temporary title of charg d'affaires. The DCM is almost always a career foreign service offi cer. Other Mission Relationships The SAO deals with all country team members from time to time, but is particularly concerned with the following members: The political-military offi cer. Normally located within the embassy's political section, the pol-mil position may be either full-time or an additional duty. The SAO coordinates with him especially on issues of visibility to the DoS in Washington, such as a proposed major weapons sale which requires a formal country team position, or a proposed third-party transfer of U.S.-origin equipment. The consul general. In charge of the offi ce which issues U.S. visas to host nation citizens, the SAO works closely with him on the vetting and issuance of visas for international military students. The economic counselor can provide valuable information on the host country's economy, budget, and its ability to support arms purchases. The public affairs offi cer (PAO) can provide background data and information on sensitivities of the host nation government and citizens, which can facilitate the SAO's relationships with host nation counterparts. Additionally, through the embassy's web site, press releases, and other interactions, the PAO can disseminate information on the benefi ts to the host nation of security assistance and other USG programs. The regional security offi cer (RSO) has overall responsibility for security, anti-terrorism and force protection for all personnel under the authority of the ambassador. The RSO is the focal point for the SAO in all matters pertaining to force protection, to include security requirements and country clearance for offi cial and distinguished visitors. The RSO also supervises the Marine security guard (MSG) detachment, where assigned. The defense attach (DATT) heads the DAO that represents the Defense Intelligence Agency (DIA) but also has mutual interests with the SAO. Good communication and routine cooperation are necessary if each is to realize the combined benefi ts of those mutual interests and promote a positive image of the DoD team to the rest of the embassy community. Their distinctly different mission responsibilities, however, must be kept segregated. The SAO and the DAO are normally independent DoD "stovepipe" agencies within the embassy, each accountable to a different defense agency in Washington (DSCA and DIA respectively). However, in rare instances, a small SAO may be subordinate to a DAO, in which case the SAO chief is rated by the DATT. In addition to the core DoS staff of the embassy, several other federal government agencies are normally serving in the mission. In developing countries, for example, the embassy typically includes an offi ce of the U.S. Agency for International Development (USAID), whose chief is part of the country team. This agency has the lead responsibility for developmental assistance, humanitarian assistance, and disaster relief actions within the country team. If the host nation receives U.S. foreign 4-15 Security Assistance Organizations Overseas aid for its civilian sector, such as through the economic support fund (ESF), the local USAID offi ce normally supervises this program. The SAO also interacts daily with the embassy staff on requirements necessary for its administrative support. Such issues include housing, communications, commissary, medical support, local manpower, fi nancial support, customs clearance of personal and offi cial property, dependent schooling, and numerous other areas. Relationships between Security Assistant Offi ces and Area Combatant Commands Relationships between the SAO and the COCOM can generally be classifi ed as either operational or administrative. The operational relationships are primarily related to the SAO's execution of the COCOM's security cooperation strategy with the host nation military, as discussed above. Concerning the administrative relationships, the COCOM is required to perform the following functions, among others: Rate/endorse SAO personnel on their evaluation reports. For chiefs of SAOs, U.S. ambassadors may provide letter input, and their evaluation reports are completed by the combatant commander or his designated representative Control and coordinate the SAO joint manpower program requirements (details in Chapter 17, "Resource Management for the Security Assistance Organization.") Coordinate the administration of SAO fi nancial and personnel records Administer SAO direct hire programs Fund and administer quality of life programs for the SAO Serve as the focal points for reviewing and consolidating SAO operational budgets and forwarding them through the COCOM administrative agent to DSCA The combatant commander and the ambassador must ensure that the SAO does not receive confl icting guidance, instructions, or priorities. If this occurs, the SAO must seek clarifi cation or resolution. While the SAO chief is in the occasionally diffi cult position of responding to two masters, he is also uniquely able to understand both the COCOM and the embassy, balance their respective priorities, and leverage their resources. In particular, the SAO chief must be alert to take advantage of the wide range of support and expertise available from the COCOM, despite the distances separating the two activities. It is imperative for the SAO to maintain routine and timely communications with the COCOM on behalf of both the ambassador and the host nation. Host Country Relationships If the USG has made a considerable commitment to a partner nation, shares kindred interests, and is on excellent diplomatic terms, it is probable that the SAO's relationship, accessibility, and credibility with the host nation's military establishment will be equally solid. However, if the diplomatic climate between the U.S. and the host nation is less amicable, the SAO's job will be more challenging as it works to cultivate an improved relationship with the host nation military. Whatever the situation, the SAO's total professionalism and integrity in executing all responsibilities remains paramount. Establishing a good working relationship begins with a sharing of interests and ideas. The SAO should recognize that there is a common foundation upon which to build rapport with host nation military counterparts, namely the universal brotherhood of arms. The problems of military doctrine, force structure, training, equipping, and logistical support are common to the armed forces of all nations. The successful SAO will take a sincere personal interest in the host nation's culture, history, 4-16 Security Assistance Organizations Overseas customs, and religion, and likewise will cultivate both personal and professional relationships with local counterparts, which often forms the basis of life-long contacts and friendships. Within the professional relationships, the SAO will be called upon to answer many questions, some of which will be diffi cult, unexpected, irritating, or time-consuming. Some situations will involve practices and decisions that may encroach on sensitive U.S. foreign policy positions or business ethics. Obviously, responses to these and other diffi cult inquiries must be handled with the great care, tact and honest professionalism. Nothing discredits a SAO more quickly than duplicity, failure to respect host nation concerns or the inability to fulfi ll a commitment made in unthinking haste. Likewise, the SAO must be careful not to make promises or commitments which he cannot keep. DoD has long maintained a policy against raising false expectations on the part of our security assistance partners, per DoDD 2100.3. Prime examples of "commitments" which neither the SAO chief nor his visitors should make include promises about appropriated funds, e.g., FMF, and release of military technology. Both of these processes are tightly controlled and highly centralized within DoD and DoS. In summary, the SAO must retain its integrity and identity as an offi cial arm of the USG. Its close relationship with host nation counterparts must not cloud its professional judgments and recommendations, or compromise offi cial U.S. policy. Security Assistance Organization Limitations and Security Assistance Teams SAO personnel have a mandate from Congress to act in a management, coordination, and liaison capacity for security assistance programs. First and foremost, SAOs are noncombatants. Second, they are generally not to provide training or technical assistance. These functions are defense services and must be specifi cally authorized, costed, and paid by the host nation, normally through the FMS process. When these functions are performed in country, they are normally done so by security assistance teams (SATs). According to Section 515(b), FAA, "advisory and training assistance" conducted by SAO personnel shall be kept to an absolute minimum. "It is the sense of Congress that advising and training assistance in countries to which military personnel [i.e., SAOs] are assigned under this section shall be provided primarily by other personnel . . .", i.e., security assistance teams, which are detailed for limited periods to perform specifi c tasks. Likewise, advisory assistance by SAOs is not to extend to combat operations. SAOs must refer any such requests to the ambassador and the COCOM. There are a variety of SATs that may be dispatched to a country for training or other missions. Teams may be deployed on either a permanent or temporary basis. Some teams have an offi cial existence of ten years or longer. A source of funding is required to establish and maintain a team. Typically this source of funding is an FMS case or the country's current year IMET program. The term "team" is used loosely as it can in fact consist of a single individual. The following is a listing of the common types of SATs. The terminology sometimes varies according to the U.S. military service providing the team. Extended training service specialist (ETSS) Contract fi eld services (CFS) Technical assistance fi eld teams (TAFTs) Mobile education teams (METs) 4-17 Security Assistance Organizations Overseas Mobile training teams (MTTs) Technical assistance teams (TATs) Language training detachments (LTDs) Weapon system logistics offi cers (WSLOs) Quality assurance teams (QATs) Site survey teams Defense requirements survey teams Security Assistance Organization Oversight and Support of Security Assistance Teams Guidance on security assistance teams, including the requirement for SAO oversight and support, is found at SAMM, Section C11.13, including Table C11.T25. The SAO chief exercises operational oversight for, and provides administrative support to in-country SATs. Specifi c duties include the following: Oversee, along with the team chief, the effective and professional execution of the team's mission in accord with its specifi ed charter. Reconcile any disagreements or misunderstandings with the host nation concerning the mission of the SAT and its execution. Integrate, as necessary, team activities with other U.S. efforts in security assistance, security cooperation, and foreign policy. Ensure team compliance with relevant directives on security assistance, anti-terrorism/ force protection, and other areas. Keep the ambassador, the combatant commander, and the supporting MILDEP and/or FMS case manager informed of SAT activities and progress. Oversee and support, as necessary, administrative issues for the team, such as housing, budget, force protection, quality of life and mission sustainment. The Security Assistance Organization Environment The vast majority of SAOs are small offi ces which are tasked with administering a wide range of programs, often even usually outside the personal military expertise of its members. It is common for one member, without regard to parent military service, to be tasked to manage an FMS case or other program sponsored by another military service, with its associated requirements involving logistics, training, and other areas. A common example is the U.S. Air Force offi cer assigned to an SAO who assumes the in-country responsibility for a U.S. Army helicopter purchase by the host nation air force. Likewise, the common administrative tasks and extra duties incumbent in every SAO personnel issues, budget, property, vehicles, etc. may be accomplished by a fi eld grade offi cer, a non-commissioned offi cer, a U.S. civilian employee, or a foreign service national (FSN), depending on a variety of local circumstances. As with other organizations, delegation of routine duties is a valid management tool, but can only succeed to a point in a small offi ce. The fi eld-grade offi cer who is reluctant to pick up a visitor's suitcase, put gas in his SAO vehicle, or send his own faxes will likely not be successful in the 4-18 Security Assistance Organizations Overseas SAO environment. Because of the relative scarcity of manpower, SAOs must recognize the need for effective and fl exible management. Key tools include: Developing and maintaining a thorough point of contact list for both host nation personnel and relevant DoD organizations. Using e-mail with multiple addressees in all organizations working an issue. Accessing offi cial publications and other guidance (DoD directives and instructions, service regulations, etc.) on the internet wherever possible. Leveraging personnel and other resources, within the embassy country team, the COCOM, and elsewhere, for information or support as necessary. There is normally a direct correlation between the size of an SAO and the magnitude of a country's security assistance program. Those countries with large FMS programs and those in which the U.S. has key strategic interests generally have larger SAOs. In developing countries where security assistance programs are small, usually because of limited funding, security cooperation programs often take on a more prominent role. In developed countries, on the other hand, the host nation may be largely self- suffi cient in both its fi nancing and management of security assistance, so the role and responsibilities of the SAO will take on a different tone. However, the importance of a program vis-a-vis its size may be relative; in some countries, a small program can be as meaningful and as politically infl uential as larger programs in other countries. In summary, the size of the SAO, the relationship with the host nation military, and the scope and volume of current programs, both in security assistance and security cooperation, all combine to produce a unique working environment in each SAO. RULES OF ENGAGEMENT WITH U.S. INDUSTRY While security assistance is principally a foreign policy tool for the USG, it also provides benefi ts to U.S. industry in the form of sales, jobs, and profi ts. Nearly all FMS cases involve procurement of goods and services, directly or indirectly, from U.S. industry. For reasons of foreign policy, standardization and interoperability with U.S. forces, and economic self-interest, it is to the advantage of the U.S. that other countries buy American when they identify a military requirement. In this regard, the relationship between SAO personnel and representatives of U.S. industry, although unoffi cial, is important to both sides. Note the following extracts of applicable documents: The U.S. will take such steps as tasking our overseas mission personnel to support overseas marketing efforts of American companies bidding on defense contracts, actively involving senior government offi cials in promoting sales of particular importance to the U.S. [Secretary of State Message, 180317Z February 1995, Subject: Conventional Arms Transfer Policy]. The DoD is committed to greater cooperation with U.S. industry to facilitate sales of U.S. defense articles and services when in support of U.S. national security and foreign policy objectives. DoD is prepared to assist and cooperate with U.S. industry regardless of the type of sale, e.g., direct commercial sale, foreign military sale, or a combination of the two [OSD Memorandum, 05 May 1999, Subject: Department of Defense Policy for Relations with U.S. Industry in Sales of Defense Articles and Services to Foreign Governments]. See Attachment 4-2, "SAO-Industry Relations," for the complete memorandum. 4-19 Security Assistance Organizations Overseas To support U.S. policy, trade, and interests, including enhancement of U.S. defenses through support to friendly countries, the USG and U.S. industry must work together through both FMS and DCS channels to effectively market U.S. military items and services [SAMM, Section C2.5.7.2]. Promotion of Sale of U.S. Systems The SAO is normally the primary point of contact in a U.S. embassy for American defense industry representatives. In principle, the SAO should support the marketing efforts of U.S. defense vendors over those of foreign competitors. The SAO can play a key role in facilitating the exchange of information between host nation offi cials and U.S. vendors. The SAO must, however, maintain strict neutrality between U.S. fi rms competing for the same potential sale and should not endorse one specifi c American product or vendor over another to the host nation unless specifi cally directed by higher DoD or USG authority. In cases where it is clear that there is only one U.S. source of production for a certain product, the SAO may endorse that American product to the host nation. While supporting U.S. industry, the SAO must also be an honest broker, considering both U.S. and host nation defense and policy interests. Should the SAO judge that the marketing and/or sale of a product is not consistent with U.S. interests, or is inappropriate for the host nation's best interests, or could adversely impact U.S. credibility or bilateral relations, he should relay these concerns to the ambassador, DSCA, and the COCOM. Security Assistance Organization Support to U.S. Defense Industry SAMM, Section C2.5.7, is the primary source for policy guidance on the interface between SAOs and U.S. industry. Attachment 4-3 is a briefi ng checklist for SAO personnel for use in meetings with representatives of U.S. defense vendors. Upon request, the SAO can provide the vendor with a wide range of unclassifi ed information pertaining to the host nation. This typically includes defense organization charts, names of key decision makers, budget process and spending limits, current and proposed requirements, information on any foreign competitors, and capabilities of the host nation defense industry, as applicable. Further, the SAO can provide advice on sales tactics to include unique cultural aspects of conducting business in that country; assist with appointments with host nation offi cials; provide specifi c information on the host nation acquisition and decision-making process; and offer realistic estimates of what the country will probably buy. If possible, the SAO should attend vendor meetings with the host nation to prepare for host nation offi cials seeking follow-up information. The SAO must ensure a level playing fi eld in country among U.S. vendors competing for the same potential sale unless directed to do otherwise. Assistance rendered to one must be offered to a competitor. Likewise, the SAO should not disclose information about a U.S. vendor that may provide an unfair advantage to its American competitor. Industry representatives are encouraged to debrief the SAO on the results of their in-country marketing efforts and their future plans. Role of the Department of Commerce and the Commercial Attach The Department of Commerce has the primary responsibility to promote U.S. trade with other countries and has an offi ce for the promotion of international trade. The commercial attach (stationed in most embassies) is the Department of Commerce representative on the country team, responsible for supporting U.S. trade and conducting market research on the host nation. Some larger embassies and consulates have U.S. and Foreign Commercial Service (U.S. and FCS) trade specialists who have greater expertise in fostering trade between the U.S. and the host country, to include some defense items sold commercially. These offi cials of the Department of Commerce can provide assistance to both industry representatives and SAOs on issues of marketing in the host nation. 4-20 Security Assistance Organizations Overseas Vendors may seek USG advocacy for their proposed exports through the advocacy center of the Department of Commerce. Under certain circumstances, Commerce may coordinate with DoS, DoD, and other agencies as appropriate, and determine that it is U.S. national interest to support a proposed sale. If such determination is made, the SAO and local embassy will be formally notifi ed and may then advocate for the proposed sale with the host nation. This advocacy function is not primarily intended to support sale of items on the U.S. Munitions List, but may still be appropriate in some cases. Current guidance is contained in the advocacy center's web site, at http://www.export.gov/advocacy/. MISCELLANEOUS FUNCTIONS In addition to their primary duties, SAOs perform a wide variety of collateral functions, both operational and administrative in nature. The more common functions are described below. U.S. Defense Representative In many countries, the SAO chief may be designated as the U.S. defense representative (USDR). The purpose of this function is to ensure coordination and synchronization of all DoD activities and interests in country. The process for the periodic designation of the USDR and a summary of his duties is outlined in DoDI 5105.57, Procedures for the U.S. Defense Representative (USDR) in Foreign Countries. Each area combatant commander, in consultation with the respective chief of mission, recommends to the Joint Staff who, by billet, should be the U.S. defense representative in each country within the area of responsibility. In the vast majority of countries, either the SAO chief or DATT will be appointed as the USDR. Just as the ambassador is the personal representative of the president and the secretary of state, so the USDR acts as the in-country representative of the secretary of defense, the chairman of the Joint Chiefs of Staff, and the area combatant commander. As listed in the above instruction, the duties of the USDR include, but are not limited to, the following: Act as primary point of contact to USG offi cials for in-country defense issues and activities Provide advice and information to both the chief of mission and the combatant commander Perform diplomatic-type representational duties where no DATT is assigned Coordinate administrative and force protection issues for all DoD noncombatant command elements in country Streamline and facilitate the fl ow of information among all DoD elements in country Coordinate country team support for high level visits by DoD offi cials In cases of emergency, exercise directive authority over DoD noncombatant element personnel When the SAO chief is the designated USDR, and no DATT is assigned, he will not become involved in intelligence matters. It is important to note, for whomever performs the functions of USDR, that this is an additional duty. The USDR is a title, not a manpower billet, and it does not carry with it any associated funding. 4-21 Security Assistance Organizations Overseas Anti-Terrorism/Force Protection Responsibilities If designated as the USDR, the SAO chief has additional responsibilities for anti-terrorism and force protection (AT/FP). For most U.S. missions, a memorandum of agreement (MOA) on AT/ FP responsibilities is in effect between the ambassador and the combatant commander. The MOA delineates whether the ambassador or the combatant commander has AT/FP responsibility for which DoD personnel and their dependents in country. The individual MOAs in U.S. embassies worldwide are implemented pursuant to DoD 5210.84, Security of DoD Personnel at U.S. Missions Abroad. This document includes, as an enclosure, the 1990 memorandum of understanding (MOU) between DoS and DoD concerning overseas security support for DoD personnel. Subsequently, in 1997, DoS and DoD signed a second, so-called universal MOU in order to clearly defi ne the authority and responsibility for the security of DoD elements and personnel in foreign areas not under the command of a geographic COCOM. The MOUs and the implementing MOAs were made necessary by The Omnibus Diplomatic Security and Antiterrorism Act of 1986, P.L.99-399. This law is the statutory authority for the secretary of state to provide for the security of USG personnel and their dependents on offi cial duty abroad, except for those personnel under the command of the area combatant commander. DoD 5210.84 assigns to the USDR the duty of coordinating security matters for all in-country noncombatant DoD elements and states that the USDR shall act as the DoD's single point-of-contact for security issues relating to the MOU. Because SAO and DAO personnel are generally located within the embassy, the implementing MOAs usually assign the responsibility and authority for their security to the chief of mission, rather than the combatant commander. If designated as the USDR, the SAO chief carries out AT/FP responsibilities specifi ed by the COCOM for those DoD noncombatant organizations and personnel located in the host country. This includes personnel temporarily deployed, such as mobile training teams. The USDR must work closely with the embassy's regional security offi cer and the AT/FP points-of-contact at the COCOM. Administrative Duties As a largely stand-alone offi ce, the SAO is responsible for numerous administrative or housekeeping functions. Depending on the issue, the SAO may rely on the COCOM, or the embassy, or both, for policy guidance and support in accomplishing these tasks. The common administrative functions include: Planning and executing the SAO budget Maintaining accountability for both offi ce and residential property Performing necessary personnel actions for assigned military, U.S. civilians and FSN personnel such as evaluations, promotions, awards, and pay actions Maintaining the SAO vehicles Assisting assigned personnel with housing matters and other quality of life concerns Assisting visiting temporary duty (TDY) personnel and coordinating VIP visits (also see discussion of DoD foreign clearance responsibilities below) Managing SAO computers and communications equipment These responsibilities become especially challenging in smaller SAOs with few personnel assigned. As members of the embassy staff, SAO personnel may also be called upon to perform duties in support of the embassy community. Examples of these duties include serving as a member of various 4-22 Security Assistance Organizations Overseas committees such as housing boards, FSN personnel boards, ICASS council, embassy employees club, and organizing committees for community events such as the embassy National Day (4th of July) reception and celebration. Department of Defense Foreign Clearance Responsibilities A key mission of DoD personnel stationed in U.S. embassies around the world is to control and process requests for foreign clearance (also called country clearance), both for offi cial DoD visitors and for DoD aircraft. Depending on local arrangements and workload, this function may be managed by the DAO, the SAO, or (more probably) both offi ces. SAOs are frequently the action or information addressees in country clearance request messages because they have support responsibilities before and/or after the arrival of personnel/aircraft. Foreign clearance responsibilities are not confi ned to merely approving or disapproving DoD-sponsored personnel travel and DoD aircraft diplomatic clearance requests. Blanket clearances are occasionally negotiated with the host nation for personnel or overfl ight, landing and entry of DoD aircraft and personnel to support peacetime missions (e.g., weather reconnaissance or humanitarian assistance), exercises, or contingency operations. In addition, delivery of FMS equipment sometimes occurs via the Defense Transportation System (DTS), principally through the Air Mobility Command (AMC). Logistics support for DoD-sponsored distinguished visitors, aircrews, or other travelers is arranged in advance of arrival. Likewise, ground servicing arrangements for DoD aircraft must be coordinated in advance or upon arrival. The SAO must understand and enforce compliance with local embassy and DoD policy on the full spectrum of foreign clearance issues, to include: DoD personnel issues regarding host nation and U.S. passport policy for DoD- sponsored travel versus personal travel (i.e., while on leave status); support for the DoD policy to minimize overseas travel; U.S. embassy and COCOM policies regarding AT/FP; and in-country uniform requirements. DoD aircraft and vessel freedom of navigation; sovereignty from unauthorized boarding, search and seizure; and support to DoD aircrews when host nation representatives or other offi cials attempt to assess charges for services exempt under agreement, custom, or practice. Recognition of the applicability of specifi c international laws, treaties, custom and practice. Inherent in these responsibilities is the requirement to keep the DoD Foreign Clearance Guide (FCG) current for the country of assignment. The FCG, including the on-line, electronic version, contains instructions for SAOs and other organizations to submit changes, such as additional restrictions or increased lead-times. Changes originating within the U.S. embassy must contain a statement that the message has been coordinated with the U.S. ambassador or chief of mission. JURISDICTION AND LEGAL STATUS OVERSEAS The legal status of security assistance personnel who are performing their duties in foreign countries may be affected by the provisions of one or more treaties, international agreements, or laws. In most cases, the privileges and immunities afforded by these agreements are specifi c to the country and to the status of the individual involved. Each SAO has been established according to a diplomatic agreement between the U.S. and the host nation. This agreement generally allows a degree of immunity somewhat less than that granted under full diplomatic immunity, yet greater than that offered under 4-23 Security Assistance Organizations Overseas status of forces agreements (SOFAs). This section discusses the various privileges and immunities that may be afforded to DoD personnel stationed or sent abroad under SAO-related orders. Jurisdiction A primary element of national sovereignty is the exercise of jurisdiction by a government over persons within its territory. The authority of a host nation government to exercise jurisdiction extends not only to its own citizens but also to most foreign nationals within that country's territory. The USG strives to obtain legally binding international agreements that provide protections, privileges and immunities for DoD personnel overseas on offi cial duty, or to ensure that such personnel are accredited to the host government as U.S. embassy staff members. DoD personnel not accredited or otherwise protected under an existing agreement are entirely subject to the host nation's laws and jurisdiction while in that country. Jurisdiction applies not only to criminal issues that may involve arrest or prosecution, but also to routine civil matters such as taxation, importing and exporting of personal property and vehicles, issuance of driver's licenses, and other routine affairs. Vienna Convention on Diplomatic Relations of 1961 The Vienna Convention on Diplomatic Relations (1961) is the primary international agreement which has regularized the functions, status and privileges of foreign missions. It recognizes several categories of personnel with respect to immunity. The most comprehensive category is that of "diplomatic agent" and is often referred to as full diplomatic immunity. Diplomatic agents and their families enjoy full immunity from the criminal jurisdiction of the host country as well as from most forms of administrative and civil jurisdiction. Diplomatic agents are exempt from most forms of taxation, inspection of personal baggage, and giving testimony as witnesses. Full immunity covers all acts of the diplomatic agent, both offi cial and private. Diplomatic agents are placed on the host government's diplomatic list and normally include the ambassador, deputy chief of mission, and attachs, including military attachs. A second recognized category of personnel is that of "administrative and technical" staff. Persons in this category and their families receive the full criminal immunity afforded diplomatic agents, but are exempt from the country's administrative and civil jurisdiction only in conjunction with their offi cial duties. Most SAO personnel and their sponsored dependents fall into this category, however in some countries the SAO chief and selected other personnel may be accorded "diplomatic agent" status. Inbound SAOs should ascertain their exact diplomatic status from the U.S. embassy. Some U.S. embassy employees may retain third country nationals as private servants (e.g., maids or gardeners). These persons have no immunity under the Vienna Convention. They may, however, receive an exemption from taxation on their salary by the receiving state. Status of Forces Agreements In addition to the Vienna Convention, the USG has entered into agreements with many countries concerning the presence and activities of U.S. military and DoD civilian personnel within the territory of the host country. These agreements are typically called status of forces agreements, although defense cooperation agreements, access agreements or other international agreements may contain status-of-forces provisions. It is the policy of the USG to ensure, to the maximum extent possible, due process protections for all U.S. military and DoD civilian personnel visiting or stationed in foreign countries. This includes personnel and forces that are not performing a diplomatic mission, such as military units on exercises or operational deployments, and visiting security assistance personnel, such 4-24 Security Assistance Organizations Overseas as those on mobile training teams. Status of forces agreements (SOFAs) (or status of forces provisions in other agreements) describe the rights, privileges, and responsibilities of visiting personnel within the territory of the other party to the agreement i.e., the host nation government. SOFAs also typically address issues such as claims by governments and third parties, security issues, governmental and personal tax exemptions, entry/exit (visa requirements), the carrying of weapons and the wearing of uniforms, construction, contracting, utilities, motor vehicles, offi cial and personal importation, customs procedures, environmental health and safety, and the status of contractors. Each SOFA is negotiated separately with the host nation government. While there is no standard format, SOFAs generally address the same range of issues with every country. SOFAs are often tailored to the size of the presence and activities that the U.S. will be conducting within the territory of the host nation. The DoS, working on behalf of and in coordination with DoD, normally negotiates such agreements and concludes them through an exchange of diplomatic notes. The U.S. currently has SOFA arrangements with more than 80 countries. While a permanent SOFA is normally the U.S. goal, in some cases it is mutually agreed to conclude a "mini-SOFA" that covers a short-term presence such as a combined exercise. The U.S. is partner to one multi-lateral SOFA negotiated with the original North Atlantic Treaty Organization (NATO) partners in 1951. This is formally known as the Agreement Between the Parties to the North Atlantic Treaty Regarding the Status of Their Forces. This agreement is in the form of a treaty, which was ratifi ed by the U.S. Senate in 1953. The NATO SOFA was expanded 1995 to include the new Partnership for Peace (PfP) nations of Eastern Europe. In most NATO countries, the U.S. has also entered into separate bilateral agreements that supplement the NATO SOFA, often providing greatly enhanced privileges and immunities. Criminal Matters under Status of Forces Agreements One of the key elements of SOFAs is the exercise of criminal jurisdiction. Typically, the USG seeks to have the host nation agree to limit its exercise of jurisdiction over DoD personnel (both civilian and military) in favor of jurisdiction by the U.S., to include court-martial of military members. There are various formulations under which the host government and the USG agree to exercise jurisdiction. Under concurrent jurisdiction, which is the formulation found in the NATO SOFA, either the U.S. or the host nation may exercise jurisdiction over U.S. forces for offenses committed against host nation law, depending on the circumstances under which the offense was committed. The U.S. has exclusive jurisdiction if a crime violates only U.S. law. However, if an act is illegal under both nations' laws, it will fall to one country or the other to exercise jurisdiction, depending on the circumstances surrounding the offense. For example, if a U.S. military member commits an offense that is illegal under both countries' laws while conducting offi cial duties, the U.S. has jurisdiction. If the member of the force were to commit that same offense while off-duty, the host nation could exercise jurisdiction, although in some cases the host nation may opt to waive jurisdiction. The U.S. always determines whether the member or employee was acting in the course of his or her offi cial duty when the offense took place. Likewise, the U.S. generally has jurisdiction when a crime is committed against another military member or American citizen. Concurrent jurisdiction is a feature of many of our older SOFAs and is no longer the standard. In most of the agreements the U.S. has concluded since 1990, DoD personnel are accorded a status equivalent to the administrative and technical staff of the U.S. embassy. This does not mean that these individuals are U.S. embassy staff or otherwise accredited to the host nation. Under this formulation, the U.S. has exclusive jurisdiction when personnel are alleged to have committed a 4-25 Security Assistance Organizations Overseas criminal offense either on or off duty. If an off-duty act gives rise to a civil claim, the host government has jurisdiction. Notes on Privileges and Immunities The issuance of a diplomatic passport (or an offi cial passport) by the USG does not grant diplomatic status or immunity in and of itself. That is, privileges and immunities are not afforded by issuance of a passport, but under various multilateral and bilateral agreements, as explained above. However, USG personnel transiting through third countries between the U.S. and their posts are granted inviolability by those third countries while en route, even though they are not accredited to that state. Resident family members of the SAO are typically accorded the same level of protection as the sponsor. The DoS defi nes a family member as a spouse or any child twenty-one years old or younger; twenty-two if the child is still in school. Also included is anyone over fi fty percent fi nancially dependent upon the assigned member. However, if a family member is a national or permanent resident of the receiving state, he or she is not afforded the same level of immunity as the sponsor. The duty-free import of household goods for members of the administrative and technical staff is permitted one time only, at the beginning of their assignment. Persons immune from the jurisdiction of the host nation are still subject to the laws of the sending country (including the UCMJ, when applicable). Many SOFAs (including the NATO SOFA) provide for "sympathetic consideration" in which the state exercising jurisdiction waives that right and releases the military member to the other nation for prosecution. Sympathetic consideration can work both ways. It has been used by the USG to obtain custody of DoD personnel who otherwise would be prosecuted by the host nation. However, in egregious cases, the USG has also shown its willingness to waive jurisdiction and release military members to the host nation for trial. It is not uncommon for different agreements to be in effect simultaneously in any given country. Thus, DoD military and civilian personnel in the same country may, and probably will, enjoy varying degrees of rights and privileges, depending on whether they are serving as a military attach, a member of an SAO, on a deployed security assistance team, or as part of a deployed tactical unit. Department of Defense Security Assistance Personnel Visiting Foreign Countries Personnel based in the continental U.S. who travel overseas on temporary duty are not considered part of the local U.S. embassy's administrative and technical staff and are not afforded immunity under the Vienna Convention. However, they may be protected under a SOFA or similar agreement. As part of the planning process for in-country teams, SAOs should know or verify the jurisdictional status of those personnel. The staff judge advocate (SJA) of the appropriate COCOM maintains this information and can determine if an existing agreement covers the proposed teams. If no agreement provides the desired coverage, the SJA should contact the Offi ce of the Legal Advisor on the Joint Staff to determine what sort of coverage can be arranged. In turn, the Joint Staff will coordinate with the COCOM, OSD, and the DoS to secure necessary protections. Without authorization from the DoS, the local U.S. embassy does not have authority to negotiate such an agreement, and cannot request accreditation of the team members to the host nation. If the USG is unable to secure such protections, the team members should be briefed prior to entering the country that they may be subject to host nation law. 4-26 Security Assistance Organizations Overseas Status of Forces Agreements and Article 98 Agreements The traditional arrangements for jurisdiction under SOFAs were complicated in 1998 when a United Nations conference in Rome adopted a treaty, known as the " Rome Statute," to create the International Criminal Court (ICC). The Rome Statute entered into force in 2002, although the USG, citing serious fl aws, did not become a party. Article 98 of the Rome Statute allows for bilateral agreements by its members in which countries pledge not to seek the prosecution of each other's citizens under the ICC. With countries that have become parties to the Rome Statute, the USG has become concerned that existing SOFAs are insuffi cient to protect U.S. military members. While SOFAs do not explicitly provide for transfer of individuals to other jurisdictions, they do not prohibit such transfers either. Further, SOFAs do not protect private American citizens at all. The USG has since concluded Article 98 agreements with more than one hundred nations, which protect all American citizens from referral to the ICC for prosecution. ETHICS AND STANDARDS OF CONDUCT SAO personnel are expected to maintain the highest standards of ethics in both their professional and personal conduct. This is particularly important when SAOs, as representatives of the USG, interact with partner nation offi cials and with marketing agents of U.S. vendors. In all instances, SAO personnel must maintain strict standards of integrity and ethics, and avoid even the perception of impropriety. The affairs of the USG, including security assistance and security cooperation programs, are conducted by persons appropriately authorized to act on behalf of the government. The responsibility of those so authorized is akin to that of a fi duciary, i.e., a person holding a special relationship of trust, confi dence, or duty to act primarily for another's benefi t. In keeping with this fi duciary concept, stringent rules and standards are applicable to the activities and conduct of DoD personnel. USG employment is a matter of public trust and requires that DoD personnel place loyalty to country, ethical principles, and the law above private gain and other interests. Confl icts of Interest Congress has provided a structure of laws that give guidelines as to what constitutes a breach of fi duciary duty by a federal offi cial. Most of these laws have been codifi ed under Title 18 U.S.C., entitled "Crimes and Criminal Procedure." 18 U.S.C. defi nes both bribery and graft and prescribes criminal penalties for each. Bribery is the corrupt giving or offering of anything of value to a public offi cial with the intent to: Infl uence offi cial acts Have the offi cial perpetrate fraud or set up the opportunity for fraud Have that offi cial do anything contrary to his public duty (18 U.S.C. 201) The reciprocal of bribery is graft - the seeking by a public offi cial of something of value in order to assure that his public acts will conform to those desired by the prospective donor. This is also prohibited by 18 U.S.C. In addition to establishing penalties for bribery and graft, Congress has legislated 18 U.S.C. 207 which restricts the business activities of former USG employees. Section 207 provides that any former employee of the USG who, after his employment has ceased, acts for another in seeking a determination in regard to a claim or contract in connection with which he personally and substantially participated 4-27 Security Assistance Organizations Overseas while an offi cial shall be vulnerable to a $10,000 fi ne and no more than two years confi nement. SAO personnel who anticipate leaving government service to join the workforce of a U.S. defense vendor, or to offi cially represent a foreign government, must be aware of these constraints and others. DoDD 5500.7-R, Joint Ethics Regulation (JER), provides guidance on confl icts of interest, as well as for DoD members seeking outside (i.e., post-retirement) employment and their employment following government service. Gifts and Gratuities SAOs, along with all other DoD personnel, are subject to the provisions of DoDD 5500.7-R, Joint Ethics Regulation (JER). In this regard, DoD personnel shall avoid any action, or even the appearance of any action, of: Using public offi ce for private gain Giving preferential treatment to any person or entity Impeding government effi ciency or economy Losing complete independence or impartiality Making a government decision outside offi cial channels Affecting adversely the confi dence of the public in the integrity of the government Among other limitations, DoD personnel are prohibited from accepting gratuities from those who have, or seek to have, business with DoD, e.g., defense contractors. Certain USG employees, such as procurement offi cials (41 U.S.C. 423), are subject to additional restrictions. However, by law, so-called "micro-purchasers" (those making purchases of less than $2,500, not to exceed $20,000 in a 12-month period) are not considered procurement offi cials. According to DoDD 5500.7-R, all DoD employees, regardless of assignment, are prohibited from soliciting or accepting, with limited exceptions, any gift from a prohibited source which is given because of the employee's offi cial position from those who have or seek business with the DoD, or from those whose business interests are affected by DoD functions. A gift is defi ned in DoDD 5500.7-R as any gratuity, favor, discount, entertainment, hospitality, loan, forbearance, or other item having monetary value. It includes services as well as gifts of training, transportation, local travel, lodging and meals, whether provided in-kind, by purchase of a ticket, payment in advance, or reimbursement after the expense has been incurred. The acceptance of a gift by DoD personnel or their families, no matter how innocently tendered, may prove to be a source of embarrassment to the DoD, may affect the objective judgment of the DoD personnel involved, and may impair public confi dence in the integrity of the government. Exceptions Involving Gifts and Gratuities Title 5 Code of Federal Regulations, Section 2635 (5 CFR 2635) provides several exceptions to the general prohibition of accepting gifts. Government employees, subject to more restrictive standards set by their agency, may accept unsolicited gifts having an aggregate value of no more than $20 per occasion and subject to a $50 limitation per donor per calendar year. Gifts of cash, stocks, bonds, 4-28 Security Assistance Organizations Overseas or certifi cates of deposit are not covered by this exception and may not be accepted. This limitation applies to gifts from both contractors and state-owned industry A USG employee may accept a gift based on a personal relationship if it is clear that acceptance of the gift is restricted to a family relationship or personal friendship and not by the offi cial capacity of the employee. Relevant factors include the history of the relationship and who actually paid for the gift Additionally, the defi nition of gift does not include any of the following items: Modest items of food and refreshments, such as soft drinks, coffee, and donuts, offered other than as part of a meal Greeting cards and items with little intrinsic value, such as plaques, certifi cates, and trophies, which are intended solely for presentation Opportunities and benefi ts available to the general public or to a specifi c class of government employees, e.g., uniformed military members Anything for which fair market value is paid by the employee Gifts from Foreign Governments DoDD 1005.13, Gifts and Decorations from Foreign Governments, governs the acceptance and retention of gifts from foreign governments. This directive and the individual service regulations that implement it provide guidance for individuals to follow in reporting and determining if gifts can be retained or must be turned over to the appropriate custodian. The primary governing principle is that no DoD employee may request or otherwise encourage the offer of a gift from a foreign government. Whenever possible, individuals should politely refuse gifts of anything larger than minimal or token value (e.g., plaques, photographs, calendars, pens, etc.) Only if the refusal would cause embarrassment to the USG or the presenting government should gifts be accepted by a USG representative. As of June 2006, the maximum value of a gift that an employee may retain is $305.00. Gifts exceeding the maximum value are the property of the USG and should be deposited with the employing DoD component for disposition in accordance with DoDD 1005.13. The burden of proof of the gift's value rests with the employee who received the gift. DoD Directive 5500.7-R permits attendance or participation of DoD personnel in gatherings, including social functions, that are hosted by foreign governments or international organizations when: Acceptance of the invitation is approved by the DoD component Attendance or participation is for authorized purposes The social event involves a routine or customary social exchange with offi cials of foreign governments in pursuit of offi cial duties The event is not in the context of the foreign government's commercial activities, i.e., attempting to make a sale to DoD Disposition of Gifts Should an employee accept a gift which is not allowable under the preceding guidelines, one of the following actions must be taken: 4-29 Security Assistance Organizations Overseas The employee may request an exception to policy, in writing, to retain the gift. The employee may request to purchase the gift, or right of fi rst refusal. Per DoD 1005.13, the request is made to the General Services Administration (GSA) and must be accompanied by a commercial appraisal. If the purchase is approved, the price to be paid is the appraised value and cost of the appraisal. The item may be shared with the offi ce. If it is a tangible item, this would entail putting the item on the organization's property control records. If none of the above options is pursued, the item must be turned in to the organization's legal offi ce for disposition. SECURITY ASSISTANCE ORGANIZATION TRAVEL AND TRANSPORTATION Air Travel SAOs must adhere to the standard DoD requirements for travel and transportation, as found in the Joint Federal Travel Regulations (JFTR) for military members and the Joint Travel Regulations (JTR) for DoD civilians. This includes the requirement to use economy-class (coach) accommodations for all travel on common air carriers unless an exception for premium-class is authorized by a designated offi cial. Additionally, it includes the requirement to use a contract commercial travel offi ce, normally available in the local U.S. embassy, for all offi cial travel requirements. Military air transportation is rarely available or convenient for SAO personnel, so most of their travel is conducted via commercial air. However there may be unusual circumstances involving personal security or cost effi ciencies that warrant military air. SAOs are expected to be alert to opportunities to use military air where appropriate, both for themselves and their DoD visitors in country. However, this must be balanced with host nation entry/exit requirements. For example, if a visitor arrives via commercial air and plans to depart via opportune military airlift, the SAO and U.S. embassy must clear the visitor with host nation immigration offi cials. SAOs in a few countries have DSCA-managed C-12 aircraft which are useful for in-country and regional travel. In other countries, DIA operates C-12 aircraft which may be available for SAO offi cial use. SAMM C11.2 contains policies and procedures for SAO utilization of C-12 aircraft. Regardless of the source of funds for offi cial travel, the SAO is expected to be a good steward of USG resources. If offi cial travel is manipulated in order to acquire frequent fl yer miles or other promotional items and results in an increased cost to the government, it is a violation of the Joint Ethics Regulation and, potentially, a violation of criminal law as well. If the SAO cannot resolve a travel issue by reference to the JFTR/JTR, it should refer the matter to the COCOM for guidance or resolution. Vehicle Transportation Most SAOs have an authorization for USG motor vehicles to support their offi cial duties. DoD guidance stems from DoD 4500.36-R, Management, Acquisition, and Use of Motor Vehicles, which is supplemented by regulations at the COCOM or other level. The use of all motor vehicles, including those leased from commercial sources, is restricted to offi cial purposes only. Whether a use is for an offi cial purpose is a matter of administrative discretion by the SAO chief. If a question arises about the scope of the discretion, it should be resolved in favor of strict compliance with DoD policy. Factors to consider include whether the transportation is essential to a DoD function, activity, or operation, and whether the use of the vehicle is consistent with the purposes for which it was acquired. 4-30 Security Assistance Organizations Overseas Both U.S. law and DoD policy prescribe penalties for unauthorized or willful misuse of a government-owned or -leased vehicle. As with air travel, an issue involving vehicle transportation should be referred to the COCOM for resolution. The rules for the use of employee-leased vehicles are the same as for government motor vehicles. When on offi cial travel, one may use that vehicle only for offi cial purposes. The traveler does not have the option of using the vehicle for both offi cial and unoffi cial purposes and claiming reimbursement solely for the offi cial use. Domicile to Duty Transportation Under long-standing U.S. law, commuting by government employees between their residence and place of duty is treated as a personal obligation and expense. The law currently authorizes only fi fteen senior DoD offi cials by duty position to receive domicile to duty transportation (DTDT). However, the law (10 U.S.C. 2637) also allows the Secretary of Defense to delegate to combatant commanders the authority for approving DTDT for selected personnel (including SAOs) stationed overseas in their area of responsibility. This authorization is made by the combatant commander based on a determination that "public or private transportation in such area is unsafe or unavailable." Such authorizations must be made in writing and may not exceed one year in duration, although they may be renewed. SAOs may request DTDT authorization from their COCOM if they believe local conditions warrant it. DTDT is treated as an employer-provided fringe benefi t which is taxable under current law. However, it must be stressed that, where authorized, DTDT exists for the safety and security of DoD personnel, not as a benefi t. DoD 4500.36-R, Chapter 4, provides DoD-level guidance on DTDT. SUMMARY This chapter addresses the major considerations, challenges, and issues which impact upon the overseas SAO in today's environment. Security assistance and security cooperation are two key instruments of U.S. foreign policy and the SAO is in the front lines of shaping and executing that policy. The opportunities associated with an overseas SAO assignment provide unique experiences for the military member and his or her family. As a member of an embassy country team, the SAO has a fi rst-hand look at USG inter-agency activities and foreign policy in action. An assignment to an SAO provides a level of responsibility and breadth of experience seldom seen in other military assignments. REFERENCES Congressional Budget Justifi cation for Foreign Operations (CBJ), FY 20XX, available on-line at: http://www.state.gov/s/d/rm/rls/cbj/. Foreign Service Act of 1980, P.L. 96-465. Foreign Assistance Act (FAA) of 1961. Arms Export Control Act (AECA) of 1976. Department of State and U.S. Agency for International Development, Strategic Plan, Fiscal Years 2007-2012. Available at http://www.state.gov/documents/organization/82819.pdf. Department of Defense, DoDD 5132.3, DoD Policy and Responsibilities Relating to Security Assistance, 10 March 1981, incorporating Change 1 of November 16, 1994. Department of Defense, Army Regulation 1-75/SECNAVINST 4900.49/AFJI 16-104, Administrative and Logistical Support of Overseas Security Assistance Organizations, 27 March 2000. 4-31 Security Assistance Organizations Overseas Department of Defense, DoD 5105.38-M, Security Assistance Management Manual, Chapters 2, 8, and 11. Department of Defense, DoDD 5100.1, Functions of the Department of Defense and Its Major Components, August 1, 2002. Department of Defense, DoDD 5100.3, Support of the Headquarters of Combatant and Subordinate Joint Commands, November 15, 1999, incorporating through Change 2, December 5, 2003. Department of Defense, DoDI 5105.57, Procedures for the U.S. Defense Representative (USDR) in Foreign Countries, December 26, 1995. Department of Defense, DoDD 2055.3, Manning of Security Assistance Organizations and the Selection and USDP Training of Security Assistance Personnel, March 11, 1985. Department of Defense, DoDD 2000.12, DoD Antiterrorism (AT) Program, August 18, 2003. Department of Defense, DoDI 2000.16, DoD Antiterrorism Standards, June 14, 2001, incorporating Change 2, December 8, 2006. Department of Defense, DoDI 5210.84, Security of DoD Personnel at U.S. Missions Abroad, January 22, 1992, incorporating Change 1, October 15, 1996. Department of Defense, DoDD 1005.13, Gifts and Decorations from Foreign Governments, February 19, 2002, incorporating Change 1, December 6, 2002. Department of Defense, DoDD 2100.3, United States Policy Relative to Commitments to Foreign Governments Under Foreign Assistance Programs, July 11, 1963, incorporating Change 1. Department of Defense, DoD 5500.7-R, The Joint Ethics Regulation (JER), including Change 6, March 23, 2006. Available through the DoD Standards of Conduct Offi ce website at: http://www. defenselink.mil/dodgc/defense_ethics/. Department of Defense, Joint Publication 3-07.1, Joint Tactics, Techniques, and Procedures for For- eign Internal Defense (FID), 30 April 2004. Joint Federal Travel Regulations (Volume 1 Military Members) and Joint Travel Regulations (Volume 2 DoD Civilians), available on-line at: https://secureapp2.hqda.pentagon.mil/perdiem/ trvlregs.html. DoD 4500.36-R, Management, Acquisition, and Use of Motor Vehicles, March 16, 2007. Vienna Convention on Diplomatic Relations, 18 April 1961, 23 UST 3227; TIAS 7502. Agreement Between the Parties to the North Atlantic Treaty Regarding the Status of Their Forces, 19 June 1951, 4 UST 1792; TIAS 2846; 199 UNTS 67. 4-32 Security Assistance Organizations Overseas ATTACHMENT 4-1 AUTHORITIES AND RESPONSIBILITIES OF CHIEFS OF MISSION (SELECTED SECTIONS IN THE DETAILED INSTRUCTIONS ARE IN BOLD TEXT.) PRESIDENT GEORGE W. BUSH'S LETTER OF INSTRUCTION TO CHIEFS OF MISSION Revised and Approved June 30, 2003 Dear Mr./Madam Ambassador: Thank you for your willingness to serve the American people as our country's representative to [country/international organization]. The great struggles of the 20th century between liberty and totalitarianism ended with a decisive victory for the forces of freedom - and a single sustainable model for national success: freedom, democracy, and free enterprise. Today, the United States enjoys a position of unparalleled strength and infl uence. In keeping with our heritage and principles, we do not use our position to press for unilateral advantage. We seek instead to create a balance of power that favors human freedom. Our commitment to freedom is America's tradition. The advance of freedom is also the surest way to undermine terror and tyranny, and to promote peace and prosperity. Your task is to help in advancing this great cause by: Waging a relentless global war against terrorism, to defeat those who seek to harm us and our friends; Overcoming the faceless enemies of human dignity, including disease, starvation, and poverty; and, Assisting American citizens, institutions, and businesses as they pursue their haritable and commercial interests. This letter contains your detailed instructions as my personal representative and the United States Chief of Mission. These instructions have been shared with relevant departments and agencies, and I have directed that they give you their full cooperation. I expect you to carry out your mission to the best of your ability and in full conformance with the law and the highest ethical standards. I am counting on your advice and leadership as Chief of Mission to help protect America's interests and to promote America's values. ///Presidential signature/// 4-33 Security Assistance Organizations Overseas DETAILED INSTRUCTIONS As Chief of Mission, you have full responsibility for the direction, coordination, and supervision of all United States Government executive branch employees [in country/at international organization], regardless of their employment categories or location, except those under command of a U.S. area military commander or on the staff of an international organization. Except for the activities of the personnel exempted above, you are in charge of all executive branch activities and operations in your [Mission/international organization.] You will report to me through the Secretary of State. Under my direction, the Secretary of State is, to the fullest extent provided by the law, responsible for the overall coordination and supervision of all United States Government activities and operations abroad. The only authorized channel for instruction to you is from the Secretary or me unless the Secretary or I personally instruct you to use a different channel. All executive branch agencies under your authority, and every element of your Mission, must keep you fully informed at all times of their current and planned activities. You have the right to see all communications to or from Mission elements, however transmitted, except those specifi cally exempted by law or Executive decision. You have full responsibility for the direction, coordination and supervision of all Department of Defense personnel on offi cial duty [in country/at international organization] except those under the command of a U.S. area military commander. You and the area military commander must keep each other currently and fully informed and cooperate on all matters of mutual interest. Any differences that cannot be resolved in the fi eld will be reported to the Secretary of State and Secretary of Defense. I expect you to take direct and full responsibility for the security of your Mission and all the personnel for whom you are responsible, whether inside or outside the chancery gate. Unless an interagency agreement provides otherwise, the Secretary of State and you as Chief of Mission must protect all United States Government personnel on offi cial duty abroad other than those under the protection of a U.S. area military commander or on the staff of an international organization and their accompanying dependents. You and the U.S. area military commander should consult and coordinate responses to common threats. I ask that you review programs, personnel, and funding levels regularly, and ensure that all agencies attached to your Mission do likewise. Functions that can be performed by personnel based in the United States or at regional offi ces overseas should not be performed at post. In your reviews, should you fi nd staffi ng to be either excessive or inadequate to the performance of priority Mission goals and objectives, I urge you to initiate staffi ng changes in accordance with established procedures. Every executive branch agency under your authority must obtain your approval before changing the size, composition or mandate of its staff. If a Department head disagrees with you on staffi ng matters, that individual may appeal your decision to the Secretary of State. In the event the Secretary is unable to resolve the dispute, the Secretary and the respective Department head will present their differing views to me for decision. All United States Government personnel other than those in country under the command of a U.S. area military commander or on the staff of an international organization must obtain country clearance before (entering country/visiting international organization] on offi cial business. You may refuse country clearance or may place conditions or restrictions on visiting personnel as you determine necessary. I expect you to discharge your responsibilities with professional excellence and in full conformance with the law and the highest standards of ethical conduct. You should ensure that there is equal opportunity at your Mission and no discrimination or harassment of any kind. Remember as you conduct your duties that you are not only representing me, but also the American people and America's values. 4-34 Security Assistance Organizations Overseas ATTACHMENT 4-2 SECURITY ASSISTANCE ORGANIZATION - INDUSTRY RELATIONS [ Department of Defense Memorandum, 05 May 1999, Subject: Department of Defense Policy for Relations with U.S. Industry in Sales of Defense Articles and Services to Foreign Governments] Offi ce of the Secretary of Defense Washington, DC 20301-1000 05 May 1999 MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS CHAIRMAN OF THE JOINT CHIEFS OF STAFF ASSISTANT SECRETARIES OF DEFENSE GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE INSPECTOR GENERAL OF THE DEPARTMENT OF DEFENSE DIRECTOR, OPERATIONAL TEST AND EVALUATION DIRECTORS OF THE DEFENSE AGENCIES DIRECTORS OF THE DOD FIELD ACTIVITIES SUBJECT: Department of Defense Policy for Relations with U.S. Industry in Sales of Defense Articles and Services to Foreign Governments The DoD is committed to greater cooperation with U.S. industry to facilitate sales of U.S. defense articles and services when in support of U.S. national security and foreign policy objectives. DoD is prepared to assist and cooperate with U.S. Industry regardless of the type of sale, e.g., Direct Commercial Sale, Foreign Military Sale, or a combination of the two. The purpose of this policy is to improve communication and teamwork between DoD and U.S. Industry in the Security Cooperation process. DoD and U.S. Industry participants must establish specifi c roles and responsibilities by developing DoD and U.S. Industry arrangements. In cases where only one U.S. contractor is involved, the military departments will be the DOD representatives for weapon systems under their cognizance. The Defense Security Cooperation Agency (DSCA) will be the DoD representative when more than one U.S. contractor is competing until down selection is complete. DoD representatives will not favor one U.S. contractor over another in competition process. The level of cooperation and assistance will be determined on a case-by-case basis. While the mechanism(s) for a DoD/U.S. Industry cooperative effort of this nature are being developed as part of the Security Cooperation reinvention process, certain actions will be common to all situations. We expect industry to advise the DoD of cooperation and assistance it desires for a particular effort. Receipt of that information will prompt: (a) identifying DoD/U.S. Industry principal players, (b) establishing formal lines of communication, (c) defi ning roles, and (d) developing a joint approach. Conversely, DoD may request support from industry. Your participation and cooperation are essential to improving the Defense Security Cooperation process. //SIGNED// //SIGNED// Jacques S. Gansler Walter B. Slocombe Under Secretary of Defense Under Secretary of Defense for Policy for Acquisition & Technology 4-35 Security Assistance Organizations Overseas ATTACHMENT 4-3 CHECKLIST FOR MEETING REPRESENTATIVES OF DEFENSE INDUSTRY (See SAMM C2.5.7 for detailed guidelines on interface with industry) 1. Exchange business cards. 2. Inquire about the articles and/or services which the vendor is marketing 3. Ask to see the vendor's export license, or inquire about the status of license approval. Ask what provisos (limitations) are associated with the license. 4. Indicate that, in general, the USG has no preference as to whether a sale is made via FMS or DCS channels (SAMM C4.5.8). Inquire as to whether the vendor has a preference (some vendors have a preference for DCS on fi le with DSCA; see SAMM C4.5.10). 5. Inquire whether the vendor is marketing similar articles or services to other countries in the region. 6. As appropriate, provide an overview of host nation military picture. a. Organization b. Known requirements and priorities c. U.S. and DoD relations with host nation d. Host nation defense industry 7. As appropriate, review the host nation procurement strategy. a. Key decision-makers within MOD and the services b. Defense budget and expected availability of FMF, if any c. MOD procurement system (preferences for FMS vs. DCS) d. Host nation offset policy, if appropriate e. Foreign competition 8. Inquire if the vendor has an in-country agent. 9. Inquire if the vendor would like marketing assistance from the Department of Commerce through the embassy's commercial attach or local Foreign Commercial Service (FCS) representative. 10. Inquire if the vendor wants assistance in appointments with host nation offi cials and/or other U.S. embassy offi ces. 11. Request a back-brief from the vendor after meetings with host nation. 4-36 Security Assistance Organizations Overseas 5-1 Foreign Military Sales Process INTRODUCTION The foreign military sales (FMS), program is part of security assistance authorized by the Arms Export Control Act (AECA). It is a fundamental United States (U.S.) foreign policy tool. Under Section 3, of the AECA, the U.S. may sell defense articles and services to foreign countries and international organizations when the president formally fi nds that to do so will strengthen the security of the U.S. and promote world peace. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Table C4.T2, identifi es countries and organizations designated as eligible to purchase articles and services through the FMS system. This program is conducted through formal contracts or agreements between the U.S. government (USG) and an authorized foreign purchaser. These agreements are called U.S. letters of offer and acceptance (LOA). Beginning with a customer country's request, the FMS process is a complex one that for a major weapon system sale may last for more than seven years. It is outlined in Figure 5-1 and discussed in this chapter and later in Chapter 6, "Foreign Military Sales Cases". The USG acquisition, logistics, fi nancial, and training elements of the FMS process are further discussed in subsequent chapters in this textbook. This chapter addresses the entire FMS process starting with the preliminary stages when the customer begins to defi ne requirements and ending up with a discussion of FMS program closure. It is important to remember that the USG infrastructure that supports the FMS process is not a stand-alone arrangement. Instead, it overlays the existing domestic structure of the Department of Defense (DoD). Therefore, policies, databases, and organizational elements for support of FMS vary among DoD agencies. The military departments (MILDEPs) and other DoD agencies involved in writing and managing FMS programs are collectively referred to as implementing agencies (IA). Note also that while this textbook offers an overview of the FMS process, it is not intended to replace the SAMM or other offi cial policies and regulations. The SAMM, which is published by the Defense Security Cooperation Agency (DSCA), is the principal manual providing policy and guidance for the administration and implementation of security assistance in compliance with the AECA, the Foreign Assistance Act (FAA), and other related statutes and directives. The SAMM and the associated policy memos are essential reading if one is to understand the FMS process. Much of what is discussed in Chapters 5 and 6 of this text correlates to Chapters 1, 2, 4, 5, and 6 of the SAMM. It is important to keep abreast of new policies and procedures by reviewing periodically the links to the SAMM and to security assistance policy memoranda and messages on the DSCA web site http://www. dsca.mil/publications.htm. STAGES OF THE FOREIGN MILITARY SALES PROCESS: PRELIMINARY AND DEFINITION The FMS process begins when the customer starts to develop requirements for a U.S. defense article or service. During this preliminary stage, there should be ongoing consultation between the customer and U.S. representatives, principally the in-country U.S. security assistance organization (SAO). Chapter 4, "Security Assistance Organizations Overseas," of this text discusses the SAO in detail. As the customer continues to defi ne requirements, follow-on discussions will expand to include U.S. defense contractors as well as representatives from MILDEPs and other DoD organizations. These discussions should address such topics as acquisition programs, training plans, fi nancing, and concepts of operations and support, among others. U.S. security assistance plans should complement the customer's plans and budgets whenever feasible. Follow-on discussions for the more complex sales may even lead to an international agreement or a memorandum of understanding (MOU) between the FOREIGN MILITARY SALES PROCESS Chapter 5 5-2 Foreign Military Sales Process customer and the U.S., documenting the rights and obligations of each with regard to weapons systems development, production, or transfer. Chapter 8, "Foreign Military Sales Contractual Agreements," of this text discusses these types of agreements in detail. TABLE 5-1 FOREIGN MILITARY SALES PROCESS Preliminary (Indefi nite) Customer determines requirements Customer obtains specifi c systems information Defi nition (Indefi nite) Customer and U.S. exchange technical information Request (Indefi nite) Customer prepares and submits an LOR for price and availability (P&A) data Customer prepares and submits LOR for an LOA Development of Offer Implementing agency (IA) receives the LOR (Policy for the response to LOR IA develops an LOA data (LOAD) by LOA is 120 days for 80% of LORs) DSCA-CWD writes LOA (Congressional review if required is DoS/DSCA/Congress review LOA from 15-50 days.) DSCA countersigns LOA IA issues LOA to customer Acceptance of the Offer Customer signs LOA (Policy is 60 days to accept a LOA) Customer sends signed copy of LOA and initial deposit to Defense Finance Accounting Service-Indianapolis Center (DFAS-IN) Customer sends signed copy of LOA to IA Implementation DFAS-IN* issues obligational authority (OA) (15 days average) IA issues implementing directive IA activates FMS computer systems Execution Case and line managers order articles/ services/training (Depends on delivery schedule) Articles and services shipped and expended training conducted IA reports performance to customer and DFAS-IN Reconciliation and Closure MILDEP/DFAS-IN and customer reconcile records (Policy is 2 years from last delivery) MILDEP sends closure certifi cate to DFAS-IN DFAS-IN issue fi nal bill to customer [*Editor's Note: DFAS-DE functions are transitioning to DFAS-IN within the next 10-12 months.] 5-3 Foreign Military Sales Process STAGES OF THE FOREIGN MILITARY SALES PROCESS: REQUEST As the customers begin to down-select systems and services to meet their requirements, they may submit an LOR to the USG. An LOR may ask only for P&A data or for a full-up formal sales offer in the form of an LOA. By policy the LOA response should be done in 120 days eighty percent of the time. A P&A is considered a rough order magnitude response and by policy should be made in 45 days. The LOR should outline the customer's requirement in as much detail as possible. LORs are usually submitted in formal correspondence, such as letters or messages. LORs may also be submitted via e-mail if the customer has made prior arrangements with the IA. Technically, less formal methods of communication such as meeting minutes and even oral discussions may be considered appropriate media for transmission of LORs, but this is rarely, if ever, the case in practice. Whenever a customer makes a request through less formal media like these, the normal U.S. response is to ask the customer to put his request in an offi cial letter or message. See SAMM, C5.1, for a detailed discussion on LORs. Letter of Request: Format There is no standard format for an LOR. However, customers are encouraged to provide as much detail as possible in their requests. The information the IA may require in an LOR in order to provide a timely and comprehensive response includes but is not limited to the following: Whether an LOA or P&A is requested Defense documentation for previous DoD or contractor discussions that would impact the LOA response Specifi c user/purchaser information and a traceable reference/serial number Quantity and specifi c model numbers and/or nomenclatures of the items requested Unique non-U.S. confi guration requirements Sole source requirements Requested delivery schedule Requested payment schedule Amount of time required for customer acceptance of LOA Customer operational and support concepts for items requested Concurrent spare parts required (usually up to three years worth of spares) USG or contractor services required Training requirements Funding source/method of fi nancing Customer specifi c budget or payment schedule requirements Waivers requested 5-4 Foreign Military Sales Process Warranty requirements Special transportation requirements Whether concurrent foreign competition or commercial negotiations are underway Any offsets with a defense contractor connected with this proposed sale Overseas contract administrative services be requirements Whether a site survey has been requested or completed Any related agreements such as a MOU or a letter of intent (LOI) Letter of Request: Channels of Submission The action addressee for the LOR is the implementing agency (IA). The IA is the USG organization authorized to receive and process LORs. A description and listing of authorized IAs are provided in Attachment 5-1. The channel of submission used for an LOR depends on whether the article or service requested is considered signifi cant military equipment (SME), or all other FMS, i.e., non-SME. See Figure 5-1 for this channel of request for the LOR. Signifi cant Military Equipment SME are items highlighted on the U.S. Munitions List (USML) as warranting special export controls because of their capacity for special military utility or capability. The USML is included in Part 121, International Traffi c in Arms Regulations (ITAR). The ITAR and USML are on the Department of State (DoS) web site at http://www.pmdtc.org/itar_index.htm. Note that SME can be further identifi ed as major defense equipment (MDE), which is listed in the SAMM, Appendix 1 and is subject to these processing guidelines. If the customer sends an LOR for SME to the U.S. embassy, the embassy should forward the LOR to the relevant IA for action, with information copies to the DoS, Bureau of Political-Military Affairs (STATE/PM), DSCA, and the relevant combatant command (COCOM). The embassy's transmittal should include a country team assessment (CTA), addressing such topics as: ! " #$ ! #" Figure 5-1. Channels of Request 5-5 Foreign Military Sales Process The reason the customer requires the system How the customer intends to employ and deploy the system The customer's ability to operate and maintain the equipment How the customer intends to pay for the system The embassy's plan for end-use monitoring The embassy's recommendation as to whether the U.S. should agree to sell the system Refer to SAMM, Table C5.T1 for more detail regarding this assessment. Note that this submission is a country team assessment, not just an SAO assessment. Although the SAO is normally the action offi ce that prepares the transmittal, it is important to remember that the analysis and recommendations it contains must be staffed with other members of the country team and represents the position of the U.S. chief of mission. Country team assessments are normally classifi ed. If the customer sends an LOR for SME directly to the IA, the IA should provide information copies to DoS Bureau of Political-Military Affairs (STATE/PM), DSCA, and the relevant combatant command. The IA should also send a copy of the LOR to the U.S. embassy via the SAO and ask for a country team assessment. Non-Signifi cant Military Equipment If the U.S. embassy receives an LOR for non- signifi cant military equipment (non-SME), the SAO should forward it to the cognizant IA, with information copies to DSCA and the combatant command. No country team assessment is required. If the customer sends the LOR directly to the IA, then the IA must ensure that DSCA receives an information copy. Although not offi cially required, it is common for IAs to also provide information copies of non-SME LORs to the SAO and the combatant command. If it is not clear which IA has cognizance for the system requested, or if the subject of the LOR is sensitive enough to require a higher-level review, then the U.S. embassy or customer may send the LOR directly to STATE/PM and DSCA. Within fi ve days of receipt of an LOR, STATE/PM and DSCA should initiate coordination to determine if there will be any USG objection to the proposed sale. Although not offi cially required, it is common for COCOMs to also submit assessments with a combatant commander recommendation to the IA regarding the sale, similar to the country team assessment sent by the U.S. embassy. There may be many USG agencies not identifi ed in this chapter that may need to review an LOR and a proposed offer. The type and breath of the USG reviews vary to a large extent depending upon whether the request contains for example, non-SME, SME, MDE, classifi ed items and sensitive or missile related technology. It is the responsibility of the IA to ensure that the correct organizations review the LOR. The goal is for the necessary reviews to happen concurrently to minimize the response time to the FMS customer. 5-6 Foreign Military Sales Process Letter of Request Advisories and Pre-Operational Testing and Evaluation Sales Policy DSCA may need to coordinate on LOR advisories to the Under Secretary of Defense for Acquisition, Technology and Logistics [ USD (AT&L)] and the Chairman of the Joint Chiefs of Staff. For example, an LOR requesting an LOA or P&A for SME/MDE that is still in DoD development and not approved for U.S. production must be approved by DSCA prior to the IA responding to the customer. DSCA will not approve this pre-operational testing and evaluation (OT&E) systems request until USD (AT&L) concurs. This is often referred to as the Yockey waiver. LOR advisories are also necessary for other types of requests such as requests for co-production licensing agreements for MDE or requests for MDE which are expected to require congressional notifi cation. LOR advisories are discussed in the SAMM, C5.1.4.5. Letter of Request: Negative Responses If the IA believes that an LOR should be disapproved, the IA should fi rst coordinate with DSCA, who will coordinate with STATE/PM and other relevant agencies. Refer to SAMM, Section C5.2.2 for a detailed discussion. STAGES OF THE FOREIGN MILITARY SALES PROCESS: OFFER AND ACCEPTANCE The individual within an IA responsible for processing an LOR is the country director. The country director is also known as country desk offi cer or country program manager (CPM). Country directors are usually found in the headquarters element of the IA's security assistance structure. More detail on IA organizations can be found in Attachment 5-1 at the end of this chapter. A country director will normally process all LORs the IA receives for a given country or region. However, there may be several country directors assigned to a customer country with many large complex FMS programs. Upon receipt of an LOR, the country director should confi rm that the requestor is eligible to purchase defense articles and services under the AECA, FAA, and other statutes and policies. Refer to SAMM, Table C4.T2, to determine this eligibility. Letter of Request Response Documents There are two primary USG responses to an LOR. Price and Availability A P&A response is an estimate that refl ects rough order of magnitude (ROM) data. It is provided for country planning purposes only and shows estimated costs and projected availability of defense articles or services. P&A responses will normally not be provided for nonstandard subsystems and the IA should respond within 45 days of receipt of an LOR. P&A data is not valid for use in the preparation of an LOA or should it be used by the customer for budgeting purposes. P&A responses should not be construed as a USG approval for the material or service. Only the LOA is the offer to sell. To avoid confusion, the term P&A should not be used in reference to data developed for completion of an LOA, and such data should be referred to as LOA data (LOAD). Refer to SAMM, Section C5.3, for further discussion of P&A. Letter of Offer and Acceptance The LOA, or the FMS case, is the authorized document used by the USG as an offer to sell defense articles and services to a foreign country or international organization. An example of an LOA, including many related FMS process documents, and a description of the LOA elements are shown in Appendix 1, "Case Document Package," at the end of this textbook. The LOA represent a 5-7 Foreign Military Sales Process bona fi de offer by the USG to sell the described items identifi ed on the document. The LOA becomes an agreement when the customer accepts the case by signing it and providing the payment specifi ed in the LOA. If logistical or fi nancial requirements change during the execution phase of the FMS case, it may be possible to amend or modify the case. Amendments and modifi cations are discussed in later Chapter 8, " FMS Contractual Agreements". The LOA is subject to many conditions and restrictions referred to as the LOA Standard Terms and Conditions. These standard terms and conditions of an LOA are further described also in Chapter 8, "FMS Contractual Agreements." As soon as LORs are received by the IA, they are loaded into the Defense Security Assistance Management System (DSAMS). Examples of a DSAMS-developed LOA along with most of the supporting documents used in the FMS process are shown in Appendix 1. It is important to remember that a P&A response is not a commitment by the USG to sell the requested articles and services. Once the customer has decided to purchase an article or service via FMS, an LOR for an LOA must be submitted. Only the LOA is an offer by the USG to sell. Foreign Military Sales Case Identifi er To differentiate among the approximately 12,000 open FMS cases, each LOA is assigned a unique case identifi er, which is described in detail in Chapter 6, "Foreign Military Sales Cases." Milestones and Metrics In order to ensure timely responses to LORs, DSCA has established several FMS process management milestones and metrics. The clock starts ticking as soon as the IA receives an LOR and it is loaded into DSAMS. Within 5 days, the IA should send the customer an acknowledgement of receipt of the LOR. This acknowledgement should also list a unique case identifi er Within 5 days, DSCA should initiate coordination with STATE/PM and other relevant government agencies to determine if there are any immediate objections to the proposed sale within the USG Within 10 days, the IA should provide Congressional notifi cation data to DSCA, if required. [More on congressional notifi cation is below. Also see earlier Chapter 2, "Security Assistance Legislation and Policy," and SAMM, Section C5.6.] Within 10 days, the IA should enter case information into the DSCA 1200 database system via DSAMS. [See Appendix 3, "Security Assistance Automation," in this textbook, and SAMM, Chapter 13 for a discussion of these and other information systems] The IA should provide the customer a P&A within 45 days of receipt of an LOR The IA should provide the customer an LOA within 120 days for 80 percent of all LORs In order to meet DSCA's milestones, each IA has also developed its own internal metrics and milestones. 5-8 Foreign Military Sales Process Initial Processing of the Letter of Request by the Implementing Agency LORs are initially received and processed by the applicable IA country director. Except for purchasers with very large programs, country directors will process all LORs for a particular country or region. Before any further action is taken on the LOR, it must be validated to ensure the customer is eligible to purchase defense articles and services. The IA should acknowledge receipt of the LOR with the case identifi er within 5 days. The LOR is also the loaded into the DSAMS. This system, described in Appendix 3, "Security Assistance Automation," will be used to task organizations and compile the LOA data that will be used to write the LOA documents. The 120 day LOA processing metric starts when the LOR is loaded into DSAMS. It is important to note that the LOR should be loaded into DSAMS immediately and not held aside if the LOR is incomplete. While the LOA is being compiled, country directors will normally have a checklist of tasks or questions to answer in order to complete the processing of the LOR. The following are typical checklist items: Did copies of the LOR go to the proper USG review organizations? Does the LOR contain an identifi able customer reference or serial number? Is the LOR a result of a foreign solicitation? Are there any additional LOR references, such as a MOU or a pre-negotiated response? Does the request comply with total package approach (TPA) policy? Is the request a valid military requirement? Is this a sensitive technology request? Will the request result in the transfer of classifi ed information? For Section 36(b), AECA cases, has DSCA been provided with the congressional notifi cation data within 10 days? Is the request for missile related technology or classifi ed information? Will production be in-country? Will any production be used for third country sales? If the request is for standard U.S. materiel, is a valid national stock number (NSN) provided? How many initial spare parts are required to be delivered with the end items? Does a sole source request contain the proper justifi cations? If the request is for non-standard materiel has a military specifi cation (MILSPEC) package or engineering data description been included? Has the request been screened to determine if there is a concurrent commercial bid in process? 5-9 Foreign Military Sales Process Does a quality inspection team need to inspect the material upon delivery to the customer? Does the customer require any special USG or contractor services? Does the customer require a not to exceed (NTE) or fi rm fi xed price (FFP) response? Does the LOR contain any unique customer budget or payment schedule requirements? Is there enough information to properly identify all the requirements? Is a site survey required? Has a negative response been coordinated with DSCA? Compilation of Letter of Request Data by the Implementing Agency As the country director proceeds through the IA's initial processing checklist, the case manager is tasked via DSAMS to begin compiling LOA data (LOAD). In some instances, the country director may also serve as the case manager but most often the case manager resides in the organization that manages the primary article or services requested in the LOR, such as a systems command or a system program offi ce. It is the case manager who normally has primary responsibility for the LOA content. See SAMM, Section C2.4 for a detailed discussion of case management responsibilities. The case manager must coordinate with weapon system program managers and item managers to collect cost and availability estimates for every article and service that will be included in the LOA. These estimates may be based on current DoD inventories or on information from U.S. defense contractors. As the data develops, the case manager and country director should both be alert for issues that may require further coordination, not only within the IA but also with other DoD organizations, as well as the DoS and other non-DoD agencies. When outside coordination is required, the time required and the level at which it should occur will depend on a number of political, technical, and fi nancial factors. For example, a routine follow- on support case will likely require little or no coordination with organizations outside the IA. Cases involving more than one proponent MILDEP (e.g., U.S. Navy helicopters with U.S. Army electronics) require coordination across service lines. More complex sales involving political issues, such as basing rights, may require participation by DSCA, the Offi ce of the Assistant Secretary of Defense for Global Security Affairs [ASD (GSA)], the combatant command, and the DoS. Complex fi nancial or other business arrangements may also require coordination with the Departments of Commerce and Treasury. The MILDEP organizations and other agencies responsible for compiling and coordinating LOAD and for writing LOAs will be further described in later Attachment 5-1. Correlating the Letter of Request with the Military Articles and Service List In order to write an LOA, the IA will construct a separate LOA line item for each generic category of material or services. For each line item, the IA will also determine the appropriate material Military Articles and Services List (MASL) number. The complete material MASL is contained within DSAMS. MASL data, such as generic codes, MASL numbers, and descriptions must be included on the LOA for each line item. A sample extract of the material MASL is in Appendix 1 "Case Document Package", of this textbook. A table of generic codes is in SAMM, Appendix 4. 5-10 Foreign Military Sales Process It must be noted that there are two separate and distinct MASLs, one for material and services and another for training. They should not be confused. Each contains different kinds of information and has different uses. DSCA maintains the material MASL with input from the MILDEPs. The security assistance training activities of the MILDEPs maintain the training MASLs, which are accessed via the training management system (TMS). SAMM, Section C13.6, discusses both types of MASLs in detail. Completeness of Offer: The Total Package Approach When compiling LOA data, case managers should adhere to the policy of total package approach (TPA) outlined in SAMM, Section C4.5.3. TPA ensures that FMS customers are afforded the opportunity to acquire the full complement of articles and services necessary to fi eld, maintain, and utilize major items of equipment effi ciently and effectively. In addition to the weapon system itself, an LOA that follows the TPA concept will address areas such as training, technical assistance, publications, initial support, and follow-on support, among others. As part of the TPA, IAs should ensure that LOAs for equipment include at least one year's supply of spare parts [SAMM, Section C5.4.8.9.2]. These packages are referred to both as concurrent spare parts (CSP) and as initial spare parts (ISP). LOAs should include CSP or ISP for all support and ancillary equipment listed on the LOA as well as for major weapon systems. IAs normally require that a signifi cant portion of CSP and ISP be in country before they will release major end items for delivery. CSP and ISP are often identifi ed by category and total value rather than itemized on the LOA. IAs implement TPA through checklists for various weapon systems. TPA is discussed in more detail later in this chapter. Quality of Items Sold DoD policy requires that articles and services sold under FMS refl ect favorably on the U.S. Therefore, in most cases, articles provided under FMS will be new or unused or will have original appearance and function as much as possible as a result of rebuild, overhaul, or other rehabilitation. At a minimum, articles provided via FMS should meet the same serviceability standards prescribed for issue to U.S. forces. If the customer desires new equipment exclusively, this should be specifi ed in the LOR and set forth in the LOA. Similarly, if the customer wants to buy excess defense articles (EDA) as is, where is, this too should be specifi ed in the LOR and LOA. For EDA, the customer usually bears any costs for repairs, rehabilitation, or modifi cation required to make the materiel usable. Additionally, LOA notes for EDA typically state that the USG is not obligated to provide transportation or future support for such material. Chapter 2, "Security Assistance Legislation and Policy," and Chapter 10, "Logistics Support of International Military Sales," discuss EDA sales in detail. Also refer to SAMM, Section C11.5. Release of Letter of Offer and Acceptance Data It is DoD policy to comply with the Freedom of Information Act (FOIA). However, under exemption (b)(4) within DoDD 5400.7, DoD FOIA Programs, Paragraph C3.2.1.4. Commercial or fi nancial information that a person, a U.S. or foreign business, or a foreign government provides to the USG may be exempt from disclosure to the public if: It is not the type of information that the originator would usually release to the public Disclosure is likely to cause substantial competitive harm to the originator 5-11 Foreign Military Sales Process Disclosure is likely to impair the ability of the USG to obtain necessary commercial or fi nancial information in the future Disclosure is likely to impair some other legitimate USG interest Any USG employee who receives an FOIA request regarding an LOA or an FMS procurement contract should refer it to the appropriate IA legal counsel. IAs should coordinate any decision to release or withhold information with DSCA General Counsel. Chapters 7, "Technology Transfer, and International Programs Security," and Chapter 8, "FMS Contractual Agreements," of this textbook also address FOIA requests. Also refer to SAMM, Section C3.4.1. Congressional Notifi cation For most countries, an LOA meeting one of the following Section 36(b)(1) AECA thresholds will be notifi ed to Congress: $14 million or more of major defense equipment $50 million or more of total case value $200 million or more of design and construction services The thresholds for North Atlantic Treaty Organization (NATO) countries, Japan, Australia, and New Zealand are $25 million, $100 million, and $300 million respectively. It must be noted that MDE is signifi cant military equipment (SME) for which the USG has incurred more than $50 million in total nonrecurring research and development costs or more than $200 million in total production costs. Although the IA provides most of the information contained in a Section 36(b) notifi cation package, it is DSCA that must assemble the package and forward it to Congress, specifi cally the House International Relations Committee (HIRC) and the Senate Foreign Relations Committee (SFRC). DSCA must also obtain concurrence from State/PM before sending a notifi cation package to Congress. In order to present the customer with an LOA as soon as possible, preparation for the congressional notifi cation process should run concurrent with the compilation of LOA data and the preparation of the LOA. For most countries, the time frame for a congressional notifi cation action is a total of 50 days, which consists of 20 days advance (informal) notice and 30 days statutory notice. Statutory notifi cation immediately follows advance notifi cation and is marked when the notifi cation information is entered into the Congressional Record. Congressional notifi cation packages are considered classifi ed until the statutory notifi cation period begins. For NATO and NATO countries, Japan, Australia, and New Zealand, there is only a fi fteen day statutory requirement and no requirement for advance or informal notifi cation. Once statutory notifi cation begins and the package is no longer classifi ed, the IA may, with DSCA approval, give the customer an advance copy of the LOA. However, this copy of the LOA must be unsigned and annotated as a draft, and is therefore not binding. It is a courtesy copy for information only and should not be construed as an offi cial offer. The IA can present the offi cial LOA to the customer only after the congressional notifi cation period has lapsed and when directed by DSCA. If Congress objects to a proposed LOA, it must pass a joint resolution to that effect prior to the expiration of the notifi cation period. If the notifi cation period passes with no congressional action, DSCA may then countersign the LOA and release it to the IA for offi cial presentation to the customer. 5-12 Foreign Military Sales Process See SAMM, Section C5.6 and Table C5.T10 for a detailed discussion of the congressional notifi cation process. Defense Security Cooperation Agency Countersignature The IA will notify the DSCA Case Writing Division (DSCA-CWD) when they complete compiling LOAD. The DSCA-CWD will complete the LOA writing process by doing a quality review for policy compliance and add necessary LOA notes and payment schedule. In most cases, an LOA also requires countersignature which is coordinated through the CWD. Countersignature indicates that DSCA has reviewed and concurs with the release of the LOA. Countersignature may also require a fi nal round of coordination with other government agencies, such as ASD (GSA) and STATE/PM. The CWD also routinely coordinates with the relevant DSCA regional directorate prior to countersigning the LOA. Countersignature now occurs electronically between DSCA-CWD and the IA using e- mail and DSAMS. SAMM, Section C5.4.13 and Table C5.T9 for a detailed discussion of the DSCA countersignature process. Once DSCA-CWD countersigns and releases the LOA, the IA will forward it to the customer for acceptance. The IA should also send a copy of the LOA to DFAS-IN. Though not required, it is also common for the IA to send an information copy of the LOA to the SAO. STAGES OF THE FOREIGN MILITARY SALES PROCESS: ACCEPTANCE OF A LETTER OF OFFER AND ACCEPTANCE Once the IA presents the customer with the LOA, the customer, by SAMM policy should have 60 days to review and accept it; however, there are many exceptions to this rule. [SAMM, Figure C5.F] To offi cially accept an LOA, the customer must: Send signed copies of the LOA to DFAS-IN and the IA (this may be done via the SAO) Send to DFAS-IN, the initial deposit/payment due with acceptance as annotated on the LOA Both of these actions must be completed before an LOA is considered accepted and ready for implementation. Payment must be in U.S. dollars and may be via check or, preferably, wire transfer. Customers should strive to accept an LOA by the offer expiration date (OED) listed on the fi rst page of the LOA. If an OED is less than 60 days from the date the IA offers the LOA, the LOA must include a note explaining the reason. [SAMM, Table C5.T5] If the customer cannot meet the OED. It may request an extension from the IA. Many considerations, such as contract deadlines for multi-country programs or policy concerns, may preclude granting an extension. Moreover, customers should note that even if an extension is granted, cost and delivery estimates are perishable and will tend degrade over time. The longer the period between the offer and the acceptance, less accurate cost and delivery estimates may result. STAGES OF THE FOREIGN MILITARY SALES PROCESS: IMPLEMENTATION AND EXECUTION Implementation After receiving the initial deposit, DFAS-IN releases obligational authority (O/A) to the cognizant IA. The O/A is forwarded via DSAMS to the MILDEP FMS management unique computer systems. The O/A is evidence that proper case acceptance, including cash deposit, have been received and 5-13 Foreign Military Sales Process the case may be implemented. The O/A provides case fi nancial authority which allows the IA case manager to implement the case. The IA may then prepare case directives that direct and coordinate the case implementation process. Implementation ends and case execution begins when requisitions for the LOA material and services are processed against the case. There is no standard time frame for case implementation; however, it should be accomplished within 10-15 days. Although an LOA provides basic information and authority for an FMS case, it will often have insuffi cient information for case implementation. A case directive provides detailed instructions and information that the IA's fi eld activities can use to support requirements within the FMS case. Much of the information in the case directive is related to fi nance and logistics, such as fund cites and shipping instructions. A user of the case directive should consider it as the intermediate step linking the LOA and the actual requisition or purchase order for the articles and services listed on the LOA. The case manager is normally the person who prepares the case directive. The term, FMS case directive, has several defi nitions depending on the variations of case directive documents. In the broadest context, a case directive is a document, or an assortment of documents, used to implement an accepted LOA. The case directive is also known as the project directive for the Navy and the international program directive for the Air Force. Implementation transitions into case execution when the IA's fi eld activities begin to requisition articles and services against the case. While there is no standard metric for case implementation, a good rule of thumb is to implement a case within 15 days of acceptance by the customer. Moreover, since the case directive is an extension of the LOA, it should be amended or modifi ed concurrent with LOA amendments and modifi cations. If LOA fi les and case directive fi les are not maintained in tandem, discrepancies will arise between what the LOA intends and what actually happens during the execution phase. Execution Case execution, depicted in Figure 5-2, is the longest part of the lifecycle of an FMS case. It begins when the IA's fi eld activities start the requisition and procurement process against the case directive and does not end until the last article or service is delivered or completed. This can take several years for a major case. SAMM, Section C6.3.1, dictates that acquisition in support of FMS cases will be conducted in the same manner as it is for U.S. requirements, thus affording the customer the same benefi ts and protection that apply to DoD procurement, which is one reason why customers often prefer to buy via FMS. Accordingly, procurement and supply actions for FMS cases are normally carried out in the same manner by the same USG procurement and logistics activities that support U.S. forces, although IAs may establish offi ces or positions within their organizations specifi cally to coordinate and monitor FMS support. A typical FMS case includes items both from U.S. supply stocks and from new procurement. FMS procurement requirements may be consolidated on a single contract with U.S. requirements or may be placed on a separate contract, whichever is most expedient and cost effective. [SAMM, Chapter 6. discusses case execution in detail.] 5-14 Foreign Military Sales Process Foreign Military Sales Case Management Policy, Procedures and Concepts A signifi cant element of the case execution process involves FMS case management. The management of FMS programs and their cases, like the concept of management itself, is often regarded by some as more of an art than a science. While it is beyond the scope of this chapter to assess that contention, an argument can be made that FMS program and case management follows the same universal management principles of other DoD and USG programs or even nongovernmental ventures for that matter, i.e., the principles of planning, organizing, coordinating, communicating, directing, and controlling. Of this list of traditionally accepted management principles or functions, communication is especially pertinent as it relates to security assistance in general and FMS in particular. Equally important to case management is an understanding of the overall FMS process, in particular, identifying the key organizations and people responsible for executing an FMS case. It is not an understatement to say that FMS has a language of its own and that learning and communicating with the numerous acronyms, special terms, and organizational symbols is very often half of the battle. According to the SAMM, C2.4 the MILDEPs will assign a case manager to each active FMS case. Case management begins during P&A, LOA preparation, and should include the TPA concept. Further, the SAMM identifi es the following specifi c responsibilities of a case manager. Establish initial and long-range goals and objectives for execution. Ensure foreign disclosure and international transfer arrangements are approved prior to signature of the LOA or agreement. Prepare a master plan (including a plan for case closure). Develop a fi nancial and logistics management plan. % % & & ! '( ') " * +# $ % * ! #" ,, + - * & % . '' '#/0 * $ 1 1 - 1 1 -, 0- * 2 +# 2( & * 2* & * & Figure 5-2 Foreign Miltary Sales Case Execution 5-15 Foreign Military Sales Process Approve plans of execution, scope, and schedule of work. Review and verify funding and program requirements. Integrate the program. Initiate requirements. Ensure that all schedules are accurate and timely. Validate that costs are accurate and billed. Reconcile cases especially during execution. Respond to purchaser, higher headquarters, counterparts, functional activities, and other supporting agencies. Initiate working agreements with supporting activities as appropriate. Analyze performance in relation to required performance specifi cations. Maintain a complete chronological history (signifi cant events and decisions). Provide status, progress, and forecast reports. Ensure all automation records are in agreement. Prepare case for closure. Ensure that case records are retained in accordance with DoD 7000.14-R, FMR, Volume 15, Chapter 6. Implementing Agency Case Management An FMS case is not generally under the sole domain of any one organization. Rather, several organizations touch or impact an FMS case during its life cycle. Thus, there can be many organizations and people involved in the management of one FMS case. However, there should be one person assigned as the case manager. The case manager for blanket order and cooperative logistics supply support arrangement (CLSSA) cases normally resides at the appropriate MILDEP international logistics control organization (ILCO). The case manager for a defi ned order case may also be in the ILCO or in the MILDEP weapon system program offi ce. SAMM policy states that a case manager should be assigned by the IA before the case is implemented. The case manager is accountable for all aspects of assigned FMS cases. This includes planning and execution functions as well as all fi nancial, logistical, and acquisition matters associated with each program. The objective is to provide all articles and services within the cost and schedule estimated on the LOA. The case manager must stay on top of each program and be aware of any problems which could impact the estimated cost or schedule. This requires frequent communication with the weapon system program manager as well as the contracting offi cer. When potential cost overruns or delays are identifi ed, the case manager is expected to consult with the program manager, the contractor and the foreign customer to ensure all options are explored and IA informed decisions can be made. LOA amendments and modifi cations should be processed promptly to ensure the case refl ects up-to-date estimates and descriptions for the program. Good case management requires cooperation between the USG managers, contractors, and the foreign purchaser prior to any fi nancial impacts on the case. 5-16 Foreign Military Sales Process Case management may entail different terminology depending upon the IA case management philosophy. For instance, the U.S. Navy tends to use the term case administering offi ce (CAO) to describe the systems command, e.g., NAVAIR, having basic cognizance over a case. The U.S. Navy will also identify a program manager (PM) to be a case manager at a systems command. The term integrated country program manager identifi es a case manager at the Navy Inventory Control Point International Programs (NAVICP) directorate level. The U.S. Army uses the term program manager which is defi ned as the Army Materiel Command (AMC) commander, or his designated representative, assigned total responsibility for complete management of an FMS case by Headquarters, AMC. The Army also uses the terms command case manager at the Major Subordinate Command Security Assistance directorate level and central case manager at the U.S. Army Security Assistance Command (USASAC) in New Cumberland, Pennsylvania, to identify personnel involved in FMS case management. The U.S. Air Force also uses different FMS case manager terminology such as: country director at Deputy Under Secretary of the Air Force for International Affairs (SAF/IA), command country manager at Air Force Security Assistance Center (AFSAC) and case manager or security assistance program manager (SAPM) at an air logistics center (ALC) or systems program offi ce (SPO). At the international logistics control offi ce (ILCO) level, the following are representative of a case/country manager's duties: Maintain effective case management control of all FMS cases and programs for assigned countries through shipment and case/program line closure Coordinate and implement country program management directives for support requirements of an assigned country's programs Serve as the point of contact for matters relating to country programs, acting as the country's U.S. representative within the U.S. supply system to insure responsive and timely service Audit FMS cases to insure that the materiel requirements of the LOA have been satisfi ed Resolve problems relative to materiel delivery services, special relationships between customer country armed forces, and U.S. requirements for transportation or documentation In effect, case managers serve as the interface (or focal point) between the foreign country's requirements and the DoD acquisition, logistics, fi nancial, and training systems. They are responsible for the overall logistics and fi nancial management of FMS cases. Total Package Approach Successful program and case management and customer satisfaction are generally the result of careful up-front planning and foresight. The planning for a specifi c FMS weapon system sale is, in large part, a function of anticipating all the requirements for the initial weapons sale and the follow-on support requirements. These requirements should be comprehensively reviewed and, where applicable, incorporated into the FMS program sale, thus to achieve what is termed the TPA. Planning for what should be included in a systems sale will of course vary accordingly to type of weapon system. Attachment 5-2 is a compilation of common items on checklists used by the Army, Navy and Air Force for an aircraft systems sale. This type of aircraft checklist can be used by the case manager to identify the myriad of items or services to be considered for a sale. A checklist can provide the case writer with the questions that need to be asked to ensure that all requirements have been planned 5-17 Foreign Military Sales Process for and incorporated into the proposed sale. Checklists provide an effective means for implementing the TPA particularly since the personnel involved in writing the case may not be technical or program management experts. Site survey is an essential element of TPA. Site Surveys The policy for types of security assistance survey teams, including site surveys, is contained in the SAMM, C1.3.4.2 and C1.F1. The LOA data checklist such as shown in Attachment 5-2 may provide the questions to be asked or identify items to be considered for a weapons sale. However, it may not be suffi cient to anticipate all variables, and the answers to the LOA checklist questions still need to be developed. To accomplish these requirements and provide a comprehensive LOA, it may be necessary for the U.S. MILDEP to conduct a site survey. Site surveys are associated with major weapon system sales and are conducted in country with MILDEP, purchaser, and contractor representatives (if appropriate). The purpose of the site survey is to assess the requirements for introducing a specifi c weapon system into a country. Thus, as the planning TPA checklist indicates, an assessment of facilities, and required levels of maintenance and support capabilities will be reviewed. A program management plan for introducing the weapon system will also be developed. Normally, the best time to conduct a site survey is prior to the writing of the LOA. The site survey will allow for the most accurate assessment of delivery schedules and pricing data. Site surveys are funded by the FMS customer as noted in SAMM, Table C5.T6. Military Department Security Assistance Computer Systems Each of the military departments has its own dedicated FMS systems to provide internal control and management of security assistance transactions. These systems are used to monitor the supply and fi nancial performance of the implemented cases. They are also used to report case status to the purchasers and to DFAS-IN. The MILDEPs use the DSAMS to develop, write, and implement LOAs. The following are the current database systems used by the MILDEPs for FMS case execution management. These systems are often referred to as legacy systems and are scheduled to be replaced by a standardized database management system entitled the Case Execution Management Information System (CEMIS). DSAMS and CEMIS are described in more detail in Appendix 3, "Security Assistance Automation." U.S. Army Centralized Integrated System for International Logistics (CISIL) Program, Budget, and Accounting System (PBAS) U.S. Navy Management Information System for International Logistics (MISIL) U.S. Air Force Case Management Control System (CMCS) Security Assistance Management Information System (SAMIS) Since these systems are essential for monitoring the performance of the approximately 12,000 open FMS cases, their reports and case products are used extensively by case managers to manage their assigned cases. 5-18 Foreign Military Sales Process Security Cooperation Information Portal The Security Cooperation Information Portal (SCIP) is a web-based means by which the security cooperation community can access the data from many different security assistance data base systems including the legacy systems mentioned above. SCIP allows the international security cooperation community, including the FMS customer, access to a wide range of FMS logistical and fi nancial case data. The SCIP is also discussed in Appendix 3, "Security Assistance Automation." Foreign Military Sales Case Reviews The FMS case review is a tool case managers and customers use to assess the overall program status relative to its objectives. Appropriate management actions can be exercised to correct discrepancies. The SAMM requires an annual case review by the case manager. Program management reviews (PMRs) are oriented to a specifi c weapon system sale and may include several FMS cases. PMRs which usually involve face to face discussions with the customer identify problems as early as possible so that resolution can be accomplished before program milestones are impacted or compromised. The PMR also provides USG and customer representatives with updates and exchanges of information. The frequency and the location of the PMR should be indicated in the LOA notes. Case reviews have various names and can be attended by USG, purchaser, and contractor personnel, depending on program, case size, and complexity. Some of the MILDEP unique titles for these reviews are: Security assistance reviews (SARs) Security assistance management review (SAMRs) Program management reviews (PMRs) Case reconciliation reviews (CRRs) The reviews can be major in scope looking at all cases related to a program sale in order to assess and adjust program requirements or program performance. Typically, case or PMRs will assess the following topics: Major item contract status Major item delivery status Supply discrepancy reports (SDR) Payment schedule adjustments Case fi nancial status (commitments, obligations and expenditures) Critical/urgent requirements and procedures Confi guration issues Price increases Funding issues Transportation/shipping problems Case closure Spares, supply and shipment status 5-19 Foreign Military Sales Process The SAMM, C6.T6, provides a listing of the different categories of reviews, who should attend and when they should occur. There are also fi nancial management reviews (FMRs) that are conducted by DSCA and are described in the SAMM, C9.F7. More comprehensive information concerning FMS reviews is contained in the DSCA policy Memo 00-19, available on the DSCA web site: http://www. dsca.mil. STAGES OF THE FOREIGN MILITARY SALES PROCESS: RECONCILIATION AND CLOSURE As the delivery of articles and services listed on an LOA nears completion, the case manager should begin making preparations to reconcile and close the case. Case reconciliation should include the customer as a major participant. Reconciliation and closure mark the fi nal stages of the FMS lifecycle. They have historically also been the most diffi cult and contentious, so much so that DSCA has published a separate manual addressing reconciliation and closure procedures and requirements in detail. Refer to DoD 5105.65-M, Foreign Military Sales Case Reconciliation and Closure Manual (RCM), available on the DSCA web site at http://www.dsca.mil. Although many USG agencies, as well as the customer, are all deeply involved in reconciling and closing a case, the responsibility for success at these stages falls ultimately on the shoulders of the case manager. Reconciliation The RCM, Section C1.3, defi nes reconciliation to include: The fi nancial and logistical actions that ensure proper accounting, accuracy, and thoroughness of data Currency of schedules Timeliness and completeness of reporting It is important to note that although this textbook discusses reconciliation as if it were one of the last things done with an FMS case, reconciliation should begin when an FMS case is implemented and should continue throughout the life of the case. A major case can generate thousands of requisitions and procurement actions. Closing out all transactions requires aggressive planning and continuous follow-up. At a minimum, per RCM, paragraph C1.5.2, case managers should reconcile all of their cases at least annually. Case managers who differ detailed reconciliation till the end of a case's period of performance are setting themselves up for failure. On the other hand, through and continuous reconciliation starting at implementation supports a successful closure. Supply and Services Complete It is DSCA policy to close an FMS case as soon as it is feasible to do so. Timely closure reduces the administrative distraction of monitoring dormant cases that are logistically but not fi nancially complete. This allows case managers to focus their energies on executing and reconciling active cases. Additionally, closing cases promptly expedites the release of excess case funds back to the customer. An IA declares that a case is a candidate for closure when it is supply and services complete (SSC): All material has been delivered All services have been performed Program management lines must be completed no more than 1 year after SSC 5-20 Foreign Military Sales Process All supply discrepancy reports are resolved All warranty periods have elapsed The IA and customers logistical records have been reconciled All notes on the LOA have been satisfi ed The appropriate database systems are updated with SSC case status The customer has been notifi ed with a notice of supply services complete (NSSC) All other requirements of the LOA have been met SAMM, Section C6.8.3, requires IAs to include a note in LOAs declaring an estimated closure date which depends on the procedures used to close the case. The IA will provide DFAS-IN a certifi cate of case closure after the case becomes SSC. DFAS will then complete its closure/reconciliation process and ultimately provide the customer with a fi nal bill. An FMS case is considered closed when DFAS-IN issues a fi nal bill or a fi nal statement of account ( DD Form 645) to the customer. Procedures for Case Closure Cases can be closed under the accelerated case closure procedures (ACCP) or non-ACCP. Except for foreign military fi nance program (FMFP) funded cases, customers may choose which program they want to participate in. SAMM, Table C4.T4, and RCM, Table C3.T1, indicate which countries participate in ACCP. If a customer chooses ACCP, then all of the country FMS cases will be closed under that program, including those implemented prior to the date the customer decided to participate in ACCP. Non-ACCP is used for countries that have elected not to participate in ACCP. Under non-ACCP, cases may be closed only when all case requirements, i.e., obligations are completed and then fi nal billed, and audited if necessary. Normally, the estimated closure date in a non-ACCP LOA is 36 months after the completion of the longest underlying contract. For major system sales, especially those with procurement contracts that also support U.S. forces and other FMS customers, these requirements can delay closure for several years after a case is supply and services complete (SSC). If no contracts apply, then the estimated closure date is normally 36 months from the last scheduled delivery or service. Because non-ACCP is so cumbersome and takes so long, most countries elect to participate in ACCP. ACCP applies to all countries using FMFP funds and any other countries that choose to participate. Since most participate in ACCP, it is now the standard for case closure. ACCP requires cases be closed within 24 months after the case is SSC. Historically, it was not uncommon for system sales cases to remain open for 3-5 years after becoming supply complete. Figure 5-3 illustrates many of the historical inhibitors to case closure. ACCP procedures allow a case to be closed even if there are outstanding unliquidated obligations against on the case. A work request for services, a procurement contract and an inventory requisition are examples of an obligation. Under non-ACCP, all case obligations must be supply and fi nancially complete, i.e., fi nally disbursed or liquidated. ACCP allows the case manager to estimate the fi nal case disbursements after the case has become supply complete. This estimated fi nal disbursement is called the unliquidated obligation (ULO) value. 5-21 Foreign Military Sales Process The ULO value along with the delivered value of the case is billed and collected from the FMS customer. The ULO collection is placed by DFAS-IN into a customer-owned, country level case closure suspense account (CCSA). The customer is given a fi nal bill indicating that the case is closed. The IA records will indicate that the cases are interim closed. Subsequent post-closure case disbursements for the unliquidated obligations will be processed against CCSA, thereby allowing cases closed by the accelerated process to remain closed. Customers receive regular CCSA statements as part of their quarterly DD Form 645 billing package. If the balance exceeds anticipated ULOs, the customer may receive a refund. However, if the CCSA balance is in arrears $100,000 or more for more than six months, DFAS-IN may require payment of the entire balance owed. Cases closed under the ACCP procedures outlined above are considered interim closed. Cases are not moved into fi nal closed status until all outstanding obligations equal fi nal disbursements. If there are excess ULO collections at fi nal closure the FMS customer may receive a reimbursement from the CCSA. Enhanced Accelerated Case Closure Procedures and Force Closure Enhanced accelerated case closure (EACC) and force closure are subsets of ACCP, used to enforce closure of cases under ACCP. ACCP cases not closed within 24 months of SSC are candidates for nomination by DSCA for EACC. Cases which land on DSCA's EACC list receive top priority for closure. DSCA usually give IAs two to three quarters (i.e., six to nine months) to close cases on the EACC list. If a case remains open on the EACC list for more than three quarters, DSCA may direct DFAS-IN to unilaterally force close the case, without reconciling with the IA's records. Force closed cases are in an interim closed status until IA and DFAS-IN records agree, all underlying contracts are closed out, and ULOs equal zero. Figure 5-3 Case Closure Inhibitors Competing Priorities Logistics Reconciliation Financial Reconciliation Long Running Contracts Customer Resistance Vague Policy & Procedures Low Dollar Value Variances Lack of Emphasis Personnel Turnover Relocations/Consolidations Records 5-22 Foreign Military Sales Process Processing Transactions Against Closed Cases Although fi nal closure marks the end of the lifecycle of an FMS case from a practical and operational standpoint, cases never really close from a DoD accounting perspective. DoD policy requires that all charges or credits against a case be processed, regardless of when they arise. Thus, it is possible for a case to be considered closed for many years, only to be reopened when a fi nal audit fi nds a lost expenditure. If the customer participates in the ACCP, this newly discovered expenditure will be processed against the CCSA. If the customer is a non-ACCP participant, then the affected case must be reopened. Reopening a case is undesirable for both the customer and the IA. For the customer, it may mean trying to justify a new expenditure for a case reported as delivered and complete years before. For the IA, a reopened case represents the use of already premium resources and perhaps an instance of ineffi cient management of the case closure process. At a minimum, reopened cases distract all concerned from the important business of processing, implementing, managing, reconciling, and closing currently active cases. SUMMARY The process of FMS management follows a logical sequence of steps over a prescribed timeline. A purchaser initiates the FMS process by submitting an LOR through one of two basic channels. An FMS request initiated in country for signifi cant military equipment is routed through the U.S. embassy or through the purchasing government's representative in the U.S. to the appropriate U.S. military department for action. Information copies routed through the U.S. embassy are sent to the appropriate combatant command, DSCA, and STATE/PM. FMS requests for articles other than SME are also sent directly to the cognizant IA with information copies to STATE/PM and DSCA. Depending on the nature of the foreign government's requirements, a purchaser may request either P&A data or an LOA. P&A data is usually needed by the foreign government for ROM estimates on prices and delivery timeframes. Response times for military departments to provide P&A data is within 45 days after receipt of the request. For LOAs, it is 120 days for 80 percent of cases. The LOA also known as an FMS case, is a contractual document and should provide the purchasing country with all the information required to purchase not only the materiel or service, but also all the ancillary support needed for full functional operation. The LOA should be written in such detail and clarity that the purchaser can accept the offer as stated. The LOA, upon country acceptance, is returned to the implementing agency and to DFAS-IN with the required initial payment. DFAS-IN then provides obligation authority to the IA. The FMS case may be implemented after a case directive is promulgated by the military department. The case directive provides signifi cant management information required to track the case through its active life and to provide an audit trail. The DSCA 1200 FMS information system along with the DSAMS are used for program control and status reporting of FMS especially during execution. A case is considered supply complete when all articles and services have been delivered or performed by the implementing agency. Case closure is then undertaken. A case is considered closed when, in addition to fi nal delivery or performance, all fi nancial transactions, including collections, have been completed and the customer has received a fi nal statement of account for the case. REFERENCES Department of Defense, DoD 5105.38-M, Security Assistance Management Manual (SAMM) 5-23 Foreign Military Sales Process Department of Defense, DoD 5105.65-M, Foreign Military Sales (FMS) Case Reconciliation and Closure Manual (RCM) Department of Defense, DoD 7000.14, Financial Management Regulation (FMR), Volume 15, Security Assistance Policy and Procedures 5-24 Foreign Military Sales Process ATTACHMENT 5-1 IMPLEMENTING AGENCY ORGANIZATIONS IN SUPPORT OF FOREIGN MILITARY SALES The DoD organizations that receive and process letters of request from foreign customers, write letters of offer and acceptance, and manage FMS cases are known as IAs. Although over 90 percent of open FMS cases are managed by the three military departments (Army, Navy, and Air Force), a number of other agencies may also be tasked to act as IAs. Several other organizations have served as IAs in the past and may still have some older LOAs open. This attachment briefl y discusses IA codes and then summarizes the way each of the MILDEPs is organized to support FMS. Additional information about specifi c MILDEPs and other IAs is available on the internet. If a customer country wants defense articles or services through FMS, it may request an LOA from the USG. An LOR for an LOA is forwarded through the channels described earlier in this chapter. The LOR must ultimately fi nd its way to the implementing agency so that work on developing the LOA may begin. Figure 5-2 indicates that the LOR should be sent to the IA for action. Principal IA action addressees authorized to receive LORs are listed below. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Table C5.T2, contains the complete list with addresses. U.S. Army U.S. Army Security Assistance Command (USASAC) Fort Belvoir, Virginia For training-only LORs: Security Assistance Training Field Activity (SATFA-TRADOC) Fort Monroe, Virginia For construction-only LORs: U.S. Army Core of Engineers Washington, D.C. Information address for Army LORs: Offi ce of the Deputy Assistant Secretary of the Army for Defense Exports and Cooperation Arlington, Virginia U.S. Navy Navy International Programs Offi ce (Navy IPO) Washington, D.C. The Navy International Programs Offi ce also processes LORs for the U.S. Marine Corps and U.S. Coast Guard U.S Air Force For communications, electronics, aircraft and missile systems (SME) LORs: Deputy Under Secretary of the Air Force for International Affairs (SAF/IA) Washington, D.C. 5-25 Foreign Military Sales Process For follow-on support (except for training) LORs: Air Force Security Assistance Center (AFSAC) Wright-Patterson Air Force Base, Dayton Ohio For training-only LORs: Air Force Security Assistance Training (AFSAT) Squadron Randolph Air Force Base, Texas Defense Security Cooperation Agency DSCA writes specialized FMS cases: Defense Security Cooperation Agency-Case Writing (DSCA) Arlington, Virginia Defense Contract Management Agency DCMA writes cases for Contract Administration Services (CAS) on direct commercial sales: Defense Contract Management Agency (DCMA) Alexandria, Virginia Defense Reutilization and Marketing Service DRMS is the Defense Logistics Agency offi ce that writes cases for excess property: Defense Reutilization and Marketing Service (DRMS) Battle Creek, Michigan Defense Logistics Information Service DLIS is the Defense Logistics Agency offi ce that writes cases for cataloging services: Defense Logistics Information Service (DLIS) Battle Creek, Michigan Defense Information Systems Agency DISA provides information systems and services: Defense Information Systems Agency (DISA) Arlington, Virginia National Geospatial-Intelligence Agency NGA writes cases for charts and maps: National Geospatial-Intelligence Agency (NGA) Bethesda, Maryland National Security Agency NSA writes cases for special communication systems: 5-26 Foreign Military Sales Process National Security Agency (NSA) Ft. George Meade, Maryland Defense Threat Reduction Agency DTRA writes cases for special weapons development and improvement services: Defense Threat Reduction Agency (DTRA) Fort Belvoir, Virginia Letter of Request Information Addresses An information copy of the LOR should be sent to DSCA, STATE/PM/RSAT, and to one of the following appropriate combatant commands: United States European Command (EUCOM) Stuttgart Germany United States Pacifi c Command (PACOM) Camp H. M. Smith, Hawaii United States Southern Command (SOUTHCOM) Miami, Florida United States Central Command (CENTCOM) MacDill Air Force Base, Florida United States Northern Command (NORTHCOM) Peterson Air Force Base, Colorado Implementing Agency Codes DSCA has assigned each implementing agency a one-letter code that identifi es it as the cognizant organization for a given FMS case. This code is recorded in the third position of the FMS case identifi er. For example, a case managed by the U.S. Air Force (IA code D) on behalf of the Appendix 1, "Case Document Package," fi ctitious country of Bandaria might be BN-D-YCY, whereas a Bandarian case managed by the U.S. Army (IA code B) would be BN-B-YCY. Below is a list of active IA codes. Those marked with an asterisk are no longer used on new LOAs, but may still be found on older cases. See SAMM, Table C5.T2, for a current list of IAs currently authorized to receive LORs and prepare LOAs. IA Code Organization B Department of the Army C Defense Information Systems Agency (DISA) D Department of the Air Force E* U.S. Army Corps of Engineers (USACE; now included under IA code B with the rest of the U.S. Army) F Defense Contract Management Agency (DCMA) L* Defense Audiovisual Agency (DAVA) M National Security Agency (NSA) 5-27 Foreign Military Sales Process P Department of the Navy Q Defense Security Cooperation Agency (DSCA) R Defense Logistics Agency (DLA) U National Geospatial-Intelligence Agency (NGA) W* Defense Advance Research Projects Agency (DARPA) X* Defense Finance and Accounting Service-Indianapolis Center (DFAS-IN) Z Defense Threat Reduction Agency (DTRA) Military Departments The three MILDEPs manage the vast majority of FMS cases. Accordingly, the offi ces that support security assistance for the most part overlay the existing domestic infrastructure. As one might expect from such an arrangement, the policies, databases, and organizational elements used to manage FMS vary among MILDEPs. Still, the MILDEP FMS organizations are similar in that each has: A dedicated FMS headquarters element located in the vicinity of Washington, D.C.; An International Logistics Control Offi ce (ILCO) that deals primarily with support equipment, spare parts, and repair services An FMS training activity, which manages both stand-alone schoolhouse training such as professional military education (PME) and training in support of system sales Additionally, although each MILDEP uses its own legacy information management systems for some aspects of case management, all MILDEPs and other IAs use the DSAMS to task and prepare LOAs. Normally, the headquarters element is the point of entry for material LORs. It then uses DSAMS to designate a lead command for the preparation of the P&A or LOA. The lead command is responsible for obtaining data from other relevant organizations to prepare the P&A/LOA. Read Chapter 3, "U.S. Government Organizations for Security Assistance", Chapter 10, "Logistics Support of International Military Sales", and Chapter 14, "International Training" of this textbook for more discussion of the overall MILDEP FMS organizational structure, ILCOs, and training activities. See Appendix 3 of this textbook and SAMM, Chapter 13, for a discussion of DSAMS and other security assistance information management systems. U.S Army Two organizations share FMS headquarters responsibilities for the U.S. Army. The Offi ce of the Deputy Assistant Secretary of the Army for Defense Exports and Cooperation (DASA-DE&C) has management oversight for Army security assistance policy, as well as for international armaments cooperation, foreign disclosure, technology transfer, and munitions export licensing. Headquarters, U.S. Army Security Assistance Command (USASAC) located at Ft. Belvoir, Virginia, is the Army's executive agent for FMS. As such, it receives all Army LORs for material, which it then tasks out via DSAMS. 5-28 Foreign Military Sales Process USASAC has a branch organization at New Cumberland, Pennsylvania, (USASAC-NC) that acts as the Army ILCO. Although USASAC-NC writes and manages cases for follow-on support, it cannot sign LOAs, unlike its Navy and Air Force counterparts. The Security Assistance Training Field Activity (SATFA), located at Ft. Monroe, VA, is the Army organization that writes and manages training cases. Unlike the Navy and Air Force, the Army normally does not include training on material cases. Instead, SATFA will write a separate training LOA to support a material LOA. SATFA may receive taskings from USASAC-Belvoir or may receive LORs directly. SATFA may also sign training LOAs as the offi cial U.S. Army representative. Another U.S. Army organization connected to FMS training is the Security Assistance Training Management Offi ce (SATMO) at Ft. Bragg, NC. SATMO neither receives LORs nor writes LOAs. Instead, it is responsible for selecting, training, and supporting mobile training teams (MTTs) that deploy overseas to support security assistance training requirements. There is no comparable organization in the other two MILDEPs. SATMO works closely with SATFA and with SAOs. The Headquarters, U.S. Army Corps of Engineers (USACE) in Washington, D.C., is the organization responsible for receiving LORs and for writing and managing FMS cases for Army design and construction services. U.S. Navy The Navy International Programs Offi ce (Navy IPO) is the security assistance headquarters element in the U.S. Navy. Navy IPO handles not only FMS, but also other international programs such as international armaments cooperation and technology transfer. It also acts as the executive agent for security assistance matters related to the U.S. Marine Corps and U.S. Coast Guard. Accordingly, Navy IPO is the action addressee/point for entry for all LORs related to U.S. maritime services. The Navy Inventory Control Point for FMS (NAVICP-OF), located in Philadelphia, Pennsylvania, is the Navy ILCO. Navy IPO tasks NAVICP-OF to write cases for follow-on support, and although it does not have the authority to receive LORs directly, NAVICP-OF does have the authority to sign such cases as the offi cial Navy representative. The Naval Education and Training Security Assistance Field Activity (NETSAFA) in Pensacola, Florida, is the agency that has oversight for FMS maritime training. Almost every LOA for the sale of a major maritime system will include a training line prepared by NETSAFA. However, unlike its counterparts in the Army and Air Force, NETSAFA is not authorized to accept LORs directly. Instead, LORs for maritime training must go to Navy IPO who will in turn task them to NETSAFA via DSAMS. Navy IPO, NAVICP-OF, and NETSAFA also work closely with counterpart offi ces in the U.S. Marines Corps and U.S. Coast Guard to access their resources to meet FMS requirements. U.S. Air Force The Offi ce of the Deputy Undersecretary of the Air Force for International Affairs (SAF/IA) is the Air Force headquarters element for security assistance. SAF/IA receives LORs for major system sales and tasks them out via DSAMS. The Air Force Security Assistance Center (AFSAC) at Wright-Patterson Air Force Base, Ohio, is the Air Force ILCO. However, not only can AFSAC receive LORs and write, sign, and manage cases for follow-on support, it may also receive taskings from SAF/IA to write cases for major system sales. 5-29 Foreign Military Sales Process The Air Force Security Assistance Training Squadron (AFSAT) at Randolph Air Force Base. Texas, receives LORs and writes, signs, and manages cases for Air Force training. Air Force training via FMS may be included as a line on an LOA for a system sale or may be provided via a separate FMS case. 5-30 Foreign Military Sales Process ATTACHMENT 5-2 SAMPLE LETTER OF OFFER AND ACCEPTANCE AND TOTAL PACKAGE APPROACH AIRCRAFT CHECKLIST Identifi cation Requirements Facilities Description Requirements, airfi elds, storage, etc. Nomenclature Construction services Quantity Delivery timeframe Maintenance In-country Maintenance Plan Initial Support Requirements Organizational 90 day/2 year test equipment Intermediate POL and fuel requirements Depot Weapons handling equipment In-country manpower skill requirements Power units Operational Concepts Staging Mission profi le Where? Primary/secondary U.S. government or commercial? Hours Use Number of Bases Training Requirements Technical Information Requirements Engish language Production and engineering data Maintenance Plans and drawings Training aids/devices Specifi cations Administration Changes and modifi cations Operational (fl ight, navigational) Performance and failure data Supply (inventory management) Computer software CONUS vs. in-country Publications Confi guration Management Follow-on Support Requirements Additions/deletions Repair Pre or post production Publication Technical support/documentation Services Services Site Servey Ammo Packaging requirements Fuel Quality assurance Technical assistance Program management Construction Ferry service - transport equipment Commercial vs. USG 6-1 Foreign Military Sales Cases INTRODUCTION The foundation of any United States government-sponsored sale of defense articles or services is the letter of offer and acceptance (LOA), a contractual sales agreement between the seller (the U.S. government (USG)) and the purchaser (a foreign government or international organization). The LOA is written by a U.S. military department (MILDEP) or other USG implementing agency (IA), based on applicable regulations and the specifi cations the purchaser has set forth in its letter of request (LOR). The LOA, is commonly referred to as a foreign military sales ( FMS) case. Each LOA has a unique case identifi er (described later in this chapter), which enables both the USG and the foreign purchaser to refer to it without possibility of confusion amidst the thousands of foreign military sales cases currently active. CATEGORIES OF STANDARD FOREIGN MILITARY SALES CASES The LOA is used to implement one of the following three types of FMS cases: Defi ned order Blanket order Cooperative Logistics Supply Support Arrangement (CLSSA) While each MILDEP uses its own terminology to describe a given type of case, in accordance with DoD 5105.38-M, Security Assistance Management Manual (SAMM), C5.4.3, all FMS cases, regardless of nomenclature, fall into one of the aforementioned categories. Defi ned Order A defi ned order case is one in which the defense articles, services, or training desired by the requesting country or international organization are specifi ed/quantifi ed by the customer in their LOR, and subsequently stated in the LOA. The defi ned order case is most commonly used for sale of major end items or signifi cant military equipment (SME) which requires security controls throughout the sales process. Also included in a major end item sale (tanks, aircraft, etc.) are approximately two years of related initial support items. Cases of this type are commonly referred to as standard sales by the U.S. Army, defi ned line or push requisitioning by the U.S. Navy, and fi rm order by the U.S. Air Force. Attachment 6-1 is an example of a defi ned order FMS case. A defi ned order case normally requires a complete LOA data study of separately deliverable line items in the case. This study gives the purchaser the best available estimate of item costs and delivery schedules within an allowable processing time frame. This data study also includes information on payment schedules, fi nancial analysis for program milestones, and deliveries and payments made to contractors. Chapter 6 FOREIGN MILITARY SALES CASES 6-2 Foreign Military Sales Cases The types of defense articles, services, or training normally processed as defi ned order cases include: SME which includes major end items and weapon systems (e.g., tanks, ships, airplanes, missiles, etc.), and any related requirements to activate and operate an item or system during an initial period of time. Explosives including munitions Specifi c services (i.e. transportation, aircraft ferrying) Technical data packages (TDP) Blanket Order Foreign Military Sales Case A blanket order case is an agreement between a customer and the USG to purchase a specifi c category of items or services (including training) at a set dollar value ceiling with no defi nitive listing of the exact items or quantities desired. Customers may requisition against a blanket order case as long as the case has funds available. Cases of this nature are commonly called the following: Blanket open end by the U.S. Army Direct requisitioning procedures, open end requisitioning, by the U.S. Navy Blanket order/annual requisitioning by the U.S. Air Force Attachment 6-2 is an example of a blanket order case. Blanket order cases are normally used to process the following items: Spares and repair parts. Spares and repair parts are consumable or repairable items that become part of a higher assembly during use. Normally, a case in this category is opened to provide for follow-on support of a major item or weapon system following an initial support period. Initial or concurrent support is usually provided for in the system/package sale as a part of the total package approach. A blanket order case can be established for each major item or weapon system, or if offered by the implementing agency, one case may be established for the support of multiple systems. Publications. To order, maintain, and support defense articles and services, the following publications may be ordered through a blanket order case: forms, catalogs, manuals, stock lists, technical orders, engineering drawing specifi cations, reports, books, maps, and charts. Support Equipment. These items are special tools, test equipment, vehicles, construc- tion equipment, materials handling equipment, etc., used in direct or indirect support and maintenance of weapon systems or end items. Maintenance. Minor modifi cations/alterations performed at United States military installations. These involve changes to an existing confi guration as authorized by the cognizant MILDEP. The level of service so authorized must be specifi ed in the case. 6-3 Foreign Military Sales Cases Repairables. These are any items of supply of a durable nature and design which, when unserviceable, normally can be economically restored to a serviceable condition through regular repair procedures. Repairables may be repaired at the request of the customer and with the approval of the appropriate military service. Examples are major com- ponents such as aircraft engines, communications equipment, radars, motor vehicle engines, and transmissions. Technical Assistance Services. These are services in the form of technical advice or action that require the assistance of a specialist. Technical assistance services include such processes as determining the economy and feasibility of repair, estimating the nature and level of repair to be accomplished, analyzing the feasibility of updating the confi guration of items, determining the range and depth of spare parts needed to sustain repair at various levels, establishing failure rates and analyzing reported failure data to make adjustments. Other examples of such assistance are: Site/system survey teams Installation and operational readiness testing of major items Systems evaluation Study groups to develop such essentials as engineering requirement plans, system integration and training programs Program activation teams Technical assistance teams Training. This includes formal (classroom) or informal (on-the-job) instruction of international military students by Department of Defense (DoD) components, contractors (including instruction at civilian institutions), or by correspondence course and also includes technical, educational, or informational publications, and instructional media of all kinds. Training Aid Devices. These are used principally to supplement training programs. the following are examples: Videotapes Slides Film Microfi che Transparencies Aperture cards Restrictions on Blanket Order Procedures There are a number of instances where, by regulation, blanket order case procedures do not apply. [SAMM, C5.4.3.2.2] These items must be ordered under a defi ned order case. Included in these restrictions, but not limited thereto, are: 6-4 Foreign Military Sales Cases SME initial logistics support that is normally ordered for concurrent delivery Classifi ed material Lumber and other commercial-type material Technical data packages Ozone depleting substances Defi ned versus Blanket Order Procedures There are instances wherein either the defi ned order or blanket order case may be used, depending on the specifi c implementing agency and country involved. MILDEP policy, customer preference, minimum case values, and item application (support for a specifi c system or program, or general support to a customer service, unit, depot, etc.), will dictate which type of case is most appropriate. An important feature of both defi ned order and blanket order cases is that their material require- ments are normally fi lled from DoD stocks only if on-hand assets are above the control level. The only time that FMS requisitions will normally be fi lled below the control level is through a mature (programmed) cooperative logistics supply support arrangement (CLSSA). Cooperative Logistics Supply Support Arrangement A CLSSA is an arrangement designed to provide responsive follow-on spare part support for U.S. produced military hardware possessed by foreign countries. Implementing agencies may offer a CLSSA to a customer on approval from the Defense Security Cooperation Agency (DSCA). The advantage of a CLSSA for a customer is that it allows support for the purchaser on an equal basis with U.S. units having the same force activity designator (FAD), which relates to the mission of the activity, and the same urgency of need. This arrangement provides for the execution of two foreign military sales orders (FMSOs) covering stockage, and consumption as follows: Foreign Military Sales Order I Case. The FMSO I is to provide the estimated value of the total initial list of items and quantities to be stocked and maintained on order from procurement sources for the support of the purchaser's U.S. furnished equipment. Foreign Military Sales Order II Case. The FMSO II is a blanket order type case, and covers the estimated annual withdrawals from the U.S. supply system by the purchasing country. FMSO II cases are undefi ned in terms of items and quantities, refl ecting instead the value of an estimated demand. Each MILDEP treats FMSO II cases slightly differently, and the appropriate departmental regulations and directives should be consulted before any defi nitive action is taken. A CLSSA increases the chance of items being available for issue from DoD stock. For additional information on the CLSSA, refer to later Chapter 10, " Logistics Support of International Military Sales." CASE IDENTIFIER Each FMS case will have a unique case identifi er assigned on the fi rst page of the LOA by the implementing agency. The case identifi er has three major components: 6-5 Foreign Military Sales Cases Country Code. A two-position code representing the purchasing county or organization. A list of DoD country/activity codes is in SAMM, Table C4.T2. Implementing Agency (or service) Code. A single character alpha code which identifi es the U.S. MILDEP or agency which has made the sale on behalf of the USG. The most common codes are B-Army, D-Air Force, P-Navy. Refer to Chapter 5, "Foreign Military Sales Process," Attachment 5-1 or to SAMM Table C5.T2 for additional codes. Case Designator. A three-position alpha code assigned by the implementing agency to identify a specifi c offer to a country. The fi rst character of a case designator identifi es the category item or service to be provided to the purchaser. The meaning of this fi rst position code varies by service. See Attachment 6-3 for the different meanings. The second and third characters are assigned sequentially to distinguish among a country's separate cases for the same category of item or service. SAMM Figure C5.F5 further discusses building case identifi ers and designators. The case identifi er on the LOA in Attachment 6-2 is BN-B-BAB. The country code "BN" is for Bandaria, the purchasing country; the implementing agency is "B" for the U.S. Army; and the fi rst position code is "B," indicating that this is a blanket order case for spares. Finally, the "AB" in "BAB" indicates that this is the second case that the U.S. Army has implemented for Bandaria in the "B" (spares) category. The next case for Bandaria in this category would be "BAC," and so forth. The case identifi er should be used on all documentation relating to its associated LOA. It is used to track the status of the LOA and is perpetuated in case directives, military standard requisitioning and issue proceudres (MILSTRIP) documents, FMS billing documents, and the DSCA 1200 computer system. SECURITY COOPERATION PROGRAM LETTER OF OFFER AND ACCEPTANCE Various authorities within U.S. law allow using U.S. appropriated funds, other than foreign military fi nancing (FMF) and international military education and training (IMET) funds, to provide defense articles and services to friends and allies. Typically these are supplemental appropriations used to provide equipment, supplies and training to foreign military forces to conduct joint operations with U.S. forces and to conduct counter-narcotics and counter- terrorist operations. Under these authorities, federal agencies or DoD components that conduct security cooperation programs may (note that this is an option) order defense articles and services through DSCA which acts as a servicing agency. To start this process DoD and other federal agencies will submit a request to DSCA identifying the services and equipment to be provided and citing the legal authority for the program. DSCA will approve the use of the FMS infrastructure to include the SAO, implementing agencies, Defense Finance and Accounting Service (DFAS), etc., and existing security assistance automated systems to execute the program. The implementing agency prepares an implementing document known as a security cooperation program- letter of offer and acceptance (SCP-LOA) formerly referred to as a pseudo LOA. The SCP-LOA will itemize defense articles and/or services included in the request and will be used by the USG to track the sale. SCP-LOAs are not written under the authorities of the Arms Export Control Act (AECA), instead they are subject to the authority cited in the DoD or federal agency request. Each SCP-LOA will be funded with a single source of appropriated funds; multiple funding sources for a single SCP-LOA cannot be used. Normally funds from one appropriation fi scal year or type cannot be merged with another appropriation fi scal year or type to fund requirements under a SCP-LOA. 6-6 Foreign Military Sales Cases Some of the operating guidelines for a SCP-LOA are as follows: Pricing of articles and services for SCP-LOAs is in accordance with DoD 7000.14-R and the Foreign Assistance Act (FAA) All SCP-LOA documents require DSCA countersignature The SCP-LOA is NOT signed by the country and/or organization receiving the articles and/or services The FMS community delivers the items to the purchasing agency or at purchasing agency's direction to another party The purchasing agency is responsible for any Congressional notifi cations, assuring that the party is authorized to take delivery of the articles or services, and for any subsequent requirements pertaining to use and accountability for the items after delivery LOA standard terms and conditions DO NOT apply to SCP-LOAs The time period for the availability of fi nancial authority will be noted in the SCP-LOA SCP cases are readily identifi ed by the unique country code assigned by DSCA, historically either by a "Y_", "S_", or "B_". The case nickname fi led will clearly indicate the legal authority for the case, e.g., FAA Section 632(b), and that this is a non-AECA case. The purchaser's reference fi eld will cite the written request from the DoD or federal agency A change is pending to SAMM Chapter 11, "Special Programs and Services," to refl ect more detailed policy and operating instructions for SCP-LOAs. An example of a SCP LOA is shown in Attachment 6-3. SUMMARY The FMS case concept is crucial to the understanding and management of the overall FMS program. Standard FMS cases fall into one of three categories as defi ned by the SAMM: defi ned order, blanket order, and CLSSA. Each FMS case has a unique identifi er, composed of a country code, implementing agency code, and a case designator series, which is used for all managerial tasks associated with the case such as fi nancial and logistics tracking. REFERENCES U.S. Department of Defense. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapter 5. U.S. Department of the Air Force. Air Force Manual 16-101, International Affairs and Security Assistance Management. U.S. Department of the Army. Army Regulation (AR) 12-8, Foreign Military Sales Operations/ Procedures. U.S. Department of the Navy. Naval Supply (NAVSUP) Systems Command Publication 526, Foreign Military Sales Customer Supply System Guide. 6-7 Foreign Military Sales Cases ATTACHMENT 6-1 SAMPLE DEFINED ORDER CASE Based on Bandaria Letter, BN-A-0001, 15 April 2007 Pursuant to the Arms Export Control Act, the Government of the United States (USG) offers to sell to the Embassy of Bandaria, Offi ce of the Ground Attach, 1234 Massachusetts Av, NW, Washington, D.C. 29999, the defense articles or defense services (which may include defense design and construction services) collectively referred to as "items," set forth herein, subject to the provisions, terms, and conditions in this LOA. This LOA is for twenty (20) M88A1 Recovery Vehicles with associated equipment, 2 years concurrent spare parts and vehicle maintenance training. Estimated Cost: $18,072,956 Initial Deposit: $1,544,934 Terms of Sale: Cash Prior to Delivery Dependable Undertaking Congressional Notifi cation: 07-26 This offer expires on 14 December 2007. Unless a request for extension is made by the Purchaser and granted by the USG, the offer will terminate on the expiration date. This LOA consists of page 1 through page 7. The undersigned are authorized representatives of their Governments and hereby respectively furnish and acknowledge receipt of this Modifi cation: _______________________10 Sep 2007 _____________________10 Dec 2007 U.S. Signature Date Purchaser Signature Date Director, Regional Operations _________________________________ _______________________________ Typed Name and Title Typed Name and Title U.S. Army Security Assistance Command Ft. Belvoir, VA 22060 _________________________________ _______________________________ Implementing Agency Agency DSCA Reviewed/Approved 13 Sep 2007 DSCA Date Information to be provided by the Purchaser: Mark For Code_(L)_, Freight Forwarder Code_(2)_, Purchaser Procuring Agency Code_B_, Name and Address of the Purchaser's Paying Offi ce: Embassy of Bandaria, Offi ce of the Ground Attach, 1234 Massachusetts Av., NW, Washington, D.C. 29999. United States of America Letter of Offer and Acceptance (LOA) BN-B-UDD 6-8 Foreign Military Sales Cases Items to be supplied (costs and months for delivery are estimates): (3) (6) (7) (1) Qty (4) (5) Ofr Del Itm (2) Unit of Costs SC/MOS/ Rel Trm Nbr Description Condition Issue (a) Unit (b) Total TA Cde Cde 001 D4A 2350001226826 (Y)(N)(R) 20 ea $747,723.80 $14,954,476 P(24) X 9 K D4A 2350001226826 (VII) TA5 RECOVERY VEHICLE MED M88A1P Recovery Vehicle, Full Tracked Diesel Engine (M88A1) with Installed Communications Equipment 002 K8A 9K8A000CMBTSP (N)(N)(R) XX $2,000,000 X(18-21) A 5 A COMBAT VEHICLE (XXI) TA4 SPARE PARTS FOR ITEMS PROGRAMMED UNDER GENERIC CODE D, ALSO INCLUDE CONVERSION KITS 003 J8A 768ZBOOKSPUBS (N)(N)(R) XX $175,000 S(12-15) A 5 6 TECH BOOKS, TA3 PUBLICATIONS, SOFTWARE Technical and Non-Technical Books and Publications - DA Publications Estimated Cost Summary: (8) Net Estimated Cost $17,129,476 (9) Packing, Crating, and Handling $0 (10) Administrative Charge $428,237 (11) Transportation $515,243 (12) Other $0 (13) Total Estimated Cost $18,072,956 6-9 Foreign Military Sales Cases To assist in fi scal planning, the USG provides the following anticipated costs of this LOA: Estimated Payment Schedule Payment Date Quarterly Cumulative Initial Deposit $1,544,934 $1,544,934 15 Jun 2007 $2,153,637 $3,698,571 15 Sep 2007 $3,333,005 $7,031,576 15 Dec 2007 $3,903,164 $10,934,740 15 Mar 2008 $4,584,635 $15,519,375 15 Jun 2008 $2,150,716 $17,670,091 15 Sep 2008 $402,865 $18,072,956 Explanation for acronyms and codes, and fi nancial information, may be found in the " Letter of Offer and Acceptance Information." Signed Copy Distribution: 1. Upon acceptance, the Purchaser should return one signed copy of this LOA to Defense Finance and Accounting Service - Denver, ATTN: DFAS-ADY/DE, 6760 E. Irvington Place, Denver, CO 80279-2000 Simultaneously, wire transfer of the initial deposit or amount due with acceptance of this LOA document (if required) should be made to fi nancial institution identifi er ABA# 021030004 U. S. Treasury NYC, Agency Location Code 00003801, Benefi ciary: DFAS-ADY/DE Agency showing "Payment from Government of Bandaria for BN-B-UDD"; or a check for the initial deposit, made payable to the U.S. Treasury, mailed to DFAS-JDT/DE, P.O. Box 173659, Denver, CO 80217-3659, showing "Payment from Government of Bandaria for BN-B-UDD". Wire transfer is preferred. 2. One signed copy should be returned to Department of the Army, Commander, U.S. Army Security Assistance Command, ATTN: AMSAC-ME-CP, 5701 21st Street, Bldg. 216, Fort Belvoir, VA 22060. 6-10 Foreign Military Sales Cases ATTACHMENT 6-2 SAMPLE BLANKET ORDER CASE Based on Government of Bandaria Ref Ltr ABLM-45, 25 November 2006. Pursuant to the Arms Export Control Act, the Government of the United States (USG) offers to sell to the Embassy of Bandaria, Offi ce of the Ground Attach, 1234 Massachusetts Av, NW, Washington, D.C. 29999, the defense articles or defense services (which may include defense design and construction services) collectively referred to as "items," set forth herein, subject to the provisions, terms, and conditions in this LOA. This LOA is for spare parts for support of Bandaria Ground Communications, Radar Systems, and other U.S. origin communication equipment. Estimated Cost: $383,110 Initial Deposit: $226,229 Terms of Sale: Cash Prior to Delivery Dependable Undertaking This offer expires on 27 February 2007. Unless a request for extension is made by the Purchaser and granted by the USG, the offer will terminate on the expiration date. This Modifi cation consists of page 1 through page 27 The undersigned are authorized representatives of their Governments and hereby offer and accept, respectively, this Modifi cation: 6 Dec 2007 24 Feb 2007 U.S. Signature Date Purchaser Signature Date Director, Regional Operations Typed Name and Title Typed Name and Title US Army Security Assistance Command Ft. Belvoir, Va 22060 _______________________________ Implementing Agency Agency Not Required - Per SAMM 13 Dec 2007 DSCA Date Information to be provided by the Purchaser: Mark For Code_(L)_, Freight Forwarder Code_(2)_, Purchaser Procuring Agency Code_B_, Name and Address of the Purchaser's Paying Offi ce: Embassy of Bandaria, Offi ce of the Ground Attach, 1234 Massachusetts Av., NW, Washington, D.C. 29999. United States of America Letter of Offer and Acceptance (LOA) BN-B-BAB 6-11 Foreign Military Sales Cases Items to be supplied (costs and months for delivery are estimates): (3) (6) (7) (1) Qty (4) (5) Ofr Del Itm (2) Unit of Costs SC/MOS/ Rel Trm Nbr Description Condition Issue (a) Unit (b) Total TA Cde Cde 001 H9A 580000C0MPART (N)(N)(R) XX $368,101 X(-) A 5 COMM EQP SP PTS (XI) TA4 SUPP/SPT IN FSG 58 * 59 MAY INCL OTHER FSG WHEN SUPPLIED FOR COMMO EQP Unclassifi ed communications equipment, spar parts, and electronic supplies to support standard ground communications and radar systems. 002 R6C SMALLCASESUPT (N)(N)(R) $1,012 S(1) G SMALL CASE SUPPORT () Estimated Cost Summary: (8) Net Estimated Cost $369,122 (9) Packing, Crating, and Handling $0 (10) Administrative Charge $13,988 (11) Transportation $0 (12) Other $0 (13) Total Estimated Cost $383,110 To assist in fi scal planning, the USG provides the following anticipated costs of this LOA: Estimated Payment Schedule Payment Date Quarterly Cumulative Initial Deposit $226,229 $226,229 15 Jun 2007 $83,050 $309,279 15 Sep 2007 $55,367 $364,646 15 Dec 2007 $18,464 $383,110 6-12 Foreign Military Sales Cases Explanation for acronyms and codes, and fi nancial information, may be found in the " Letter of Offer and Acceptance Information." Signed Copy Distribution: 1. Upon acceptance, the Purchaser should return one signed copy of this LOA to Defense Finance and Accounting Service - Denver, ATTN: DFAS-ADY/DE, 6760 E. Irvington Place, Denver, CO 80279-2000 Simultaneously, wire transfer of the initial deposit or amount due with acceptance of this LOA document (if required) should be made to ABA#021030004, U.S. Treasury NYC, Agency Location Code:00003801, Benefi ciary: DFAS-JY/DE Agency, showing "Payment from Government of Bandaria for BN-B-BAB"; or a check for the initial deposit, made payable to the U.S. Treasury, mailed to DFAS-JJDT/DE, P.O. Box 173659, Denver, CO 80217-3659, showing "Payment from Government of Bandaria for BN-B-BAB". Wire transfer is preferred. 2. One signed copy should be returned to Department of the Army, Commander, U.S. Army Security Assistance Command, ATTN: AMSAC-ME-CP, 5701 21st Street, Bldg. 216, Fort Belvoir, VA 22060. 6-13 Foreign Military Sales Cases ATTACHMENT 6-3 SAMPLE SECURITY COOPERATION SPECIAL PROGRAMS AND SERVICES Based on written request provided by the section 1206 of PL (continued on page 2) Pursuant to the Arms Export Control Act, the Government of the United States (USG) offers to sell to the Department of Defense, the defense articles or defense services (which may include defense design and construction services) collectively referred to as "items," set forth herein, subject to the provisions, terms, and conditions in this LOA. This LOA provides for laser designators, ground diesels, and GPS for use with SUPERHAWK helicopters. Estimated Cost: $1,384,181 Initial Deposit: $1,384,181 Terms of Sale: Cash with Acceptance Public Law 109-999 This offer expires on 31 July 2006. Unless a request for extension is made by the Purchaser and granted by the USG, the offer will terminate on the expiration date. This LOA consists of page 1 through page 12. The undersigned are authorized representatives of their Governments and hereby offer and accept, respectively, this LOA: 6 Jul 2006 11Jul 2006 U.S. Signature Date Purchaser Signature Date KATHY J. JONES Section 1206, PL 109 999(Non-AECA Acting Regional Director No Purchaser Signature Required Typed Name and Title Typed Name and Title U.S. Army Security Assistance Command Alexandria, Va 22333-0001 _______________________________ Implementing Agency Agency DSCA Reviewed/Approved 7 Jul 2007 DSCA Date Information to be provided by the Purchaser: Mark For Code_(0)__, Freight Forwarder Code_(W)__, Purchaser Procuring Agency Code_B_, Name and Address of the Purchaser's Paying Offi ce:___________________________________ _____________________________________________________________________________ United States of America Letter of Offer and Acceptance (LOA) B4-P-AZZ Bandaria, PL 109-999, Sec. 1206 (Non-AECA) 6-14 Foreign Military Sales Cases Customer description continued: 777-999 Program Originator Department of Defense to Defense Security Cooperation Agency, dated 08 May 2007. The Arms Export Control Act (AECA) does not apply. The legal authority is section 1206 of PL 777-999. See Note 5 for additional information. Items to be Supplied (costs and months for delivery are estimates): (3) (6) (7) (1) Qty (4) (5) Ofr Del Itm (2) Unit of Costs SC/MOS/ Rel Trm Nbr Description Condition Issue (a) Unit (b) Total TA Cde Cde 001 A7A 4920000001A7A (N)(N)(R) 8 EA $995,368 X(24) X 9 GRND HANDLING (VIII) TA4 A EQP Power Units, Ground Diesel (Note(s) 2) 002 H6Z 589Z000THRC0M (N)(N)(R) XX $157,636 X (24) X 9 OTHER COM- (XI) TA4 A ELECTRONIC EQUIPMENT GPS, Handheld and Laser Designators, Finger Type (Note(s) 1) Estimated Cost Summary: (8) Net Estimated Cost $1,153,004 (9) Packing, Crating, and Handling 0 (10) Administrative Charge 43,814 (11) Transportation 187,363 (12) Other 0 (13) Total Estimated Cost $1,384,181 To assist in fi scal planning, the USG provides the following anticipated costs of this LOA: ESTIMATED PAYMENT SCHEDULE Payment Date Quarterly Cumulative Initial Deposit $1,384,181 $1,384,181 6-15 Foreign Military Sales Cases Signed Copy Distribution: 1. Upon acceptance, the Purchaser should return one signed copy of this LOA to Defense Finance and Accounting Service - Denver, ATTN: DFAS-JY/DE, 6760 E. Irvington Place, Denver, CO 0279-2000 .Simultaneously, wire transfer of the initial deposit or amount due with acceptance f this LOA document (if required) should be made to ABA# 021030004, U.S. Treasury NYC, Agency Location Code: 00003801, Benefi ciary: DFAS-JY/DE Agency, showing "Payment from Section 1206 (FY07) for B4-P-AZZ"; or a check for the initial deposit, made payable to the US Treasury, mailed to DFAS-JDT/DE, P.O.Box 173659, Denver, CO 80217-3659, showing "Payment from Section 1206 (FY07) for B4-P-AZZ". Wire transfer is preferred. 2. One signed copy should be returned to Department of the Navy, Navy International Programs Offi ce, 2521 South Clark Street, Suite 800, Arlington VA 22202-3928. Note 1. GPS HAND HOLD AND LASER DESIGNATOR, FINGER TYPE. Line 001 provides for eight (8) Power Units, Ground Diesel. All equipment will be new and unused from procurement. Note 2. GPS HAND HELD AND LASER DESIGNATOR, FINGER TYPE. Line 002 provides for forty (40) GPS Hand Held receivers and one-hundred (100) laser designators, fi nger type. All equipment will be new and unused from procurement. Note 3. AUTHORITY FOR SALE - SECTION 1206 OF PL 109-999 PROGRAMS. This sale is made under the authority of section 1206 of PL 110-999. Any reference in this Letter of Offer and Acceptance to the United States Arms Export Control Act, to defense articles, and to defense services shall be construed instead to be a reference to section 1206 of PL 109-999. Any reference in this LOA to "purchaser" shall be construed as a reference to the Department of Defense Note 4. CASE CLOSURE - SECTION 1206 OF PL 110-999 PROGRAMS. This case must be fully reconciled and closed by 30 September 2011. Note 5. FUNDS, PURPOSE, AVAILABILITY AND AMOUNT - SECTION 1206 OF PL 109-999 PROGRAMS. The funds fi nancing this Pseudo Letter of Offer and Acceptance (LOA) are expiring funds and are subject to all the requirements and restrictions under the heading of section 1206 of PL 109-999. The funds provided are in support of authority to build the capacity of foreign military forces and carry the same time, purpose, and availability restrictions associated with the fund source 9760100, DoD Defense-Wide Operation and Maintenance. a. Failure to obligate FY 2006 DoD Defense-Wide Operation and Maintenance funds during the period of availability ending on 30 September 2006 will render them unavailable for new obligations after that date. b. FY 2006 DoD Defense-Wide Operation and Maintenance funds must be expended on or before 30 September 2011. c. Total funds available for expenditure against this Pseudo LOA are limited to the value of $1,384,181. d. Amendments or Modifi cations to this Pseudo LOA are only authorized with DSCA written approval 6-16 Foreign Military Sales Cases Note 6. ANTI-TAMPER (AT) MEASURES. The United States Government (USG) may incorporate Anti-Tamper (AT) protection into weapon systems and components that contain Critical Program Information (CPI). The AT protection will not impact operations, maintenance, or logistics provided that all terms delineated in the system technical documentation are followed. Note 7. MISSILE TECHNOLOGY CONTROL REGIME (MTCR). Paragraph 2.3 of the Standard Terms and Conditions of this LOA discusses use and transfer restrictions on articles and services provided under this LOA and emphasizes that the Purchaser "shall not use or permit their use for purposes other than those authorized, unless the written consent of the USG has fi rst been obtained." The customer agrees not to divert articles and services received under this LOA for purposes or uses other than those for which furnished to include, but not limited to, any use that could contribute to the acquisition, design, development or production of a "missile," as defi ned in section 74 of the AECA (22 U.S.C. 2797c). The items will be used only for the purpose stated and such use will not be modifi ed nor the items modifi ed or replicated without the prior consent of the USG; neither the items nor replicas nor derivatives thereof will be retransferred without the consent of the USG. The USG also reserves the right to take action under section 73(a) of the AECA (22 U.S.C. 2797b(a)) in the case of any export or transfer of any MTCR equipment or technology that contributes to the acquisition, design, development or production of missiles in a country that is not an MTCR adherent." Note 8. END-USE MONITORING. Pursuant to section 505 of the Foreign Assistance Act of 1961, as amended (FAA), and section 40A of the Arms Export Control Act (AECA), the USG will be permitted, upon request, to conduct end-use monitoring (EUM) verifi cation with respect to the use, transfer, and security of all defense articles and defense services transferred under this LOA. The Purchaser agrees to permit scheduled inspections or physical inventories upon USG request, except when other means of EUM verifi cation shall have been mutually agreed. Upon request, inventory and accountability records maintained by the purchaser will be made available to U.S. personnel conducting EUM verifi cation. Note 9. ADMINISTRATIVE SURCHARGES. An administrative surcharge of 3.8% has been applied to line(s) 001, 002. 6-17 Foreign Military Sales Cases ATTACHMENT 6-4 FIRST POSITION OF CASE DESIGNATOR U.S. Army U.S. Navy U.S. Air Force B Repair parts A Ammunition and other explosives A Munitions (ammunitions, bombs, and rockets) G SELPO/communications security B-C Individual spares and components C CAD/PAD H Construction (Corps of Engineers) G Technical and engineering services D Communication equipment (i.e., C4) and facilities I EDA H-J Direct requisitioning procedures E Support equipment J SDAF ( special defense acquisition fund) K FMSO (KA or KS-FMSO I and G Technical services KB-KR or KT-KW-FMSO II) K CLSSA K CLSSA L Leases L Major end items (components and equipment) M Medical (U.S. Army Medical Materiel M Repair and return M Repair and return Agency) N Coproduction P Cartridge actuated devices (CAD) N Special support Propellant actuated devices (PAD) O Training Air crew escape propulsion systems O INFOSEC/COMSEC (AEPS) P P&A R Open end requisitioning procedures P Publications Q Materiel/services (from U.S. activities) S Weapon system sale (ship or aircraft) Q Specialized follow-on sustainment support located in Europe) S Materiel/services (from U.S. Army T Training R Blanket Orders Spares Security Assistance Agency-Latin America S Major aircraft system sale T Publications Z Leases T Training U-Z Materiel/services provided from various U PSEUDO or SCP life-cycle management commands V Major/minor modifi cations (including but not limited to system X Reserved for DFAS-IN package sales, munitions, spare parts Y Major missile system sale equipment, technical services Z Leases under AECA (not an FMS case) maintenance, etc.) 6-18 Foreign Military Sales Cases Technology Transfer, Export Controls and International Programs Security 7-1 INTRODUCTION Security assistance is a group of programs, authorized by law, that allow the transfer of military articles and services to friendly foreign governments via sales, grants, leases, or loans. These are authorized under the premise that they are essential to the security and economic well-being of allies and international organizations, and are equally vital to the security and economic well-being of the United States (U.S.). The courses at the Defense Institute of Security Assistance Management (DISAM) are geared to teach you how to transfer technology to help in the vital security, economic well-being, national security, and foreign policy objectives of the U.S. The key to this chapter is to understand that a technology transfer is an export and must be accomplished in a controlled way to assure U.S. national security objectives. To accomplish this, the chapter will cover international programs security requirements. The Global War on Terrorism is on the forefront of our national security and the protection of critical military technology and information is critical. There is general agreement now that a broader approach to security is needed, embracing political, economic, social, ecological, and other factors. As domestic and world markets for military equipment continue to shrink, competition based on leading edge technology has caused a signifi cant increase in economic espionage vice military espionage for U.S. technology. Although economic security has become an important part of American foreign policy, military strength will remain an essential instrument of foreign policy. It is Department of Defense (DoD) policy to treat defense related technology as a valuable and limited national security resource. Which technologies should be controlled and to what extent? First we must understand that the U.S. policy on international trade consists of two seemingly confl icting elements: Free trade - the importance of international trade to a strong U.S. defense industrial base National security - the need to restrict the export of technology, goods, services, and munitions that would otherwise contribute to the military strength of target countries that affect U.S. national security Keeping in mind the balance between free trade and national security, it is the responsibility of those that control technology to understand the laws, regulations and directives that guide the transfer. Traditional security assistance programs are mechanisms through which technology transfer may occur. International armaments cooperation programs with allies and friends are another means of transferring technology, especially through co-development, co-production, and commercially licensed production programs. Once technology transfer is discussed and the methods used to transfer and control that export are covered, one still needs to know how to transfer technology by secure means. Controlling the TECHNOLOGY TRANSFER, EXPORT CONTROLS AND INTERNATIONAL PROGRAMS SECURITY Chapter 7 Technology Transfer, Export Controls and International Programs Security 7-2 level of technology transferred to U.S. allies and friends is just a subset of the concept of international programs security (IPS). We start with a defi nition of an international program and the security of the program. An international program is a lawful and authorized government or commercial effort in which there is a contributing or receiving foreign participant and information or technology is transferred from one country to another International programs security is the total effort that safeguards information and technology identifi ed as requiring control that is generated by, provided to, or transferred in international programs This chapter will discuss nine main topics concerning technology transfer and export control policy and international programs security requirements: The concept of technology transfer and export controls Controlled unclassifi ed information (CUI) Foreign disclosure and the national disclosure policy (NDP) Export approval and license process International visits and assignments International transfers Defense Security Service (DSS) role in international programs Foreign government and North Atlantic Treaty Organization ( NATO) information Committee on Foreign Investment in the U.S. (CFIUS) and foreign ownership, control or infl uence (FOCI) THE CONCEPT OF TECHNOLOGY TRANSFER AND EXPORT CONTROLS Technology transfer is the process of transferring, from an industry in one country to another or between governments themselves, technical information and know-how relating to the design, engineering, manufacture, production, and use of goods. To comply with U.S. policy, technology transfer is regulated by a myriad of U.S. government (USG) agencies, and is ultimately controlled through a government-to-government agreement that can take the form of a memorandum of understanding, general security agreement, letter of offer and acceptance (LOA), export license, or other form agreed to by both governments. The Security Assistance Management Manual (SAMM), C3, "Technology Transfer and Disclosure," is a key reference when working with security assistance that deals with technology transfer. It must be noted that the transfer policies addressed in this chapter are concerned with those that relate to militarily critical technology. Also addressed in this chapter are the policies and controls for the transfer of classifi ed information, i.e., national disclosure policy as well as the transfer of defense articles and services. The policy and controls discussed herein do not normally apply to common or "public domain" reference material such as military standards, specifi cations, handbooks, or commercial counterparts to these documents. U.S. industry representatives can determine if their materiel is within public domain by submitting documents to the director for freedom of information and security review (OASD-PA/ DFOISR). Technology Transfer, Export Controls and International Programs Security 7-3 Department of Defense Policy on Technology Transfer The primary policy governing the process of technology transfer is contained in DoDD 2040.2, International Transfers of Technology, Goods, Services and Munitions. This directive institutionalizes technology security responsibilities within DoD. The directive establishes working relationships among the Joint Staff, the services, and the defense agencies. Selected U.S. technology laws and other appropriate DoD and military services directives are listed in Attachment 7-2 to this chapter. DoDD 2040.2 states it shall be DoD policy to treat defense-related technology as a valuable, limited national security resource, to be husbanded and invested in pursuit of national security objectives. Consistent with this policy and in recognition of the importance of international trade to a strong U.S. defense industrial base, DoD shall apply export controls to minimally interfere with the conduct of legitimate trade and scientifi c endeavor. This policy applies to DoD components. Before we can understand how to control the transfer of technology we must defi ne "defense articles." Per the International Traffi c in Arms Regulations (ITAR), Part 120.7: Defense article means any item or technical data designated in Section 121.1 of this subchapter. Section 121.1 of the ITAR is: The United States Munitions List (USML). The USML documents articles that have a primar- ily military utility. So the USML has the "Items", but what is "technical data?" Again, per the ITAR, Section 120.10, Technical Data means, for purposes of this subchapter: (1) Informa- tion, other than software as defi ned in Section 120.10(a)(4), which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modifi cation of defense articles. This includes information in the form of blueprints, draw- ings, photographs, plans, instructions or documentation, (2) Classifi ed information relating to defense articles and defense services. The ITAR goes on to state: (5) This defi nition does not include information concerning general scientifi c, mathematical or engineering principles commonly taught in schools, colleges, and universities or information in the public domain . . . Technology Transfer Mechanisms Within the context of security assistance, foreign military sales (FMS) and direct commercial sales (DCS) are normally thought of as the primary means by which technology, goods, services and munitions are transferred; however, as the following list (which is not all inclusive) from DoDD 2040.2 shows, there are many different means for effecting transfers: Commercial and government sales Scientist, engineer, student, and academic exchanges Licensing and other data exchange agreements Co-development and co-production agreements Commercial proposals and associated business visitors Trade fairs, exhibits, and air shows Sales to third-party nations Technology Transfer, Export Controls and International Programs Security 7-4 Multinational corporation transfers International programs (such as fusion, space, and high energy) International meetings and symposia on advance technology Patents Clandestine or illegal acquisition of military or dual-use technology or equipment Dissemination of technical reports and technical data, whether published or by oral or visual release Dissemination of technical reports under DoDD 5400.7, DoD Freedom of Information Act Program Dummy corporations Acquiring an interest in U.S. industry, business, and other organizations The Basics of International Programs Security To protect technology that is being transferred, one must understand the legal and national policy basis for DoD's international programs and the principal security considerations prior to pursuing an international program. The three primary documents that form the framework for national disclosure policy are the Arms Export Control Act (AECA), executive order (E.O.) 12958, as amended 25 March 2003, and the National Security Decision Memorandum (NSDM) 119. Each of these will be covered in more detail below. The fi nal topic will be a discussion of the government-to-government principle. Information for the remainder of this section comes primarily from the International Programs Security Handbook, ODUSD ( Technology Security Policy and National Disclosure Policy), February 1995 (Revised January 1, 2006). Access and Protection The conditions and criteria established by the basic laws and policies require that two fundamental decisions be addressed prior to sharing U.S. defense articles with another country or international organization: whether their access is in the best interest of the U.S. and whether the articles or information will be afforded the proper protection. Legal and Policy Basis for Program Security The three principal documents that provide the legal and national policy basis for security in most DoD international programs include the AECA, E.O. 12958, and National Security Decision Memorandum (NSDM) 119. The AECA governs the export of defense articles and defense services to foreign countries and international organizations and includes both commercial and government programs. It authorizes a list of controlled articles, the USML, which is contained in the ITAR published by the Department of State (DoS). The ITAR is available on the internet at http://www.pmdtc.gov/reference.htm#ITAR. The AECA forms the legal basis for the security requirements of most DoD international programs. The AECA states that foreign sales (i.e., access) should be consistent with U.S. foreign policy interests, strengthen the security of the U.S., and contribute to world peace. The AECA also requires the president to provide Congress assurances that the proposed recipient foreign country or international organization has agreed to certain security conditions regarding the protection of the articles or information. The Technology Transfer, Export Controls and International Programs Security 7-5 three security-related conditions that must be satisfi ed to provide export controlled defense articles and information to a foreign country or international organization are: The recipient country or organization agrees not to transfer title or possession of the articles or related technical data to anyone who is not an offi cer, employee or agent of the country or organization without prior USG consent The recipient country or organization agrees not to use the articles or related technical data or permit their use for other than the purpose for which they were furnished without prior USG consent The recipient country or organization agrees to maintain security and provide substantially the same degree of security as the USG Executive Order 12958, as amended 25 March 2003, establishes the executive branch's classifi ed national security information program. Section 4 of this order states that access may be granted only when required in order to perform or assist in a lawful and authorized governmental function. This is the basis of the need-to-know principle. Further, persons authorized to disseminate classifi ed information outside the executive branch shall assure the protection of the information in a manner equivalent to that provided within the executive branch. The executive order also states that classifi ed information cannot be transferred to a third party without the consent of the originator. It also provides for the protection of foreign government information. The executive order is implemented by Offi ce of Management and Budget (OMB) directive number 1, 32 CFR, Part 20001, and the presidential directive on safeguarding classifi ed national security information and within DoD by DoD 5200.1-R. NSDM 119 provides the basic national policy governing decision-making on the disclosure of classifi ed military information (CMI) to foreign governments and international organizations. NSDM 119 reiterates the basic requirements of the AECA and the executive order (E.O.) 12958 and emphasizes that classifi ed military information is a national asset and the USG will not share it with a foreign government or international organization (i.e., permit access) unless its release will result in a clearly defi ned benefi t to the U.S. and the recipient government or organization will provide substantially the same degree of protection. Government-to-Government Principle Classifi ed information is shared with foreign governments and international organizations based on the government-to-government principle. This principle is defi ned by two activities relating to international programs. It applies to export and disclosure decisions, and to transfers of classifi ed information and material. In keeping with the AECA, E.O. 12958, and NSDM 119, the decision to be made is whether the USG will release classifi ed information to another government or international organization If the answer is yes, then the second part or the transfer must be made either through offi cial government-to-government channels (e.g., military postal service or government courier service) or through other channels approved by the responsible governments, i.e., a government-to-government transfer The transfer via government channels transfer is necessary so that government accountability and control can be maintained from the point-of-origin to the ultimate destination and custody is offi cially transferred to the recipient government that assumes responsibility for the protection of the article Technology Transfer, Export Controls and International Programs Security 7-6 or information. Transfers normally occur between designated government representatives (DGRs). A security assurance must be obtained prior to transferring classifi ed material to a representative of a foreign government or international organization and a receipt must be obtained for classifi ed information in material form. Key Department of Defense Security Organizations Before the fundamental security considerations required in a government-to-government agreement are discussed, a review of the key USG organizations that manage technology transfer is necessary. Figure 7-1 provides a macro-overview of the key players within the Executive Branch for technology transfer and international program security. The under secretary of defense for policy [USD (P)] is responsible for international security matters. The deputy under secretary of defense (technology security policy and national disclosure policy) [DUSD (TSP&NDP)] is responsible for day-to-day decisions on NDP and the Defense Technology Security Administration (DTSA). More specifi cally the offi ce is responsible for the security policy for international programs. This responsibility includes security policy and arrangements for international programs, international security agreements, the NDP, and NATO security policy. When the DoS and the Department of Commerce require DoD input to decide if a license for export should or should not be approved, the request goes to DTSA. DTSA's responsibilities will be covered in further detail under the topic of "exports" later in this chapter. Figure 7-1 Key Players in Technology Transfer and International Programs Security The under secretary of defense for intelligence [OUSD (I)] is responsible for DoD counter- intelligence, security, and intelligence programs and staff supervision of the DSS. This includes intelligence, counterintelligence, and security support for program protection planning for DoD acquisition programs. The [USD (I)] also has staff supervision responsibility for the DSS and for publication of the National Industrial Security Program Operating Manual (NISPOM). With the DSS fi eld offi ces [USD (I)] assures that companies that manufacture military items adhere to the same laws and regulations concerning technology transfer as do individuals working for the USG. The under secretary of defense (acquisition, technology and logistics) [ USD (AT&L)] is responsible for defense procurement and international armaments cooperation programs (IACP). These functions are performed by the director, defense procurement and the director, international cooperation. The ! " " # $ $ % % & " Technology Transfer, Export Controls and International Programs Security 7-7 Defense Contract Management Agency (DCMA) also reports [USD (AT&L)]. In addition to its normal management of DoD contracts, DCMA provides industrial security support at those defense contractor facilities where a DSS representative is not available. The Joint Staff provides support that includes conducting operational and military mission impact assessments on technology, goods, services, and munitions transfer issues, as requested. The Defense Intelligence Agency (DIA) performs the following functions in the support of U.S. defense technology security: Provides assessments of the types and numbers of illegal transfers of technology, goods, services, and munitions, and the associated transfer mechanisms Designates a point of contact to represent DIA on technology transfer matters Conducts end user checks and intelligence review on technology, goods, services, and munitions transfer cases Assesses foreign availability of technology, goods, services, and munitions proposed for transfer Provides intelligence concerning the total effect of transfers of technology, goods, services, and munitions on U.S. security Provides intelligence expertise in interagency, national, and international fora on technology, goods, services, and munitions transfer matters Assists in identifying and assessing critical technologies The DoD export control responsibilities and participating organizations are further depicted in Table 7-1. Table 7-1 DoD Organizational Export Control Responsibilities Organization Responsibility [USD (AT&L)] Technical oversight for national security and nonproliferation Vice Chairman International Technology Transfer Coordinating Committee (ITTCC) National Economic Council representative Economic security balance [USD (P)] Policy overlay Joint Staff Strategic rationale and validation Intelligence community Threat assessments of foreign nations Military departments Experts input from labs and commands Institute for Defense Analysis Federally-funded research and development (R&D) center providing [USD (AT&L)] with technical support and economic security assessments Industry and academia Participate in technical working groups and multilateral negotiation Technology Transfer, Export Controls and International Programs Security 7-8 Exports through the Department of Commerce Under the Export Administration Act of 1979 (EAA), the Department of Commerce has licensing jurisdiction over all commodities and unclassifi ed technical data except for certain specifi ed items handled by other government agencies, such as USML items by the DoS, or atomic energy material by the U.S. Department of Energy. The EAA applies to the following: Exports of commodities and technical data from the U.S. Re-exports of U.S.-origin commodities and technical data from foreign destinations U.S.-origin parts and components used in a foreign country to manufacture a foreign end product for export and in some instances, a foreign product produced as a direct product of U.S.-origin technical data The Export Administration Regulations (EAR) (15 CFR Parts 368 through 399) issued by the Department of Commerce, Bureau of Industry and Security (BIS), prescribe licensing procedures for items under its jurisdiction. Controls on the issue of export licenses are based on considerations of national security, the fostering of U.S. policy and international responsibilities, the necessity for protecting the domestic economy from an excessive drain of scarce materials, and the reduction of the serious infl ationary impact of abnormal foreign demand. The Commerce Department and BIS home page is at http://www.bis.doc.gov. Items controlled by the Department of Commerce for export are listed on the commerce control list (CCL). The list is very detailed and lists items that may be exported to a certain country. Dual-use items are items that were designed with no intrinsic military function but which may have a potential military application, i.e., computers, jeeps, trucks, light aircraft, and global positioning system (GPS). The Department of Commerce is charged with coordinating requests for such items that fall into this category of dual-use. However, once a dual-use item is modifi ed for specifi c military use, the DoS, DoD, and Department of Commerce resolve the commodity jurisdiction of the article, and DoS notifi es DoD and Department of Commerce that the article falls under the DoS control and is listed on the USML. Exports through the Department of State Section 38, AECA, authorizes the president to control the import and export of defense articles and services, to designate such items as constituting the USML, and promulgate implementing regulations. By executive order (E.O. 11958), the president has delegated his responsibilities to the secretary of state, except that the designation of items as defense articles and services for export control requires the concurrence of the secretary of defense. Those responsibilities related to the control or regulation of imports of defense articles and defense services are delegated to the Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives except that designation of items as defense articles and services for import control require concurrence of the secretaries of state and defense. The ITAR, 22 CFR Parts 120-130, implements the AECA statutory authority to control the export and import of defense articles and services. By virtue of delegations of authority by the secretary of state, these regulations are primarily administered by the Directorate of Defense Trade Controls (DDTC), Bureau of Political-Military Affairs, Department of State. The ITAR is available on the Internet at http://www.pmdtc.gov/reference.htm#ITAR. DDTC is responsible for issuing export licenses for those items on the USML. The USML can be found in Section 121.1 of the ITAR and is also discussed in SAMM, C4.3. While not a list of specifi c Technology Transfer, Export Controls and International Programs Security 7-9 items (e.g., M-16, M-1A1, F-4, etc.), the USML generically designates articles, services, and related technical data as defense articles and defense services in accordance with Section 38, AECA. Those defense articles preceded by an asterisk on the USML are designated signifi cant military equipment (SME) that Section 120.7 of the ITAR defi nes as articles for which special export controls are warranted because of their capacity for substantial military utility or capability. Anything that is classifi ed is considered to be SME. The Directorate of Defense Trade Controls processed approximately 67,000 defense-related license requests in fi scal year 2006 from U.S. contractors. The numbers of license requests are increasing each year. Approximately 20 percent of these are forwarded to DTSA and the military departments (MILDEPs) for further review. The DoS regulates permanent exports, temporary exports, and temporary imports of defense articles into the U.S., and the Department of Justice regulates permanent imports of defense articles (22 CFR Parts 47, 178, and 179). Figure 7-2 provides a comparative review of the legislative and regulatory authorities for the DoS and Department of Commerce in regulating exports. Figure 7-2 Comparing Department of State and Department of Commerce CONTROLLED UNCLASSIFIED INFORMATION Controlled unclassifi ed information (CUI) is a DoD term used to describe collectively all unclassifi ed information to which access or distribution limitations have been applied in accordance with applicable national laws or regulations. For the U.S., CUI is offi cial government information that is unclassifi ed, but that has been determined by designated offi cials to be exempt from public disclosure under the Freedom of Information Act (FOIA), which is designed to make government information available to the public and thus requires openness in government. It is not designed to protect information. It provides that the public is entitled to access to agency records, unless the record is exempt from disclosure. There is no executive order to implement FOIA. Government agencies apply their own unique markings to identify the information. Consequently DoD has several policy directives covering the disclosure of offi cial information. &' (( ) )) (*+,-(*./ &' +0 ) )) (10,-(1(0 ) % " (( 2 $ ,(0-,30 &' " & ,+ 2 $ */4-*.. ) ) " 5 Technology Transfer, Export Controls and International Programs Security 7-10 DoDD 5230.9 contains policies and procedures for the release of information for publication or public release DoDD 5200.21, 5230.24, and 5230.25 govern the release of DoD technical information DoD 5400.7-R contains the DoD policies and procedures governing FOIA requests. Offi cial information that meets the standards for security classifi cation is classifi ed and protected in compliance with E.O. 12958 and DoD 5200.1-R DoDD 5230.25, Withholding of Unclassifi ed Technical Data from Public Disclosure, provides procedures for the dissemination and withholding of unclassifi ed technical data Freedom of Information Act Congress has stated the U.S. public generally has the right to know what its government is doing. FOIA requires government information to be made available to the public unless the information falls within one of nine exemption categories described in the Act and the appropriate USG offi cial determines it should be withheld from disclosure. Exemption 1 is classifi ed information. The FOIA permits the withholding of any information properly and lawfully classifi ed under the provisions of E.O. 12958. The other eight exemption categories deal with unclassifi ed but generally sensitive information. Exemption 2 permits the withholding of information which pertains solely to the internal rules and practices of a government agency. Exemption 3 permits the withholding of information that a statute specifi cally exempts from disclosure by terms that permit no discretion on the issue, or in accordance with criteria established by that statute for withholding or referring to particular types of matters to be withheld. Exemption 4 permits withholding information such as trade secrets and commercial and fi nancial information obtained from a company on a privileged or confi dential basis which, if released, would result in competitive harm to the company. Exemption 5 protects inter- and intra-agency memoranda which are deliberative in nature. Exemption 6 provides for the withholding of information, the release of which could reasonably be expected to constitute a clearly unwarranted invasion of personal privacy of individuals. Exemption 7 permits withholding records or information compiled for law enforcement purposes that could reasonably be expected to interfere with law enforcement proceedings; would deprive a person of the right to a fair trial or impartial adjudication; could reasonably be expected to constitute an unwarranted invasion of personal privacy of others; disclose the identity of a confi dential source; disclose investigative techniques; or could reasonably be expected to endanger the life or physical safety of any individual. Technology Transfer, Export Controls and International Programs Security 7-11 Exemption 8 permits withholding records or information contained in or relating to examination, operation or condition reports prepared by, on behalf of, or for the use of any agency responsible for the regulation or supervision of fi nancial institutions. Exemption 9 permits withholding records or information containing geological and geophysical information and data (including maps) concerning wells. For many years, it has been DoD policy to place distribution statements on documents containing unclassifi ed scientifi c and technical information which was produced either within DoD or on its behalf by others. Until recently, however, this policy was only marginally directed toward restricting the disclosure of such information to the public and thus to foreign persons. Moreover, although it was the policy to apply such distribution markings, the practice did not always conform to the policy. The result was that sensitive scientifi c and technical information occasionally found its way into the public domain, including the foreign public. Public Law 98-94, 24 September 1983, provided the secretary of defense with the authority to withhold from the public critical technologies under above described exemption three of the FOIA. For more specifi c information on FOIA as it relates to LOAs and FMS procurement contracts, refer to SAMM, Section C3.4, Release of Information. FOREIGN DISCLOSURE AND THE NATIONAL DISCLOSURE POLICY Specifi c policies and controls have been established and remain in place for the transfer of classifi ed military information (CMI) and CUI militarily critical technology, defense articles, and defense services. The NDP establishes a framework for the approval or denial for the transfer of CMI to foreign governments. Basic authority and policy for transferring classifi ed information are contained in NSDM 119, which is implemented by the classifi ed publication, National Policy and Procedures for Disclosure of Classifi ed Military Information to Foreign Governments and International Organizations, short title NDP-1. Effective implementation of NDP-1 is the responsibility of the [USD (P)]. Disclosure offi cials are authorized (but not automatically obliged) to disclose information up to the classifi cation levels indicated in the NDP annex for each category of information. And most importantly, each disclosure decision is made on a case-by-case basis. Classifi ed Military Information and Disclosure Decisions Under the NDP, classifi ed information that has been developed by or for the DoD or is under its jurisdiction or control. There are three criteria that must be satisfi ed prior to making a disclosure decision. The release must satisfy U.S. foreign policy towards the intended recipient government, and toward other governments in the region. Release must not jeopardize U.S. military security. The third criteria is there must be an evaluation of the proposed recipient government's capability and intent to provide substantially the same degree of protection the U.S. gives to the information or material. National Disclosure Policy Committee/Exceptions to National Disclosure Policy NSDM 119 and DoDD 5230.11 require the establishment of a national level interagency, national disclosure policy committee (NDPC), to formulate, administer, and monitor national disclosure policy. General members of the NDPC include the secretary of state, secretary of defense (chairman), secretary of the army, secretary of the navy, and secretary of the air force, and the Joint Staff. These general members have a broad interest in all committee operations and vote on all issues that come before the committee. Other organizations such as the Central Intelligence Agency (CIA), DIA, and many Technology Transfer, Export Controls and International Programs Security 7-12 others may vote on issues in which they have a direct interest. When an exception to NDP (E-NDP) is required, because disclosure criteria cannot be met within the previously authorized classifi cation level, such exceptions can be granted only by the NDPC, the secretary of defense, or the deputy secretary of defense. A request for an E-NDP must be sponsored by a NDPC member, normally the cognizant MILDEP. The NDP-1 annex states only the maximum classifi cation level of information that can be released and in itself does not authorize disclosures. The secretaries of the MILDEPs have generally been delegated authority by the NDP-1 to decide if CMI under their control can be released. The policy and guidance for implementing NDP-1 is contained in the DoDD 5230.11. Disclosure of Classifi ed Military Information to Foreign Governments and International Organizations. This directive states that the MILDEPs will release CMI in accordance with the NDP-1 annex only if all of the following fi ve conditions or criteria, originally outlined in NSDM 119, are met: Disclosure is consistent with U.S. foreign policy and national security objectives, e.g., in support of defense objectives Disclosures, if compromised, will not constitute an unreasonable risk to the U.S. position in military technology or operational capabilities The foreign recipient of the information will afford it substantially the same degree of security protection given to it by the U.S. The intent of a foreign government to protect U.S. CMI is established in part by the negotiation of a general security of military information agreement (GSOMIA) or other similar international agreement Disclosure will result in benefi ts to the U.S. at least equivalent to the value of the information disclosed. The disclosure is limited to information necessary to accomplish the purpose for which disclosure is made. One further point must be emphasized. If the classifi cation of the information proposed for disclosure exceeds the country's eligibility in the NDP-1 annex, or if the policy criteria cannot be met, then the proposed disclosure must be denied or an exception to policy must be obtained from the NDPC. Moreover, even if the U.S. disclosure offi cial has determined that eligibility in the NDP-1 annex exists and that all policy criteria have been met, disclosures of classifi ed military information may not be made until the affected originator's approval has been obtained or appropriate authority to disclose has been received. All disclosure authority rests in the fi rst instance with the head of the department or agency which originates the information. In addition, all disclosure offi cials must be certain that they possess the required authority to disclose the information in question. The secretary of defense and the deputy secretary of defense are the only offi cials who may grant unilateral exceptions to the NDP. Under DoD Directive 5230.11, the secretary of defense has delegated disclosure authority to the secretaries of the MILDEPs and other DoD offi cials whose decisions must be in compliance with NDP-1. They are required to appoint a principal disclosure authority at component headquarters level to oversee the disclosure process and a designated disclosure authority at subordinate command and agency is delegated. SAMM, Section C3.3, "Disclosure of Classifi ed Military Information," provides additional information on the national disclosure process as it relates to security assistance. Security Survey To assist the NDPC and those with disclosure authority to make decisions on disclosure of military technology to other governments, international security agreements agreed to and signed at the Technology Transfer, Export Controls and International Programs Security 7-13 government-to-government level must be developed. Before these agreements can be written, security survey teams are sent to the respective countries to review and evaluate the foreign governments and industries ability to protect USG information. The teams are usually made up of members of the DoS and DoD. The primary areas reviewed by the teams are personnel security, information security and physical security to make sure that if the respective government is allowed access to USG information, it will be able to protect the information at least at the same level as it would be protected in the U.S. International Security Agreements Before classifi ed information is released outside the executive branch of the USG, E.O. 12958 requires that written assurances must be obtained that the information will be afforded proper protection. In situations where classifi ed information is being made available to foreign governments, these assurances may be secured in several ways. First, they are included in the standard terms and conditions of FMS LOA, Section 2, "Conditions - General Purchaser Agreements." See later Chapter 8, "FMS Contractual Agreements," of this textbook for further information. They may also be the subject of diplomatic notes, memoranda of understanding and similar correspondence. Separate international agreements known as GSOMIAs have been concluded with over sixty countries. Since they are government-to-government agreements, the other governments send teams to the U.S. to ensure U.S. compliance with the agreements just like the USG would send survey teams to their countries. GSOMIAs typically include the following topics: Protection, third-party transfer, and intellectual property rights provisions Classifi ed information transfer mechanism (government-to-government) Defi nition of classifi ed information Reciprocal provision for security expert visits Requirements for investigations in case of compromise Industrial security procedures Visit request procedures Limitations on level of classifi cation Disclosure Planning DoD Directive 5230.11 requires that planning for possible foreign involvement should start at the beginning of the weapon system acquisition process to facilitate decisions on disclosure in support of foreign sales or cooperative programs. The key documents developed in the system acquisition process that relate to potential technology transfer are covered in Chapter 9, "System Acquisition Documents Associated with Foreign Military Sales" of the DoD Directive 5230.11. False Impressions It is the policy of the U.S. to avoid creating false impressions of its intention to provide classifi ed military material, technology, or information. Lack of strict adherence to this policy may create problems. Much military hardware is unclassifi ed; however, this same unclassifi ed hardware, if sold, may require the release of sensitive classifi ed information for its operation or maintenance, or for the foreign recipient to receive training on it. Therefore, the disclosure decision must be made based on the classifi cation level of all information which may be required for release if the system were to be acquired. If the proposed foreign recipient is not authorized to receive the highest level of classifi ed Technology Transfer, Export Controls and International Programs Security 7-14 information required, no information, not even unclassifi ed information, may be released or discussed until the required authority is obtained. This means that there can be no weapon specifi c information, and no release of FMS price and availability (P&A) data until authority is obtained to release the highest level of classifi ed information ultimately required for disclosure. Thus, designated disclosure authorities, in order to avoid false impressions, must authorize in advance proposals to be made to foreign governments that could lead to disclosure of classifi ed military information, technology, or material. EXPORT APPROVAL AND LICENSE PROCESS Before discussing the approval and license process for the authorized export of a military article or service we fi rst must defi ne the term "export." To paraphrase the ITAR Section 120.17 an export is sending or taking defense articles out of the U.S. in any way. That includes transferring registration, ownership, or control of an item on the USML to a foreign person. It also includes disclosing orally or visually any defense article to a foreign person in the U.S. or abroad. That means if you discuss U.S. military technology anywhere with a foreign person that does not have a need to know the information and you do not have a license to do so, this is an illegal transfer. Part 127 of the ITAR covers violations and penalties of unlawful export, re-export or re-transfer or attempt to re-transfer of any defense article or technical data for which a license or written approval is required from the DoS. Licenses for the Export of Defense Articles Part 123 and 125 of the ITAR provides for the licensing requirements for the export or temporary import of defense articles into or out of the U.S.. Any person who intends to export or to import temporarily a defense article must obtain the approval of the State Department's Directorate of Defense Trade Controls (PM/DDTC) prior to the action unless there is a regulatory exemption. Section 123.10 provides for the form DSP-83 to certify the non-transfer and use assurance certifi cate required for the export of signifi cant military equipment and classifi ed articles and technical data. A license will not be issued until a completed Form DSP-83 has been received by DDTC. The form is to be executed by the foreign consignee, the foreign end-user, and the applicant. Application for export license for the export or import of classifi ed defense articles and services must be made on DoS form DSP-85 [see SAMM, Figure C3.F3]. Application must be made by a U.S. national in accordance with the provisions of Sections 125.3, 125.7, and 125.9 of the ITAR. Table 7-2 shown on the next page, provides a guide as to which form is required for the export of munitions list items through either FMS or direct commercial sale. Export License Applications Staffi ng within Department of Defense The License Directorate of DTSA is the entry point for export requests from the DoS and Department of Commerce. It is the technical responsibility of this directorate's staff to ensure that the MILDEPs, appropriate DoD agencies, and the technical staff of the under secretary of defense for acquisition technology and logistics review applicable export requests or munitions cases. To expedite the licensing process, the DoS delivers these cases for concurrent review by those military services and DoD agencies and components which the DoS believes have an interest in the cases. After receiving recommendations from the DoD review, the DTSA License Directorate develops the DoD position in concert with DTSA technical and policy staffs, and forwards the position to the DoS. Most differences within DoD are resolved at the working level. Those that cannot be so resolved are referred to the International Technology Transfer Panel (ITTP) for resolution. Technology Transfer, Export Controls and International Programs Security 7-15 Foreign Military Sales License Exemption To paraphrase Section 126.6(c) of the ITAR, when using the FMS program a license from the DoS is not required if the defense article or technical data or a defense service to be transferred was sold, leased or loaned by the DoD to a foreign country or international organization using the LOA as authorization. Commercial Agreements Requiring Approval by Department of State Besides regular export licenses, the ITAR provides for commercial agreements that, when approved, provide authorization to export certain types of technical information and services. These differ from regular export licenses in that they are broader in scope, more fl exible, and remain in effect for longer periods of time. These agreements are typically for ongoing projects rather than a one-time export. The ITAR recognizes three categories of such agreements: Technical assistance agreement (TAA). An agreement (e.g., a contract) for the performance of defense services or the disclosure of technical data, as opposed to an agreement granting right of license to manufacture defense articles [22 CFR 120.22] Manufacturing licensing agreement (MLA). An agreement (e.g., a contract) whereby a U.S. person grants a foreign person an authorization or a license to manufacture defense articles abroad and which involves or contemplates the export of technical data or defense articles or the performance of defense services or the use by the foreign person of technical data or defense articles previously exported by the U.S. person [22 CFR 120.21] Table 7-2 Forms to Be Used for Export of Munitions List Items Activity Foreign Military Sales Commercial Sales Registration statement N/A for gov't shipment DS-2032 Permanent export of unclassifi ed LOA and DSP-94 DSP-5 defense articles and related unclassifi ed technical data Permanent/temporary export or DSP-85 and DSP-94 DSP-85 temporary import of (with DSP-83) classifi ed defense articles and related classifi ed technical data Temporary export of DSP-73 DSP-73 unclassifi ed defense articles Temporary import of DSP-61 DSP-61 unclassifi ed defense articles Non-transfer and use assurances for N/A (Already included DSP-83 export of defense articles and services in LOA) Shipper's export declariation Department of Commerce Department of Commerce Form 7525-V Form 7525-V Technology Transfer, Export Controls and International Programs Security 7-16 Distribution agreement. A contract between a U.S. person and a foreign person to export unclassifi ed defense articles to a warehouse or distribution point outside the U.S. for subsequent resale. These agreements contain conditions for special distribution, end-use and reporting [22 CFR 120.23] The use of the term person means a natural person as well as a corporation, business association, partnership, society, trust or any other entity, organization or group, including governmental entities [22 CFR 120.14] INTERNATIONAL VISITS AND ASSIGNMENTS Visit Procedures DoDD 5230.20, Visits and Assignments of Foreign Representatives, sets forth standard procedures concerning requests for visits, certifi cation of liaison offi cers and personnel exchange programs. SAMM, Section C3.5,5. "Visits, Assignments and Exchange of Foreign Nationals," provides further discussion relating to security assistance. Foreign representatives, i.e., foreign nationals or U.S. citizens or nationals who are acting as representatives of a foreign government, fi rm, or person, may be authorized to visit DoD components or U.S. defense contractor facilities only when the proposed visit is in support of an actual or potential USG program (e.g., FMS, USG contract, or international agreement). The DoD and U.S. defense contractors receive over 230,000 foreign visitors annually on matters related to mutual security and cooperation. These visits play a vital part in the exchange of information and technology as a part of U.S. international commitments. These visits account for more transfer of CMI and CUI than all other transfer mechanisms combined. The International Visits Program (IVP) established policy and procedures to control interna- tional visits and the information to be transferred during those visits. DoD policies and procedures pertaining to foreign visits are designed to achieve three objectives. To facilitate administration arrangements and otherwise plan visits Provide a vehicle for consideration of proposed export/disclosure decisions related to the visit and record the decision(s) To provide a vehicle for obtaining the required security assurance regarding the security clearance, need-to-know, and sponsorship from the visitor's government if classifi ed is involved There are three types of visits that may be authorized: A one-time visit (normally less than thirty days) For recurring contacts for a period of time, normally not exceeding one year For an extended period of time, e.g., certifi cations of liaison offi cers, normally up to one year or term of contract or applicable export license For an emergency, a one-time visit may be submitted for approval less than twenty-one working days before the visit start date. Emergency visits may only be authorized if failure to make the visit would jeopardize performance on a contract or program, or cause the loss of a contract opportunity. These authorities may not be used to employ foreign nationals. Technology Transfer, Export Controls and International Programs Security 7-17 Although security assistance offi ces (SAOs) do not approve visit clearances, they do serve as coordinators of contractor and DoD component requests to visit abroad, e.g., for security assistance or cooperative research, development, test, and evaluation (RDT&E) programs. In coordinating such visits, DoD 4500.54-G, DoD Foreign Clearance Guide, and the Defense Attach Manual prepared by the DIA provide useful guidance. Except for those visits approved by the MILDEPs, the National Security Agency/Central Security Service, and the immediate Offi ces of the Secretary and Deputy Secretary of Defense; the Director, DIA administers requests for visits and extended visits for the OSD, the Joint Staff, defense agencies, and their contractors. The MILDEPs approve or deny, or decline to render a decision on visits, liaison offi cer certifi cations and exchange personnel and for their own departments and their applicable contractors. An international agreement is necessary for personnel exchange programs and on-site assignments of liaison offi cers. Correspondence with DoD contractors relative to approved foreign visits shall be forwarded to the cognizant DSS regional offi ce for transmittal to the contractor. Requests by foreign embassies shall normally be submitted at least thirty days in advance for visits and ninety days in advance for liaison offi cer certifi cations. Visits carried out under the terms of an approved certifi cation, extended visit authorization, or one-time visit may take place after coordination with the offi ce to be visited and at least seventy-two hours advance notice. Requests for visits and certifi cations submitted by foreign embassies should follow the examples contained in DoDD 5230.20. Standardized notifi cations shall be used to advise foreign embassies of fi nal action on requests for visits and accreditations as contained in DoDD 5230.20. As noted above, the security policy automation network (SPAN) processes and records visit requests it receives and decisions on such requests. This part of SPAN is called the foreign visit system (FVS). The FVS was developed to enhance security and provide consistent application of policy in dealings with other governments. Visit requests are sent to one of four defense visit offi ces (DVO) located in Army, Navy, Air Force, and the DIA. The DVOs staff out the visit requests to foreign disclosure offi ces in the fi eld that contact the organizations to be visited to see if they will accept the visits. The DVO reviews the comments form the fi eld and renders a decision which is returned over the same electronic path used for submission to the embassy of the country submitting the visit request. Figure 7-3 provides an overview of the international visit program within DoD. At any time, participating activities have immediate access to all visit request status information. For point of contact and further information on FVS, users should contact the Director, Policy Automation Directorate at commercial (703) 697- 5495 or DSN 227-5495. Notifi cation of approval of a foreign request for a visit or certifi cation to a DoD component shall be forwarded to the contract offi cer of the DoD component concerned, or where the representative will visit. This notifi cation shall contain adequate guidance regarding the parameters of the subject visit and the maximum permissible level of classifi ed information that has been authorized for disclosure. Disclosures of classifi ed information to foreign visitors and certifi ed foreign representatives shall be limited to releasable oral and visual information, unless the release of documentary information is specifi cally authorized in an approved visit request or letter of acceptance for certifi ed offi cials, or when the U.S. contractor has secured an export license specifi c to the documentation intended for release. When documentary release is authorized, the visitor must have courier orders. Technology Transfer, Export Controls and International Programs Security 7-18 Figure 7-3 International Visit Program However, if classifi ed information is to be disclosed, a visit request must be submitted even though the contractor has a valid export authorization or license. In this case, the visit request is used to pass the security assurance on the visitors. Requests for classifi ed documentary information resulting from a foreign visit shall otherwise be processed through normal foreign disclosure channels. In either case classifi ed documentary information shall be transferred through government-to-government channels, unless the visitor is also acting as a courier and has courier orders. DoD offi cials who wish to invite foreign representatives to visit a DoD component, or who wish to have a foreign national certifi ed to the component, shall coordinate their actions with DIA or the MILDEP concerned before extending an invitation. A request of visit authorization is not required at a contractor facility when the information to be disclosed is unclassifi ed and not subject to export controls, the information is unclassifi ed but is subject to export controls, but a contractor has an export license for its export. It is not required at a DoD facility when the facility is open to the public, the information is open for public release according to service regulations, or for non-U.S. citizen DoD employees policies and procedures al- ready exist to authorize access by such personnel. Other Visit Processes A "hosted visit" occurs when a senior foreign national is extended an invitation by a DoD counterpart. "Emergency visits" may be approved only for legitimate program, project or contract purposes. The visit request can not be amended. "Amendments" to visits may be used only to change dates (no earlier dates) and list of visitors. The information to be discussed during the visit can not change. Defense Personnel Exchange Program The defense personnel exchange program (DPEP) includes the exchange of personnel between the U.S. military services and their counterparts of friendly governments for assignment to established positions within their force structure. This exchange is implemented under an agreement conforming to DoDD 5530.3, International Agreements. Assignments can be negotiated as a reciprocal exchange of military personnel. Also, civilian position assignments such as intelligence analysts, scientists and ! " # !$%#" & ! $" & $ % ! $%'(" & )& ! * " ) + % ) # , Technology Transfer, Export Controls and International Programs Security 7-19 engineers, medical personnel, and administrative specialists may be negotiated. Exchange personnel perform the functions of the specifi c position within the organization to which they are assigned. Since they are not designated offi cials of their government, classifi ed information may not be released into their permanent custody. They may only be given oral or visual access to specifi c classifi ed information authorized in the applicable delegation of disclosure letter (DDL). Written procedures must be developed to prevent inadvertent disclosure of classifi ed or controlled unclassifi ed information as described in DoDD 5230.20, Visits and Assignments of Foreign Representatives. Such personnel may not be given access to information classifi ed under the Atomic Energy Act of 1954, as amended. DPEP assignees may not act as a representative of their government or the USG. Foreign Attendance at Classifi ed Meetings Leading to Contract Opportunities The USG has entered into cooperative agreements with allies and other friendly nations that allow the exchange of information in specifi c areas of mutual interest required for their participation in contractual opportunities. See later Chapter 13, " International Armaments Cooperation Programs," for discussion of reciprocal procurement memoranda of understanding. Planning for meetings that may lead to contracts for foreign nationals shall be based on the assumption that there will be foreign attendance. DoDD 5200.12, Conduct of Classifi ed Meetings, contains policies and procedures for sponsoring and conducting meetings involving classifi ed information attended by foreign nationals. Visits Overseas by DoD Personnel The policy for overseas travel of DoD personnel is covered under DoDD 4500.54, Offi cial Temporary Duty Travel Abroad, and DoD 4500.54-G, Foreign Clearance Guide (FCG). DoD components must appoint a responsible offi cial and follow the FCG. Normally thirty days advance notice is needed before travel. Procedures also must be established to ensure disclosure authorization has been obtained if classifi ed or export controlled unclassifi ed information is to be divulged. A "theater clearance" is required for visits to a U.S. military facility overseas as specifi ed in the FCG. A "country clearance" is required for visits to a host government facility or contractor facility for classifi ed discussions. INTERNATIONAL TRANSFERS United States Classifi ed Contracts with Foreign Firms A USG agency awards or permits one of its contractors to award a classifi ed contract to a foreign contractor, only if the classifi ed information involved has been approved for release or is determined to be releasable to the government of that country under the national disclosure policy. In addition, the foreign government concerned must have entered into a security agreement with the U.S. under which it agrees to protect U.S. classifi ed information released to it. User agency responsibilities are contained in DoD 5220.22-R, Industrial Security. Transmission of Classifi ed Materiel to Foreign Governments Transmission of classifi ed materiel to foreign governments, either to addresses in the U.S. or outside the U.S., must be on a government-to-government basis, e.g., U.S. Postal Service registered mail through an Army or Air Force APO or Navy FPO postal service; and such transmissions should be in accordance with DoD 5200.1-R, Information Security Program, Chapter VIII. Disclosures or denials are recorded in the SPAN. To assure compliance, each contract agreement, LOA, or other arrangement that involves the release of classifi ed materiel to foreign entities shall either contain transmission instructions or require that a separate transportation plan be approved by the appropriate DoD security and transportation offi cials and applicable foreign governments prior to release of the Technology Transfer, Export Controls and International Programs Security 7-20 materiel. Government arrangements cannot be used as a means to bypass the ITAR. More information about the transfer of classifi ed items may be found in Chapter 11, "Foreign Military Sales Transportation Policy" of this text book under classifi ed shipments. DEFENSE SECURITY SERVICE ROLE IN INTERNATIONAL PROGRAMS The role of the DSS is to provide government contracting agencies with an assurance that U.S. defense contractors are both eligible to access and properly safeguard any classifi ed information for which it is entrusted. In fulfi lling this obligation, DSS administers the national industrial security program (NISP) operating on behalf of the under secretary of defense for intelligence [USD (I)]. DSS does not develop industrial security policy. DSS implements industrial security policy established by [USD (I)], and for international programs established by the under secretary of defense for policy [USD (P)]. Prior to access by a defense contractor to classifi ed information, the contractor must be sponsored for a facility clearance. This sponsorship is based upon a bona fi de procurement need, and is submitted to DSS by an U.S. or foreign government contracting activity or by another contractor already cleared under the NISP. DSS will conduct a facility clearance survey to determine the contractor's eligibility for access to classifi ed information, and will review the contractor's organizational structure and key management personnel, and adjudicate any existing foreign ownership, control, or infl uence (FOCI). Once a favorable determination is made and a facility clearance is granted, the contractor will execute a security agreement with the USG, a legal contract to abide by the DoD 5220.22-M, National Industrial Security Operating Manual (NISPOM). The NISPOM is a contractually binding document and mandates industrial security practices for contractors. The NISPOM derives its authority from the ITAR and implements applicable statutes, executive orders, national directives, and international treaties toward the protection of classifi ed information. The DSS verifi es the export of classifi ed articles and technical data against the license or the U.S. company's empowered offi cial's certifi cation, assures that secure means of transfer have been arranged, and endorses the license back to the DoS. DSS oversees plant visits by foreign nationals and ensures that companies have adequate technology control plans in place for long-term foreign national visitors, foreign national employees, and for FOCI situations. DSS ensures appropriate transportation plans are in place for commercial overseas shipments of classifi ed material and approves contractor international hand carriage arrangements. Additionally, DSS provides security assurances to other governments for U.S. contractor facilities and personnel and obtains assurances on foreign facilities and personnel. It advises cleared contractors concerning program protection plans, ensures compliance, and trains DoD and contractor personnel on program protection planning. The DSS provides support to cleared contractors operating overseas, and monitors their compliance with the NISPOM. Finally, DSS provides counterintelligence (CI) support to cleared contractors, including CI awareness briefi ngs. More information about DSS can be found at its web site http://www.dss.mil. Technology Control Plan The technology control plan (TCP) provides guidance on the control of access to classifi ed and unclassifi ed export controlled information by foreign employees and long-term foreign national visitors of a cleared U.S. contractor's facility. The TCP explains how the requirements of the ITAR, the EAR, and the NISPOM will be carried out. The TCP is developed by the U.S. contractor, based on the requirements of the ITAR, Section 126.13(c), and the NISPOM. The content regarding information access and restrictions may be derived from other documents provided by the USG (for example, the license provisos and the program security instructions or the form DD 254). The DSS will assist the contractor in developing the TCP and will approve it. A specifi c TCP may not be required if the company's internal security operating procedures, e.g., standard practice procedures (SPP) contain the Technology Transfer, Export Controls and International Programs Security 7-21 necessary details. If security requirements are partially contained in a document such as an SPP and additional export control procedures are in a TCP, the latter must refer to the applicable portions of the other document. Defense Industrial Security Clearance Offi ce The defense industrial security program (DISP) establishes procedures for safeguarding classifi ed defense information which is entrusted to contractors. Included in these procedures is a system for determining the eligibility of industrial personnel for access to classifi ed defense information. This function is performed centrally by the Defense Industrial Security Clearance Offi ce. FOREIGN GOVERNMENT AND NORTH ATLANTIC TREATY ORGANIZATION INFORMATION Foreign Government Information Foreign government information (FGI) is information that has been provided by a foreign government or international organization, or jointly produced, with the expectation that the information will be treated "in confi dence." The information may be classifi ed or unclassifi ed. In addition to TOP SECRET, SECRET, and CONFIDENTIAL, many foreign governments have a fourth level of security classifi cation, RESTRICTED as well as controlled unclassifi ed information (CUI) that is provided in confi dence. As a result of numerous international security and program agreements, the NATO security agreement obligates member nations to adopt common standards of protection. U.S. national policy affords FGI a degree of protection equivalent to that provided to it by the originating government or international organization. Since foreign government accountability and control measures often exceed those of the U.S., the U.S. applies separate security procedures to protect FGI. Because most exchanges are with NATO and its members, the NATO standards are used as the baseline for U. S. procedures for protecting FGI. FGI, including RESTRICTED and foreign government CUI, must be classifi ed under E.O. 12958 in order to receive protection equivalent to that provided by the originating government or organization, as stipulated in E.O. 12958 and international agreements. FGI that is classifi ed by the originating government or organization will be marked with the equivalent U.S. classifi cation, if it is not already marked in English, and the identity of the originating government or organization. Foreign government RESTRICTED and CUI are to be marked, "Handle as CONFIDENTIAL - Modifi ed Handling Authorize." FGI cannot be provided to third country entities or used for a purpose other than that for which it was provided without the consent of the originating government or organization. It must receive protection commensurate with that provided by the originating government or organization. The procedures for handling FGI are contained in two national policy documents, E.O. 12958, the presidential directive on safeguarding classifi ed national security information, and DoD 5200.1-R. Basic handling procedures for FGI are as follows: Storage. The same as U. S. information of the same classifi cation, but FGI is to be stored separately. FGI that is marked "Handle as CONFIDENTIAL Modifi ed Handling Authorized" is stored in the same manner as U. S. FOUO information, e.g., in a locked desk or fi le cabinet. Access. Using the need-to-know principle, no access by third country persons without the prior consent of the originating country or organization. Transmission. The same as U.S. classifi ed information of the same classifi cation level; however, express commercial carriers cannot be used. Receipts are required for international transfers Technology Transfer, Export Controls and International Programs Security 7-22 wherever they occur, although exceptions are made for RESTRICTED information. There are no receipts for CUI. Records. TOP SECRET - Receipt, dispatch, internal distribution, annual inventory, and destruction (two persons); SECRET - receipt, dispatch, internal distribution, and destruction; CONFIDENTIAL - receipt and dispatch, and as required by originator. North Atlantic Treaty Organization Disclosure Security Procedures Basic security requirements are necessary to comply with the procedures established by the U.S. Security Authority for the North Atlantic Treaty Organization (USSAN) for safeguarding NATO information involved in international programs. DoDD 5100.55 contains the terms of reference designating the secretary of defense as the USSAN for the USG. These requirements are consistent with USSAN Instruction 1-70. 5 April 2007, which were implemented by DoDD 5100.55, DoD C- 5220.29, and the NISPOM. The foregoing documents must be consulted for specifi c details. Classifi cation Levels NATO security regulations prescribe four levels of security classifi cation, COSMIC TOP SECRET (CTS), NATO SECRET (NS), NATO CONFIDENTIAL (NC), and NATO RESTRICTED (NR). The terms COSMIC and NATO indicate that the material is the property of NATO. Another marking, ATOMAL, is applied to U.S. restricted data or formerly restricted data and United Kingdom atomic information that have been released to NATO. Once disclosed to NATO, the classifi ed information losses its country of origin identity and is marked as NATO information. Thereafter, access, dissemination, and safeguarding of the information is accomplished in accordance with NATO procedures. The information remains the property of the entity that originated or furnished it. Access Requirements DoD and contractor employees may have access to NATO classifi ed information only when access is required in support of a U.S. or NATO program that requires such access, i.e., need-to-know. Access to NATO classifi ed information requires a fi nal DoD personnel clearance (except for RESTRICTED) at the equivalent level and a NATO-specifi c security briefi ng discussed later in this chapter. A personnel security clearance is not required for access to NATO RESTRICTED information. Foreign nationals from nations not members of NATO may have access to NATO classifi ed information only with the consent of the originating NATO member nation or civil or military body. Requests with complete justifi cation, as described in the NISPOM, will be submitted through the cognizant security offi ce (CSO). North Atlantic Treaty Organization Disclosure Briefi ngs Prior to having access to NATO classifi ed information, contractor and government personnel must be provided a NATO security briefi ng. The contractor's facilities security offi cer (FSO) will initially be briefed by the CSO. Annual refresher briefi ngs will be conducted. When access to NATO classifi ed information is no longer required, personnel will be debriefed, as applicable, and acknowledge their responsibility for safeguarding the NATO information. Technology Transfer, Export Controls and International Programs Security 7-23 Marking and Handling North Atlantic Treaty Organization Disclosure Documents Normally, NATO documents do not carry portion markings as are required for U.S. classifi ed documents. Nevertheless, all classifi ed documents created by U.S. contractors and DoD components will be portion-marked. NATO classifi ed documents, and NATO information in other documents, may not be declassifi ed or downgraded without the prior written consent of the originating NATO member nation civil or military body. Recommendations concerning the declassifi cation or downgrading of NATO classifi ed information are to be forwarded to the central U.S. registry (CUSR) via the CSO by contractors and via command or organizational channels by government personnel. NATO classifi ed documents, except for NATO RESTRICTED, are to be stored as prescribed in DoDD 5100.55 and the NISPOM for U.S. documents of an equivalent classifi cation level. However, NATO documents must not be co-mingled with U.S. or other documents. NATO restricted documents may be stored in locking fi ling cabinets, book cases, desks, other similar locked containers that will deter unauthorized access, or in a locked room to which access is controlled. International Transmission of Classifi ed North Atlantic Treaty Organization Disclosure Documents NATO policy requires the establishment of a central registry for the control of the receipt and distribution of NATO documents within each NATO member country. The CUSR, located in the Pentagon, establishes sub-registries at USG organizations for further distribution and control of NATO documents. Sub-registries may establish control points and sub-control points as needed within their activities for distribution and control of NATO documents. COSMIC TOP SECRET, NATO SECRET and all ATOMAL documents must be transferred through the registry system. Marking the Documents When a document containing U.S. classifi ed information is being specifi cally prepared for NATO, the appropriate NATO classifi cation markings will be applied to the document only after the U.S. information contained in the document is authorized for release to NATO. If the information is to be provided pursuant to a NATO contract, the requirements of the NATO security aspects letter and security requirements checklist will be followed. However, if U.S. classifi cation guidance for the U.S. information is not consistent with NATO classifi cation guidance, the matter must be forwarded to the CSO for resolution. Transmission The CSO will provide transmission instructions to the contractor: The material must be addressed to a U.S. organization at NATO, e.g., U.S. mission to NATO, U.S. national military representative to Supreme Headquarters Allied Powers Europe (SHAPE), or the U.S. representative to the NATO Maintenance and Supply Agency which will place the material into NATO security channels. The material must be accompanied by a letter to the U.S. organization that provides the necessary transfer instructions and provides assurances that the material has been authorized for release to NATO. The material will be properly double-wrapped as described in the NISPOM and DoDD 5100.55. However, the inner wrapper will be addressed to the intended NATO recipient, and the outer wrapper shall be addressed to the U.S. organization at NATO. Classifi ed material is sent to NATO via registered mail and will be routed only through the U.S. postal service and U.S . military postal channels to the U.S. organization that will affect the transfer. The use of express mail is not authorized. Technology Transfer, Export Controls and International Programs Security 7-24 Multinational Industrial Security Working Group Documents The multinational industrial security working group (MISWG) is composed of the NATO countries, less Iceland, plus Austria, Sweden, and Switzerland. It is an ad hoc group organized to rationalize different security practices and develop standard procedures for multinational programs. Although initially developed to standardize procedures among NATO member nations working jointly on a non- NATO project, the MISWG documents contain procedures that may be used in any bilateral or multilateral program or project, including NATO projects. NATO, NATO countries, and other countries have adopted the MISWG procedures. Therefore, they should be used as the baseline in preparing individual arrangements or when consolidated in a program security instruction (PSI), MISWG document 5, for international programs. Most of the MISWG documents provide procedural guidance for implementing security requirements for international programs. Other MISWG documents are used in preparing the content of international agreements and contracts involving access to classifi ed information. The DSS may approve the use of the documents in individual commercial programs. However, the Designated Security Authority, DUSD (TSP&NDP), will approve the use of the documents when they are required by an international agreement such as in a PSI. COMMITTEE ON FOREIGN INVESTMENT IN THE U.S. AND FOREIGN OWNERSHIP, CONTROL OR INFLUENCE The Exon-Florio Amendment to the Omnibus Trade and Competitiveness Act of 1988, as amended by the Defense Authorization Act for Fiscal Year 1993, empowers the president to suspend, prohibit or dissolve ("block") foreign acquisitions, mergers and takeovers of U.S. companies. The president has broad authority to block a transaction under the statute if he determines the foreign interest acquiring control might take action that threatens to impair the national security. The 2007 Foreign Investment and National Security Act requires mandatory investigation where critical infrastructure is vulnerable to foreign control. To exercise his authority, the president must fi nd that: There is credible evidence that leads him to believe that a foreign interest might take action to threaten or impair national security Provisions of law, other than Exon-Florio and the Emergency Economics Powers Act, are not adequate to protect the national security There is no mandatory requirement for a company to report under the law. Nevertheless, the president or his designee may investigate a merger, acquisition, or takeover at any time, including after a transaction has been concluded. The president can reopen a case on the basis of material omissions or material misstatements in the original notice. The president delegated responsibility for carrying out the requirements of Exon-Florio to the interagency committee on foreign investment in the U.S. ( CFIUS). The CFIUS is comprised of representatives of the Departments of Treasury (chair), DoD, DoS, Justice, Homeland Security, and Commerce, the Attorney General of the U.S., the Secretary of Labor (non-voting), and the Director of National Intelligence (non-voting). The President may determine on a case-by-case basis to include heads of any other executive department, agency, or offi ce as members of a CFIUS team. Once CFIUS considers a possible transaction as the result of a notifi cation by the investors, on its own initiative, or at the request of a third party, it has thirty days to decide whether to initiate an investigation. The investigation must be completed not later than forty-fi ve days after its commencement, at which time the committee must present a recommendation to the president. The president is required Technology Transfer, Export Controls and International Programs Security 7-25 to render a decision within fi fteen days after completion of the investigation. If the president decides to take action as the result of a CFIUS investigation, he must submit a written report to Congress on the actions that he intends to take, including detailed rationale for his fi ndings. The committee or a lead agency of the committee may, on behalf of the committee, negotiate, enter into or impose and enforce any agreement or condition with any party to the specifi ed transaction in order to mitigate any threat to the national security of the U.S. that may arise as a result of the transaction. Foreign Ownership, Control or Infl uence It is not in the interest of the U.S. to permit foreign investment in the defense industrial base where it is inconsistent with U.S. national security interests. USG contracts requiring access to classifi ed information may be awarded to companies under FOCI when adequate safeguards exist to protect national security interests. Within the context of the DoD, national security interests are represented by information and technical data inherent in the development and production of military systems, such as system capabilities and vulnerabilities. If this knowledge is lost or compromised, potential adversaries of the U.S. would have the capability to duplicate or neutralize those systems. As a result, the U.S. must take steps to ensure that foreign interests do not have the power to direct or decide matters a company operating under a facility security clearance if such power may result in the unauthorized disclosure of classifi ed and controlled unclassifi ed information, or may adversely affect the award or performance of classifi ed contracts. FOCI encompasses the possible avenues from which unauthorized foreign power may be exerted. When competent authority determines foreign interests have the power to exert such power, measures must be established to negate the FOCI or mitigate the associated risk. When a company performing classifi ed work is to be acquired by or merged with a foreign interest, an industrial security review is undertaken. The purpose of the review is to determine whether existing industrial security measures require enhancement. The matter of FOCI is considered in the aggregate, and the fact that FOCI elements are present will not necessarily bar a company from receiving a facility security clearance. There are many components of foreign involvement requiring examination to determine whether a company is under FOCI and the extent of FOCI, such as those identifi ed on Standard Form (SF) 328. Documents other than the SF 328 are analyzed, to include fi lings with the Security and Exchange Commission for publicly traded companies, articles of incorporation, by-laws, loan and shareholder agreements, and other documents pertinent to potential foreign control or infl uence. The FOCI is then examined within the context of risk factors such as the foreign intelligence threat, potential for unauthorized technology transfer, record of compliance with laws, regulations, and contracts, and the nature of applicable international agreements between the U.S. and foreign governments. If a company is determined to be under FOCI, and risks associated with FOCI are considered unacceptable, the company would be ineligible for a facility clearance or an existing clearance would be suspended or revoked, unless steps are taken to negate FOCI or mitigate associated risks to the satisfaction of the USG. The principal objective of each arrangement is to ensure there is no unauthorized access to classifi ed and controlled unclassifi ed information by foreign owners, their agents or representatives, or by other non-ownership derived sources of foreign control or infl uence. For a detailed discussion of these arrangements and agreements, refer to the International Programs Security Handbook found at: www.avanco.com, and the NISPOM. Technology Transfer, Export Controls and International Programs Security 7-26 SUMMARY The DoD has identifi ed the areas of technology where U.S. know-how should be rigidly protected. These include the critical military technology products, transfer mechanisms and information which DoD has determined should be subject to the most stringent controls. The NDP provides guidance on the disclosure and release of U.S. classifi ed military information. The criteria for disclosure decision- making in the NDP-1 and the NSDM 119 do not categorically dictate whether classifi ed military information will be released to a specifi c country. These decisions are made on a case-by-case basis, in accordance with satisfying all of the fi ve policy objectives of NSDM 119, which are restated in DoDD 5230.11. Controlling the transfer of selected technologies is but one way to maintain the integrity of the U.S. defense-related industrial base. However, the extent of control is at issue. Many feel that controls should be tempered by the realities associated with worldwide competition and the impacts upon U.S. industry and the preservation of U.S. economic security as the prerequisite condition to maintaining national security. Others, however, as noted in the chapter introduction, believe that transfer of advanced technology for military or dual-use applications can lead to the proliferation of dual-use technology as well as of nuclear and conventional arms. Technology transfer issues continue to play an important role in government-to-government sales programs, commercial sales programs, international armaments cooperation programs, and industrial base considerations. Policies and supporting directives governing technology transfer emphasize the application of the U.S. policy and legal requirements in the AECA, E.O. 12958, NSDM 119, NDP-1, and DoDD 5230.11 to each case, and the analysis of a potential recipient's need and the implied use of such information. The directives are explicit as to procedure and channels to be followed to preclude unwarranted release and disclosure of data. REFERENCES U.S. Department of Defense, DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapter 3. U.S. Department of Defense, DoDD 2040.2, International Transfers of Technology, Goods, Services and Munitions. U.S. Department of Defense, DoD 5220.22M, National Industrial Security Programs Operating Manual (NISPOM). U.S Department of Defense, DoD 5220.22-R, Industrial Security Regulation. U.S. Department of Defense, DoDD 5230.11, National Policy and Procedures for Disclosure of Classifi ed Military Information to Foreign Governments and International Organizations. U.S. Department of Defense, DoDD 5230.20, Visits and Assignments of Foreign Representatives. U.S. Department of Defense, DoDD 5230.25, Withholding of Unclassifi ed Technical Data from Public Disclosure. U.S. Department of Defense, ODUSD (Technology Security Policy and National Disclosure Policy), International Programs Security (IPS) Handbook, February 1995, (Revised January 2006). URL: http://www.avanco.com. Technology Transfer, Export Controls and International Programs Security 7-27 U.S. Government. Title 22, CFR, Parts 120-130, International Traffi c in Arms Regulations (ITAR). URL - http:www.pmdtc.gov. U.S. Department of Defense, DoD 5400.7, Freedom of Information Program. Executive Order 12958, as Amended National Security Decision Memorandum 119. National Industrial Security Program Operating Manual (NISPOM), located at: http://www.dtic.mil/ whs/directives/corres/html/522022m.htm. U.S. Department of Defense, DoD 5200.1R, Information Security Program. U.S. Department of Defense, DoD 4500.54-G, DoD Foreign Clearance Guide. U.S. Department of Defense, DoDD 5200.12, Conduct of Classifi ed Material. U.S. Security Authority for the North Atlantic Treaty Organization, Instruction I-07 Public Law (PL- 110-49), 26. July 2007. Technology Transfer, Export Controls and International Programs Security 7-28 ATTACHMENT 7-1 MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS CHAIRMAN, JOINT CHIEFS OF STAFF UNDER SECRETARIES OF DEFENSE DIRECTORS OF DEFENSE AGENCIES Subject: Training in International Security and Foreign Disclosure Support to International Programs Strong allies, and well-equipped coalition partners, make America stronger. It is, therefore, in America's national security interest to promote cooperation with other nations, seek-international participation in our weapons acquisition process and support appropriate foreign military sales. At the same time, we must ensure that sensitive and classifi ed U.S. technology and military capabilities are protected. Classifi ed information should be shared with other nations only when there is a clearly defi ned advantage to the United States. Disclosures must be carefully designed to achieve their purpose. and recipients must protect the information. To make certain that we accomplish these goals, certain security arrangements must be in place prior to any foreign participation in DoD programs. It is therefore vital that every DoD employee involved in international programs understand these security arrangements, as well as the laws, policies, and procedures that govern foreign involvement in our programs. To insure that all relevant employees are fully trained in this area, the Offi ce of the Deputy to the Under Secretary of Defense (Policy) for Policy Support (DUSD(PS) has developed a course of instruction that covers the practical application of relevant law, executive orders, and DoD policies on this subject. All DoD personnel responsible for negotiating, overseeing, managing, executing or otherwise participating in international activities shall successfully complete either the International Security Requirements Course offered by DUSD(PS), the International Programs Security and Technology Transfer Course taught by the Defense Systems Management College, or an executive version of the course for mid-level and senior managers now being developed. This requirement applies to anyone who works in an offi ce dealing exclusively with international matters, in international cooperation offi ces within broader functional offi ces, and those working on international issues within a DoD program. Examples of applicable activities include: security assistance, cooperative research, foreign disclosure, specifi c country relationships, and other international policy activities. The law also requires that we consider systems of allied nations, or the co-development of systems with allied nations, before a U.S.-only program may be initiated. Therefore the basic, intermediate, and advanced program manager courses at DSMC shall include at least four hours of training in international security requirements related to acquisition programs. Anyone working in program offi ces where any international activities occur, including exports, must also complete the full fi ve day course. DoD personnel who are newly assigned to international programs shall participate in one of the courses within six months of the assignment. To ensure consistency, DoD components that offer specialized training in foreign disclosure and security requirements for international programs shall coordinate the contents of their courses with the DUSD(PS). //Signed// John J. Hamre DEPUTY SECRETARY OF DEFENSE 1010 DEFENSE PENTAGON WASHINGTON, D.C. 20301-1010 22 OCTOBER 1999 Technology Transfer, Export Controls and International Programs Security 7-29 ATTACHMENT 7-2 SELECTED U.S. TECHNOLOGY LAWS AND PUBLICATIONS Laws: Atomic Energy Act of 1954 Energy Reorganization Act of 1974 Arms Export Control Act Export Administration Act of 1979 Stephenson-Wydler Technology Innovation Act of 1980 Defense Authorization Act of 1986, Nunn Amendment/ NATO Cooperative R&D Defense Authorization Act of 1993, Defense Technology and Industrial Base, Reinvestment and Concession Department of Defense Documents: DoD 5120.49, International Technology Transfer Coordinating Committee DoD 5200.1, DoD Information Security Program DoD 5230.9, Clearance of DoD Information for Public Release DoD 5230.24, Distribution Statements on Technical Document DoD 5400.7, DoD Freedom of Information Act Program DoD 5530.3, International Agreements International Programs Security Handbook, DUSD (TSP&NDP)) available at http:// www.avanco.com/n/ips_handbook.html International Armaments Cooperation Handbook, USD(AT&L), Director of International Cooperation available at http://www.acq.osd.mil/ic/handbook.pdf. Militarily Critical Technologies List (MCTL) (Available from Institute for Defense Analysis) Department of State Documents: International Traffi c and Arms Regulations (ITAR) (22 CFR 120-130) (Available from OCR Services or DDTC at http://www.pmdtc.gov.Attachment 7-2 Selected U.S. Technology Laws and Publications Laws: Atomic Energy Act of 1954 Energy Reorganization Act of 1974 Arms Export Control Act Export Administration Act of 1979 Stephenson-Wydler Technology Innovation Act of 1980 Defense Authorization Act of 1986, Nunn Amendment/ NATO Cooperative R&D Technology Transfer, Export Controls and International Programs Security 7-30 Defense Authorization Act of 1993, Defense Technology and Industrial Base, Reinvestment and Concession Department of Defense Documents: DoD 5120.49, International Technology Transfer Coordinating Committee DoD 5200.1, DoD Information Security Program DoD 5230.9, Clearance of DoD Information for Public Release DoD 5230.24, Distribution Statements on Technical Document DoD 5400.7, DoD Freedom of Information Act Program DoD 5530.3, International Agreements International Programs Security Handbook, DUSD (TSP&NDP)) available at http:// www.avanco.com/n/ips_handbook.html International Armaments Cooperation Handbook, USD(AT&L), Director of International Cooperation available at http://www.acq.osd.mil/ic/handbook.pdf. Militarily Critical Technologies List (MCTL) (Available from Institute for Defense Analysis) Department of State Documents: International Traffi c and Arms Regulations (ITAR) (22 CFR 120-130) (Available from OCR Services or DDTC at http://www.pmdtc.gov. 8-1 Foreign Military Sales Contractual Agreements INTRODUCTION Basic contract law concepts are evident in the government-to-government agreements for security assistance. In particular, this chapter examines the foreign military sales (FMS) case standard terms and conditions that are an integral component of every security assistance letter of offer and acceptance (LOA). Additionally, this chapter discusses the purpose and application of other security assistance agreements such as LOA amendments, LOA modifi cations, letters of intent (LOI), leases, loans and international agreements. CONTRACTS A contract is an agreement between two or more parties which is enforceable by law. DoD 5105.38-M, Security Assistance Management Manual (SAMM) states that the FMS program is conducted using formal contracts. In the FMS process, the formal government-to-government contracts are referred to as LOAs. LOAs are also commonly referred to as cases. In practice, the terms LOA and case are synonymous. A security assistance LOA is a bilateral agreement between the United States government (USG) and an authorized foreign purchaser. In the LOA, the USG commits itself to provide certain defense items or services and the purchaser commits itself to abide by specifi c terms and conditions associated with the sale and to make specifi ed fi nancial payments. It is important to note that the LOA document is also used to implement security cooperation programs. Under security cooperation programs, the LOA and overall FMS processes and infrastructure are being utilized to track and implement funds appropriated by Congress for designated activities. In this role, security cooperation LOAs are not signed by a foreign purchaser and the standard terms and conditions are not included in the agreement. Elements of a Contract Six basic elements must be present for an agreement to be enforceable by law as a contract. The six elements are found in each LOA as well as the other government-to-government documents used in security assistance. This section highlights how the six contract elements relate to the LOA process. Offer The offer is a proposal by one party to enter into a contractual relationship with another party. In order for a statement or communication to be a valid offer, the respective statement or communication must be intended to be an offer. This element plays an important role in the security assistance process. A foreign customer may submit a request for price and availability (P&A) data. When price and availability data is provided to a foreign purchaser, the SAMM requires that a statement be included with the P&A response to emphasize that providing P&A data does not constitute an offer to sell. If a foreign purchaser desires an LOA to purchase the material or services identifi ed in the P&A data, the purchaser must submit a subsequent request for an LOA. FOREIGN MILITARY SALES CONTRACTUAL AGREEMENTS Chapter 8 8-2 Foreign Military Sales Contractual Agreements Under the FMS process, a formal offer is communicated by presenting an LOA, complete with the authorized USG signatures, to the prospective customer. LOAs are generally only offered in response to a specifi c customer's letter of request (LOR). The customer's LOR is referenced in each LOA offered. The offer remains valid through the offer expiration date cited in the LOA. After the offer expiration date, the LOA is no longer an offer and cannot be accepted unless reinstated or reissued by the USG. Acceptance Acceptance is an expression of agreement to the contract offer. In order for the acceptance to be effective, it must be clear, timely and in the same terms as the offer. This contract principle is key to the LOA process. Even though a customer submitted an LOR for an LOA, the customer is under no obligation to accept the LOA offered by the USG. Acceptance of the LOA is evidenced by an authorized country representative signing the LOA prior to the offer expiration date, forwarding the specifi ed initial deposit and returning the proper number of signed LOA copies. Payment of the initial deposit is a condition of acceptance. Implementation of the FMS case cannot take place without receipt of the initial deposit. Additionally, in the acceptance process, the customer informs the USG of the applicable mark for code, freight forwarder code, procuring agency code and the name/address of their paying offi ce. This information is entered by the customer on the bottom of the fi rst page of the LOA. There may be times when minor changes need to be made to an LOA after it has been offered to the purchaser. To avoid the problem of a counteroffer, the purchaser should not make pen-and-ink changes to the offer. Unauthorized pen-and-ink changes by the customer are considered a counter- offer. Pen- and-ink changes may be requested by the purchaser or initiated by the Department of Defense ( DoD) implementing agency (IA) to make small administrative changes to the offer. In either situation, pen- and-ink changes can only be authorized by the issuing implementing agency after obtaining permission from the Defense Security Cooperation Agency (DSCA) and must be made prior to acceptance by the purchaser. In any event, such changes should be kept to a minimum. If more signifi cant changes are required, a new or restated LOA may be necessary. Consideration Consideration exists when something of legal value or benefi t is offered by one party to another. Consideration is the value of a promised action and is often manifested in monetary terms. With respect to an LOA, consideration consists of the purchaser's fi nancial payment(s) in return for defense articles and services provided by the USG. Competent Parties This means that both parties must have legal capacity to enter into the contract. Competent parties relative to the LOA are the authorized United States (U.S.) and purchaser representatives that sign the LOA. Each LOA will contain a written signature by a representative of the IA that generated the LOA. Additionally, each LOA will contain an electronic countersignature signifying that DSCA has reviewed and approved the LOA. Each customer establishes their own process for LOA review and acceptance. From a U.S. perspective, receipt of a signed LOA from the customer coupled with receipt of the initial deposit, which is typically substantial, indicates that the individual that signed accepting the LOA is an authoritative representative of that respective government. 8-3 Foreign Military Sales Contractual Agreements Lawful Purpose As a general rule, a contract which violates a statute is unlawful and will not be enforced. Under the FMS process, it is incumbent upon the agencies of both governments to insure that their respective laws and policies are complied with prior to offering or accepting a given LOA. The USG must comply with the Arms Export Control Act (AECA), Foreign Assistance Act (FAA), and other associated statutes. Each security assistance LOA includes the statement " Pursuant to the Arms Export Control Act" in the second paragraph. From the U.S. perspective, the congressional notifi cation process for certain high- value LOAs is an example of ensuring that LOAs offered to customers comply with U.S. statutory requirements. Foreign purchasers have the responsibility to ensure that their actions regarding the LOA are in compliance with their respective national laws. Terms and Conditions A contract must clearly delineate what each party has committed to perform. A contract that poorly defi nes what, when, where, how, at what cost and under what conditions may lead to confusion and may be unenforceable due to vagueness. The LOA document is intended to clearly establish what the USG has committed to do as well as what the foreign purchaser has committed to do. The LOA describes what is being sold along with estimated prices, delivery dates, projected sources of supply, transportation methods, payment dates and so forth. In addition, every security assistance LOA contains a set of standard terms and conditions. This same set of standard terms and conditions applies to all security assistance LOAs and is exactly the same for all foreign purchasers. It is important to note that when the LOA form is used to implement security cooperation programs, the standard terms and conditions are not applied. The reason for this difference is that under security cooperation programs, the LOA process is being used to document the implementation of a specially appropriated program on the behalf of another element of the USG. In reality, under security cooperation, the USG represented by DSCA, is selling defense articles and services to another component of the USG rather than a foreign purchaser. LETTER OF OFFER AND ACCEPTANCE STANDARD TERMS AND CONDITIONS The standard terms and conditions to be used with all security assistance LOAs are discussed below. The seven sections as a whole establish certain rights for the parties in the contract as well as specifying the basic provisions for the conduct of the sale to include certain limitations or constraints associated with the sale. Section 1 Conditions - United States Government Obligations Section 2 Conditions - General Purchaser Agreements Section 3 Indemnifi cation and Assumption of Risks Section 4 Financial Terms and Conditions Section 5 Transportation and Discrepancy Provisions Section 6 Warranties Section 7 Dispute Resolution 8-4 Foreign Military Sales Contractual Agreements Section 1 Conditions - United States Government Obligations Section 1.1 Standard Items. This section notifi es the purchaser that the items to be furnished under the LOA will typically be standard items. The term "standard" in this context means that the items provided will be the same as those currently in use by DoD. The ultimate purpose of security assistance is to enhance U.S. national security. When friends and allies use standard U.S. systems and components, opportunities for interoperability and logistics cross-servicing are greatly increased which, in turn, enhances U.S. national security. This general commitment to supply standard items will be applied subject to U.S. releasability determinations and technology transfer decisions which are discussed in Chapter 7, "Technology Transfer, Export Controls and International Programs Security." This condition further highlights that items will be provided without regard to make or model. This provision is necessary because the DoD generally procures using a competitive process. In the competition, the potential exists for any given manufacturer's make or model product to be selected if the respective product meets the procurement specifi cation requirements such as performance, form, fi t, or function. Although the foreign customer may have received a certain make and model product in a prior procurement, the customer should not expect to automatically receive the exact same make and model product in future procurements. If the purchaser has certain unique requirements for specifi c makes or models, this condition places the responsibility on the purchaser to make those unique require- ments known to the IA, otherwise the standard U.S. confi guration will be supplied. 1.1 Unless otherwise specifi ed, items will be those which are standard to the U.S. Department of Defense (DoD), without regard to make or model. 1.2 The USG will furnish the items from its stocks and resources, or will procure them under terms and conditions consistent with DoD regulations and procedures. When procuring for the Purchaser, DoD will, in general, employ the same contract clauses, the same contract administration, and the same quality and audit inspection procedures as would be used in procuring for itself; except as otherwise requested by the Purchaser and as agreed to by DoD and set forth in this LOA. Unless the Purchaser has requested, in writing, that a sole source contractor be designated, and this LOA refl ects acceptance of such designation by DoD, the Purchaser understands that selection of the contractor source to fi ll requirements is the responsibility of the USG, which will select the contractor on the same basis used to select contractors for USG requirements. Further, the Purchaser agrees that the U.S. DoD is solely responsible for negotiating the terms and conditions of contracts necessary to fulfi ll the requirements in this LOA. 1.3 The USG will use its best efforts to provide the items for the dollar amount and within the availability cited. 1.4 Under unusual and compelling circumstances, when the national interest of the U.S. requires, the USG reserves the right to cancel or suspend all or part of this LOA at any time prior to the delivery of defense articles or performance of defense services. The USG shall be responsible for termination costs of its suppliers resulting from cancellation or suspension under this section. Termination by the USG of its contracts with its suppliers, other actions pertaining to such contracts, or cessation of deliveries or performance of defense services is not to be construed as cancellation or suspension of this LOA itself under this section. 1.5 U.S. personnel performing defense services under this LOA will not perform duties of a combatant nature, including duties relating to training and advising that may engage U.S. personnel in combat activities outside the U.S., in connection with the performance of these defense services. 1.6 The assignment or employment of U.S. personnel for the performance of this LOA by the USG will not take into account race, religion, national origin, or sex. 1.7 Unless otherwise specifi ed, this LOA may be made available for public inspection consistent with the national security of the United States. 8-5 Foreign Military Sales Contractual Agreements Section 1.2 Buyer-Seller Relationship. This section establishes the buyer-seller relationship between the international purchaser and the USG. By accepting the LOA, the purchaser allows USG representatives to act on its behalf. When the DoD procures items to fulfi ll the purchaser's requirements, it will generally apply the same contract clauses and procedures that it uses in procuring for itself. This affords the international purchaser the same benefi ts and protection that apply to DoD procurements, and is one of the principal reasons why nations choose to procure through FMS channels. Sole Source. Sole source for the purposes of an LOA means the intent to obtain the items or services from only one designated supplier. The purchaser may request sole source in accordance with the procedures listed in SAMM, Section C6.3.4, and Defense Federal Acquisition Regulation Supplement (DFARS) 225.7304. More information on sole source procurement is contained in later Chapter 9, "Foreign Military Sales Acquisition Policy and Process. " Section 1.3 Best Efforts. The term " best efforts" is a legal term that implies a party's good faith intent to achieve a stated performance level but this term also recognizes that other factors may arise that could preclude attaining the intended goal. A party expending "best effort" will not be considered in default of the contract even though the stated performance levels are not achieved. In regard to the LOA, this section means that the USG will take action to deliver within the estimated cost and dates cited in the LOA but the USG cannot promise or guarantee these estimates will be achieved. This condition recognizes the potential for circumstances to arise that may prevent the USG from delivering at the estimated costs or within the estimated delivery dates. As such, the purchaser understands and accepts the risk that the USG may fail to meet the LOA cost and delivery estimates. Section 1.4 U.S. Government Right to Cancel or Suspend. The USG reserves the right to cancel an LOA, in part or in whole, when determined to be in the USG's best interest. The USG carefully reviews customer requests before extending an LOA offer. As indicated by Section 1.4, something signifi cant must occur for the USG to change its position and decide to cancel or suspend the LOA sale. If the USG cancels the LOA, it will pay the costs associated with terminating its suppliers. This does not necessarily mean that the entire LOA amount will be refunded to the purchaser. Given the fact that there will be unusual and compelling circumstances surrounding the exercise of this LOA term, history shows that a politically negotiated agreement will be necessary to settle the fi nancial obligations and disposition of material associated with cancelled or suspended LOAs. SAMM Section C6.6 states that DSCA will provide the IA direction regarding the disposition of property and the liquidation of liabilities in regard to any canceled or suspended LOA. Section 1.5 & 1.6 U.S. Personnel Requirements. Sections 1.5 and 1.6 implement FAA and AECA statutory requirements which apply to U.S. personnel performing security assistance functions. Section 1.5 emphasizes that the presence of U.S. security assistance personnel in the purchaser's country does not necessarily constitute a commitment by the U.S. to conduct any combat activity with the purchaser. Additionally, Section 1.6 specifi es that the U.S. will use its own personnel management processes to select individuals to conduct security assistance functions on behalf of the purchaser. Section 1.7 Freedom of Information Guidelines. Section 1.7 implements the provisions of the Freedom of Information Act (FOIA). However, information provided to the USG in confi dence by a foreign government may be exempt from disclosure to the public. Conditions which may exempt the LOA from release include determinations that the LOA contains information not normally released by the originator. Any decision to release or withhold information must be coordinated with DSCA and the appropriate legal counsel of the involved DoD component. The offi cial policy for release is 8-6 Foreign Military Sales Contractual Agreements found in SAMM, Section C3.4.1. More information on FOIA is contained in Chapter 7, "Technology Transfer, Export Controls, and International Programs Security Requirements." Section 2. Conditions - General Purchaser Agreements Section 2 outlines certain rights and obligations of purchaser associated with the LOA sales contract. 2.1 The Purchaser may cancel this LOA or delete items at any time prior to delivery of defense articles or performance of defense services. The Purchaser is responsible for all costs resulting from cancellation under this section. 2.2 The Purchaser agrees, except as may otherwise be mutually agreed in writing, to use the defense articles sold hereunder only: 2.2.1 For purposes specifi ed in any Mutual Defense Assistance Agreement between the USG and the Purchaser 2.2.2 For purposes specifi ed in any bilateral or regional defense treaty to which the USG and the Purchaser are both parties, if section 2.2.1 is inapplicable; or, 2.2.3 For internal security, individual self-defense, preventing or hindering the proliferation of weapons of mass destruction and the means of delivering such weapons or civic action if sections 2.2.1 and 2.2.2 are inapplicable. 2.3 The Purchaser will not transfer title to, or possession of, the defense articles, components and associated support materiel, related training or other defense services (including plans, specifi cations, or information), or technology furnished under this LOA to anyone who is not an offi cer, employee, or agent of the Purchaser (excluding transportation agencies), and shall not use or permit their use for purposes other than those authorized, unless the written consent of the USG has fi rst been obtained. The Purchaser will ensure, by all means available to it, respect for proprietary rights in any items and any plans, specifi cations, or information furnished, whether patented or not. The Purchaser also agrees that the defense articles offered will not be transferred to Cyprus or otherwise used to further the severance or division of Cyprus, and recognizes that the U.S. Congress is required to be notifi ed of any substantial evidence that the defense articles sold in this LOA have been used in a manner that is inconsistent with this provision. 2.4. To the extent that items, including plans, designs, specifi cations, technical data, or information, furnished in connection with this LOA may be classifi ed by the USG for security purposes, the Purchaser certifi es that it will maintain a similar classifi cation and employ measures necessary to preserve such security, equivalent to those employed by the USG and commensurate with security agreements between the USG and the Purchaser. If such security agreements do not exist, the Purchaser certifi es that classifi ed items will be provided only to those individuals having an adequate security clearance and a specifi c need to know in order to carry out the LOA program and that it will promptly and fully inform the USG of any compromise, or possible compromise, of U.S. classifi ed material or information furnished pursuant to this LOA. The Purchaser further certifi es that if a U.S. classifi ed item is to be furnished to its contractor pursuant to this LOA: (a) item will be exchanged through offi cial Government channels, (b) the specifi ed contractor has been granted a facility security clearance by the Purchaser at a level at least equal to the classifi cation level of the U.S. information involved, (c) all contractor personnel requiring access to such items have been cleared to the appropriate level by the Purchaser, and (d) the Purchaser will assume responsibility for administering security measures while in the contractor's possession. If a commercial transportation agent is to be used for shipment, the Purchaser certifi es that such agent has been cleared at the appropriate level for handling classifi ed items. These measures will be maintained throughout the period during which the USG may maintain such classifi cation. The USG will use its best efforts to notify the Purchaser if the classifi cation is changed. 8-7 Foreign Military Sales Contractual Agreements Section 2.1 Purchaser Right to Cancel. In Section 1.4, the USG retained the right to cancel or suspend part or all of the case. This section provides the FMS customer the right to change their mind. Simply because the customer accepted the case at one point does not mean the customer is locked into that decision. The customer is a voluntary participant and can cancel or delete items prior to delivery. If the customer chooses to exercise this right, the customer is liable for all the termination costs. Termination costs are incurred to cancel work that is already underway to support the LOA. Most termination costs relate to payments to contractors arising from contract cancellations. Generally, contractors are entitled to certain payments when contracts are unilaterally cancelled prior to normal contract completion. Depending on how much work is already in-process or on-contract, the termination cost to cancel or delete items may be signifi cant. Because this condition provides the right to cancel, termination liability is a factor calculated into the LOA payment schedule. The calculation of termination liability ensures that at any point in the LOA execution, the U.S. should have collected suffi cient funds in advance from the customer to cover all outstanding liabilities in the event the customer elects to cancel part or all of the LOA. More information on termination liability is contained in Chapter 12, "Foreign Military Sales Financial Management." Section 2.2 End-Use Purposes. This condition stipulates that the purchaser will only use the material purchased under the LOA for certain purposes. At fi rst, it may appear unfair that the USG attaches limitations to the sale but you must remember that the USG is selling defense articles and services rather than consumer products. Additionally, as discussed in Section 1.1, this is often the same material used by U.S. forces. As such, the USG has valid concerns over how these articles are used by the customer. More information on end-use is contained in Chapter 18, "End-Use Monitoring and Third-Party Transfer." Section 2.3 Third Country Transfers. Section 2.3 restates the obligations imposed on the FMS purchaser under the AECA. Although the FMS customer actually becomes owner of the material, the USG requires, as a condition of the sale, that the purchaser agree to not resell or transfer possession of the purchased items without fi rst obtaining written USG consent. This condition does not mean that the customer can never sell the material or turn over possession for maintenance to a third country. It simply means that the USG is very concerned about who has access and possession of this defense material. Before offering the LOA, the USG determined that it was in its best interest to permit the customer to possess this material. The USG wants to ensure that whatever third party may subsequently possess the material is also in the USG's best interest. This condition also requires FMS purchaser to respect the proprietary rights of U.S. contractors. U.S. industry often has made signifi cant investments in defense technologies that enable the fi rm to compete both commercially and in the defense sector. This condition protects the intellectual property of U.S. contractors from being misused. More information on third-party transfers is contained in Chapter 18, "End-Use Monitoring and Third-Party Transfer." This section also specifi cally identifi es conditions related to Cyprus. It does appear unusual that provisions regarding Cyprus would be included in the standard terms and conditions used with all security assistance LOAs. This is an example of the political infl uences that impact security assistance. The Congress was concerned about Cyprus. As a result, they specifi cally addressed this concern within the language of the AECA. Given these conditions relative to Cyprus are contained within the law, these same conditions fl ow over into the standard terms and conditions of the LOA. 8-8 Foreign Military Sales Contractual Agreements Section 2.4 Security Requirements. The USG is very concerned about preserving the security of material transferred under FMS. This condition requires the FMS customer to maintain equivalent security measures. This does not mean the customer must use the same procedures. It means that the end result of the customer's security process will achieve a level of security that is equivalent to the security level provided by the U.S. Additionally, the customer is responsible for security not only when the item is in government possession but also when it is provided to domestic contractors or when it is in the transportation pipeline. More information on security controls is contained in Chapter 7, "Technology Transfer, Export Controls, and International Programs Security Requirements." Section 3. Indemnifi cation and Assumption of Risk Section 3 reminds the customer that the USG's purpose in the sales contract is not for fi nancial gain. Obviously, the USG believes the sale is in its best interest but profi t is not the motivating factor. In recognition of this fact, this condition states that the purchaser indemnifi es the USG. This means that if fi nancial liabilities arise in the performance of the LOA, the purchaser agrees in advance to absorb all the fi nancial risk. At fi rst, the requirement for indemnifi cation may seem unfair and appear that the USG is placing undue risk upon the FMS purchaser. However, you must remember that the USG is conducting business on behalf of the FMS customer in the same manner that the USG conducts business for itself. As a normal business practice, the USG exposes itself to certain degrees of risk. Given the broad range of risks the USG faces, it is less expensive to absorb the occasional loss than it is to purchase insurance to cover all these risks. In procurements, the USG includes limitation of liability clauses to relieve contractors from certain liabilities (like acts of God). If contractors were required to cover all potential risks, they would demand a higher contract price in compensation for being exposed to greater risk. When it comes to FMS, the USG faces certain risks just like it does while conducting business for itself. Only this time, the USG is simply requiring the customer to absorb the risks that the USG would absorb if the actions were conducted in support of a USG requirement. So, in reality, the USG is not asking the customer to be exposed to an extraordinary degree of risk. The USG is only requiring the customer to stand in the USG's place to face the same level of risk that the USG normally faces. 3.1 The Purchaser recognizes that the USG will procure and furnish the items described in this LOA on a non-profi t basis for the benefi t of the Purchaser. The Purchaser therefore undertakes to indemnify and hold the USG, its agents, offi cers, and employees harmless from any and all loss or liability (whether in tort or in contract) which might arise in connection with this LOA because of: 3.1.1 Injury to or death of personnel of Purchaser or third parties, or 3.1.2 Damage to or destruction of (a) property of DoD furnished to Purchaser or suppliers specifi cally to implement this LOA, (b) property of Purchaser (including the items ordered by Purchaser pursuant to this LOA, before or after passage of title to Purchaser), or (3) property of third parties, or 3.1.3 Infringement or other violations of intellectual property or technical data rights. 3.2 Subject to express, special contractual warranties obtained for the Purchaser, the Purchaser agrees to relieve the contractors and subcontractors of the USG from liability for, and will assume the risk of, loss or damage to: 3.2.1 Purchaser's property (including items procured pursuant to this LOA, before or after passage of title to Purchaser), and 3.2.2 Property of DoD furnished to suppliers to implement this LOA, to the same extent that the USG would assume for its property if it were procuring for itself the items being procured. 8-9 Foreign Military Sales Contractual Agreements Liability Illustration. Suppose, under an FMS case, a foreign purchaser wanted to purchase an excess aircraft and have that aircraft's avionics upgraded prior to delivery. Following case acceptance, the U.S. awarded a contract for the upgrade, removed the aircraft from storage and transported it to a contractor for upgrade work. When the contractor completed the work, the contractor's test pilot fl ew the aircraft on a functional check fl ight. During the check fl ight, a catastrophic problem developed which caused the aircraft to crash and be destroyed as well as causing signifi cant property damage on the ground at the crash site. In this hypothetical scenario, who is fi nancially liable for the costs? The answer is that it depends. The USG would investigate the crash to determine the cause. In the investigation, the contractor's contractual responsibility would be examined to determine if contractor non-performance or negligence contributed to the accident. If the contractor would have held some fi nancial responsibility if the work was being done for the benefi t of the USG, then the contractor would also be held to the same degree of fi nancial responsibility in the case of the work being performed for an FMS customer. In certain situations, the USG knowingly exposes itself to certain risks under the self insurance principle. If, at the conclusion of the investigation, it was found that the contractor had fulfi lled all his contractual requirements and the accident cause was in an area that the USG normally accepts the liability risk, this LOA condition states that the FMS purchaser will assume this fi nancial liability rather than the USG or the contractor. Again, this provision simply informs the FMS customer that they should be prepared to be exposed to the same degree of fi nancial risk that the USG exposes itself to in the normal course of business. Section 4. Financial Terms and Conditions 4.1 The prices of items to be procured will be billed at their total cost to the USG. Unless otherwise specifi ed, the cost of items to be procured, availability determination, payment schedule, and delivery projections quoted are estimates based on the best available data. The USG will use its best efforts to advise the Purchaser or its authorized representatives of: 4.1.1 Identifi able cost increases that might result in an overall increase in the estimated costs in excess of ten percent of the total value of this LOA, 4.1.2 Changes in the payment schedule, and 4.1.3 Delays which might signifi cantly affect estimated delivery dates. USG failure to advise of the above will not change the Purchaser's obligation under all subsections of section 4.4. 4.2 The USG will refund any payments received for this LOA which prove to be in excess of the fi nal total cost of delivery and performance and which are not required to cover arrearages on other LOAs of the Purchaser. 4.3 Purchaser failure to make timely payments in the amounts due may result in delays in contract performance by DoD contractors, claims by contractors for increased costs, claims by contractors for termination liability for breach of contract, claims by USG or DoD contractors for storage costs, or termination of contracts by the USG under this or other open Letters of Offer and Acceptance of the Purchaser at the Purchaser's expense. 4.4 The Purchaser agrees: 4.4.1 To pay to the USG the total cost to the USG of the items even if costs exceed the amounts estimated in this LOA. 4.4.2 To make payment(s) by check or wire transfer payable in U.S. dollars to the Treasurer of the United States. 8-10 Foreign Military Sales Contractual Agreements Section 4 states the purchaser's fi nancial liability and obligation for items or services purchased through FMS sales. Section 4.1 Recovery of Cost. This section reiterates that the LOA data refl ects a best estimate and may be subject to change. This section obligates the purchaser to pay the USG the total cost for the items in accordance with the AECA. Section 4.2 Refunds. The USG will refund payments that are in excess of the total fi nal cost unless there are other unpaid fi nancial requirements of other LOAs with the same purchaser. In this situation, the excess payments from one LOA may be applied toward the delinquent amount due on another LOA. 4.4.3 If Terms of Sale specify "Cash with acceptance", to forward with this LOA a check or wire transfer in the full amount shown as the estimated Total cost, and agrees to make additional payment(s) upon notifi cation of cost increase(s) and request(s) for funds to cover such increase(s). 4.4.4 If Terms of Sale specify payment to be "Cash prior to delivery", to pay to the USG such amounts at such times as may be specifi ed by the USG (including initial deposit) in order to meet payment requirements for items to be furnished from the resources of DoD. USG requests for funds may be based on estimated costs to cover forecasted deliveries of items. Payments are required 90 days in advance of the time DoD plans such deliveries or incurs such expenses on behalf of the Purchaser. 4.4.5 If Terms of Sale specify payment by "Dependable Undertaking", to pay to the USG such amounts at such times as may be specifi ed by the USG (including initial deposit) in order to meet payments required by contracts under which items are being procured, and any damages and costs that may accrue from termination of contracts by the USG because of Purchaser's cancellation of this LOA. USG requests for funds may be based upon estimated requirements for advance and progress payments to suppliers, estimated termination liability, delivery forecasts, or evidence of constructive delivery, as the case may be. Payments are required 90 days in advance of the time USG makes payments on behalf of the Purchaser. 4.4.6 If Terms of Sale specify "Payment on Delivery", that bills may be dated as of the date(s) of delivery of the items, or upon forecasts of the date(s) thereof. 4.4.7 That requests for funds or billings are due and payable in full on presentation or, if a payment date is specifi ed in the request for funds or bill, on the payment date so specifi ed, even if such payment date is not in accord with the estimated payment schedule, if any, contained in this LOA. Without affecting Purchaser's obligation to make such payment(s) when due, documentation concerning advance and progress payments, estimated termination liability, or evidence of constructive delivery or shipment in support of requests for funds or bills will be made available to the Purchaser by DoD upon request. When appropriate, the Purchaser may request adjustment of any questioned billed items by subsequent submission of a discrepancy report. 4.4.8 To pay interest on any net amount by which it is in arrears on payments, determined by considering collectively all of the Purchaser's open LOAs with DoD. Interest will be calculated on a daily basis. The principal amount of the arrearage will be computed as the excess of cumulative fi nancial requirements of the Purchaser over total cumulative payments after quarterly billing payment due dates. The rate of interest paid will be a rate not less than a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding short-term obligations of the USG as of the last day of the month preceding the net arrearage and shall be computed from the date of net arrearage. 4.4.9 To designate the Procuring Agency and responsible Paying Offi ce and address thereof to which the USG will submit requests for funds and bills under this LOA. 8-11 Foreign Military Sales Contractual Agreements Section 4.3 Payment Delays. Any delay in making the LOA payments by the purchaser may result in the USG directing the contractor to stop work which, in turn, may lead to additional or increased costs and delayed delivery. Section 4.4 Terms of Sale. The purchaser agrees to pay the total cost incurred under the LOA even if this amount exceeds the estimated costs provided earlier. The purchaser agrees to make payments in accordance with the applicable terms of sale specifi ed on the LOA. Later Chapter 12, "Foreign Military Sales Financial Management," gives a more detailed explanation of the specifi c terms of sale. Section 5. Transportation and Discrepancy Provisions Section 5 delineates the transportation obligations and requirements of the purchaser and defi nes the role of the USG in arranging for transportation when required. Section 5.1 Title Transfer and Delivery Point. Section 5.1 identifi es where the title transfers and where delivery occurs. Title represents ownership. This condition states that the purchaser becomes the owner of material at the initial shipping point. Delivery, in this context, does not mean the material has arrived at the fi nal customer destination. Delivery refers to the point where transportation responsibility transfers from the USG to the purchaser. The delivery term code applied to each LOA line will indicate where the purchaser becomes responsible for transportation. Under certain delivery 5.1 The USG agrees to deliver and pass title to the Purchaser at the initial point of shipment unless otherwise specifi ed in this LOA. With respect to items procured for sale to the Purchaser, this will normally be at the manufacturer's loading facility; with respect to items furnished from USG stocks, this will normally be at the U.S. depot. Articles will be packed, crated, or otherwise prepared for shipment prior to the time title passes. If "Point of Delivery" is specifi ed other than the initial point of shipment, the supplying U.S. Department or Agency will arrange movement of the articles to the authorized delivery point as a reimbursable service but will pass title at the initial point of shipment. The USG disclaims any liability for damage or loss to the items incurred after passage of title irrespective of whether transportation is by common carrier or by the U.S. Defense Transportation System. 5.2 The Purchaser agrees to furnish shipping instructions which include Mark For and Freight Forwarder Codes based on the Offer/Release Code. 5.3 The Purchaser is responsible for obtaining insurance coverage and customs clearances. Except for articles exported by the USG, the Purchaser is responsible for ensuring that export licenses are obtained prior to export of U.S. defense articles. The USG incurs no liability if export licenses are not granted or they are withdrawn before items are exported. 5.4 The Purchaser agrees to accept DD Forms 645 or other delivery documents as evidence that title has passed and items have been delivered. Title to defense articles transported by parcel post passes to the Purchaser at the time of parcel post shipment. Standard Form 364 will be used in submitting claims to the USG for overage, shortage, damage, duplicate billing, item defi ciency, improper identifi cation, improper documentation, or nonshipment of defense articles and non-performance of defense services and will be submitted promptly by the Purchaser. DoD will not accept claims related to items of $200 or less for overages, shortages, damages, nonshipment, or non-performance. Any claim, including a claim for shortage (but excluding a claim for non-shipment/non-receipt of an entire lot), received after 1 year from passage of title to the article or from scheduled performance of the service will be disallowed by the USG unless the USG determines that unusual and compelling circumstances involving latent defects justify consideration of the claim. Claims, received after 1 year from date of passage of title or initial billing, whichever is later, for non-shipment/non-receipt of an entire lot will be disallowed by the USG. The Purchaser agrees to return discrepant articles to USG custody within 180 days from the date of USG approval of such return. 8-12 Foreign Military Sales Contractual Agreements term codes, the USG may arrange for transportation in various increments up to and including to an in- land location within the purchasers country. Regardless of when the purchaser assumes transportation responsibility, the title still will transfer at the initial shipping point. This means that the USG will not be fi nancially liable for items damaged in transit even if USG arranges or provides the transportation. This condition should not be interpreted to mean that the purchaser's fi nancial liability does not begin until title transfer. Per Section 3, the purchaser's liability begins with case acceptance. As the USG initiates actions towards fulfi lling the LOA requirements, fi nancial liabilities begin to accrue. In Section 3, the purchaser has agreed to indemnify the USG and its contractors. Additionally, in Section 2, the purchaser has agreed to be liable for termination costs if they elect to delete items or to cancel the LOA. Section 5.2 Shipping Instructions. Section 5.2 describes the customer's obligation to provide the required transportation information so that the items are shipped through the appropriate channels to arrive at the correct customer destination. The customer provides this information at the bottom of the fi rst LOA page as part of the LOA acceptance process. The freight forwarder code identifi es the commercial freight company employed by the purchaser to accomplish overseas transportation. The mark for code identifi es the ultimate in-country destination address. Section 5.3 Insurance and Export Licenses. Given the fact that the purchaser bears the risk of any damage that may occur in shipment, the purchaser is responsible to obtain any desired insurance coverage. Additionally, the purchaser is responsible for completing the necessary documents to clear customs. Most FMS customers delegate the task of coordinating all customs paperwork to their freight forwarder. Section 5.4 Delivery Documents and Claims. Section 5.4 delineates the purchaser's obligation to accept certain USG documentation as evidence that title transfer and delivery has occurred. Additionally, this section outlines the process and conditions under which the purchaser can submit claims for discrepancies. Although the USG would like the FMS process to operate error free, in reality, things sometimes do go wrong. The customer has an avenue of recourse to submit claims for "mistakes". This process is called the supply discrepancy reporting process. More information on the supply discrepancy process is contained in Chapter 10, "Logistics Support of International Military Sales." Section 6. Warranties 6.1 The USG does not warrant or guarantee any of the items sold pursuant to this LOA except as provided in section 6.1.1. DoD contracts include warranty clauses only on an exception basis. If requested by the Purchaser, the USG will, with respect to items being procured, and upon timely notice, attempt to obtain contract provisions to provide the requested warranties. The USG further agrees to exercise, upon the Purchaser's request, rights (including those arising under any warranties) the USG may have under contracts connected with the procurement of these items. Additional costs resulting from obtaining special contract provisions or warranties, or the exercise of rights under such provisions or warranties, will be charged to the Purchaser. 6.1.1 The USG warrants the title of items sold to the Purchaser hereunder but makes no warranties other than those set forth herein. In particular, the USG disclaims liability resulting from infringement or other violation of intellectual property or technical data rights occasioned by the use or manufacture outside the U.S. by or for the Purchaser of items supplied hereunder. 6.1.2 The USG agrees to exercise warranties on behalf of the Purchaser to assure, to the extent provided by the warranty, replacement or correction of such items found to be defective, when such materiel is procured for the Purchaser. 8-13 Foreign Military Sales Contractual Agreements Section 6 describes the warranty provisions of the LOA and specifi es the USG obligations and the purchaser's responsibilities. Under FMS, the customer is purchasing from the USG itself rather than from a commercial company. This section defi nes what warranties the USG provides on FMS material. Section 6.1 discusses warranty provisions for items obtained from procurement and Section 6.2 concerns items delivered from DoD inventory. Section 6.1 Procurement Warranties. For items supplied from procurement, the USG itself does not provide any type of performance warranty. The USG only warrants that the material will have a clear title. This simply means that there will be no fi nancial claim or lien against the material delivered. This does not mean that the FMS purchaser has no method of recourse if an item from procurement does not operate properly. Customers with defective items from procurement should submit a supply discrepancy report to the USG. The USG may be able to resolve the problem by seeking resolution through the contractor under the provisions of the USG procurement contract. This condition also provides the FMS purchaser the option of identifying specifi c warranty requirements when they request an item via the FMS process. Based on the foreign purchaser's specifi c warranty request, the USG will attempt to procure the desired warranty from the vendor in conjunction with the procurement of the material. The FMS customer will pay any additional costs necessary to acquire the desired warranty. The USG agrees to exercise the warranty rights on behalf of the FMS purchaser. The SAMM requires that special customer requested warranties be treated as a defense service on the LOA and described in an LOA note. The LOA note is to outline the process the customer is to use to exercise the special warranty rights. Section 6.2 Warranties from Stock. This condition states that the U.S. will repair or replace items delivered from DoD inventories when it can be determined that the defect or damage existed prior to shipment. This can be a diffi cult determination. The IAs have SDR offi ces to evaluate these claims and make determinations regarding the appropriate corrective action. More information on the supply discrepancy process is contained in Chapter 10, "Logistics Support of International Military Sales." Section 7. Dispute Resolution This section explains the method by which disputes will be resolved. Section 7.1 means that all activities the USG undertakes to execute the LOA, such as procurement contracts, are subject to U.S. federal procurement law. 6.2 Unless the condition of defense articles is identifi ed to be other than serviceable (for example, "As-is"), DoD will repair or replace at no extra cost defense articles supplied from DoD stocks which are damaged or found to be defective in respect to materiel or workmanship when it is established that these defi ciencies existed prior to passage of title, or found to be defective in design to such a degree that the items cannot be used for the purpose for which they were designed. Qualifi ed representatives of the USG and of the Purchaser will agree on the liability hereunder and the corrective steps to be taken. 7.1 This LOA is subject to U.S. Federal procurement law. 7.2 The USG and the Purchaser agree to resolve any disagreement regarding this LOA by consultations between the USG and the Purchaser and not to refer any such disagreement to any international tribunal or third party for settlement. 8-14 Foreign Military Sales Contractual Agreements Section 7.2 provides for the resolution of LOA disagreements by a bilateral consultative process. The purchaser agrees that he will not seek redress from any international tribunal such as the world court or a third party. ADDITIONAL LETTER OF OFFER AND ACCEPTANCE NOTES In addition to the standard terms and conditions, an LOA may require supplemental information to clarify requirements and responsibilities. Notes in LOAs provide more detailed information concerning items or services being offered. When LOAs are prepared before details are known, notes include general coverage of this information and an estimate of when specifi c information on these topics can be provided to the purchaser. These notes may be shared in advance with the purchaser to ensure any purchaser unique requirements are accommodated. The SAMM, Table C5.T5, lists supplemental LOA notes and identifi es the situations for which the respective notes should be applied. If a full line item description cannot fi t in the space available under the military articles and services description, Table C5.T5 states that a separate line item description note should be used to provide a detailed description of the items being sold or services performed. SAMM, Table C5.T5 identifi es two notes that are required for all LOAs which, in reality, make these two conditions equivalent to being standard terms and conditions. These two mandatory notes for all LOAs are for end-use monitoring (EUM) and missile technology control regime (MTCR). Missile Technology Control Regime. The U.S. and six other countries have agreed to restrict the transfer of sensitive missile equipment and technology. This condition states that the purchaser will not divert articles and services received under the LOA for any use that could contribute to the acquisition, design, development or production of a missile as defi ned by section 74 of the AECA. More information about MTCR is contained in Chapter 2, "Security Assistance Legislation and Policy." Additionally, DIASM conducts a MTCR course. Information about the MTCR course is available via the online DISAM course catalog available at web site: http://www.disam.dsca.mil/Catalog/MTCR. asp End-use Monitoring. This condition states that the purchaser agrees to permit the USG to conduct inspections and physical inventories upon request and to view inventory and accountability records maintained by the purchaser. More information on EUM is contained in Chapter 18, "End-use Monitoring and Third-party Transfers." CHANGES TO THE LETTER OF OFFER AND ACCEPTANCE An international purchaser's requirements and/or the conditions and circumstances of the accepted LOA may change during the course of implementation and execution. These changes can include increased or decreased costs of the item, delays in delivery, additional items, or changes in system confi guration. To authorize these changes and establish an audit trail, proper documentation must be prepared for accurate and complete case management. The specifi c document that implements the change, whether it is a new LOA, an amendment, or modifi cation, will be dictated by the special conditions surrounding each change. FMS interests are best served through use of the document which best safeguards U.S. and customer interests while most effectively accomplishing the needed program change. Selection of the appropriate document to implement the change revolves around the scope of the original LOA. Scope refers to the basic intention, goal, or purpose of the original LOA agreement. 8-15 Foreign Military Sales Contractual Agreements Specifi c details for identifying the correct document to use and for complying with the necessary administrative requirements of review and/or countersignature by DSCA are found in SAMM, Section C6.7. When a case manager has doubt as to which document is appropriate after reviewing the SAMM guidance, DSCA should be consulted. Major Changes in Scope New Letter of Offer and Acceptance Revisions that signifi cantly change original requirements are normally considered to be major changes in scope. Examples would be the addition of signifi cant military equipment (SME), or a substantial expansion of the program. Major changes normally require the preparation of a new LOA. New LOAs for major changes to an ongoing program will cross reference the previous LOA. While new LOAs are preferred for major scope changes, under certain exceptional conditions, an amendment may be used. Use of an amendment for a major scope change requires approval by DSCA. Minor Changes in Scope - Amendment Changes to an on-going program that are not categorized as major change of scope make up this category. An amendment represents a bilateral change to the LOA. An amendment does not become effective unless the purchaser accepts the change. The purchaser has a choice in either accepting or rejecting an amendment offered by the U.S. Acceptance of the change is signifi ed by the purchaser signing the amendment. Rejection of the change is signifi ed by declining to sign the amendment. Examples of minor scope changes are: Increases or decreases to blanket order cases Changes in quantity, Addition or deletion of secondary equipment Changes in confi guration, Transportation delivery code changes Some amendments may require initial deposits, and these will not be implemented until suffi cient payments have been received to cover current fi nancial requirements, including termination liability. A sample amendment is contained in Appendix 1, "Case Document Package." Changes Not Affecting Scope - Modifi cation Changes to existing LOAs that do not impact the scope of the LOA are accomplished via modifi cations. When the purchaser accepts the original LOA, they agree to accept the provisions of the standard terms and conditions. The standard terms and conditions permit the U.S. to make unilateral changes to the LOA under certain circumstances. A modifi cation is the document the U.S. uses to inform the purchaser of these unilateral changes. Because the purchaser already agreed to such unilateral modifi cations by the USG in the standard terms and conditions of the LOA, the purchaser is not required to accept a modifi cation. A modifi cation becomes effective upon issuance by the USG. A modifi cation does have a line for the purchaser to sign but, in this instance, the signature simply acknowledges receipt rather than conveying acceptance. Examples of changes implemented by a modifi cation include: Price changes Delivery schedule changes 8-16 Foreign Military Sales Contractual Agreements Changes in the payment schedule Changes to correct administrative errors The modifi cation also plays a critical role in fi nancial management by the U.S. security assistance community. Per the LOA standard terms and conditions, the U.S. is committed to apply its best efforts to provide the purchaser a modifi cation when estimated total costs change, payment schedule changes or signifi cant delivery delays occur. A modifi cation should also be provided for cost reductions, even if relatively minor, when all items are on order and prices are reasonably fi rm. More information on fi nancial management is contained in Chapter 12, "Foreign Military Sales Financial Management." A sample modifi cation is contained in Appendix 1, "Case Document Package." Pen and Ink Changes A pen and ink change refers to minor change that is authorized after an LOA or amendment is offered to the customer but is made prior to customer acceptance. These are generally small administrative or arithmetic changes. Examples are a small arithmetic change which does not increase total value and administrative changes such as an address correction, initial deposit or payment schedule adjustment, or extension of the offer expiration date. Pen and ink changes made by the customer without prior authorization by the implementing agency are considered a counteroffer and are not valid. Pen and ink changes to modifi cations are not authorized. The reason for this is that a modifi cation is a unilateral document and becomes effective upon issuance by the USG without requiring customer acceptance. Any required changes to a modifi cation must be accomplished by issuing another modifi cation. LETTER OF INTENT The letter of intent (LOI) is used for the acquisition of long lead time requirements of a proposed system sale. The LOI serves as the authority and provides the funding to begin procurement in advance of actual LOA acceptance by the customer. The LOI essentially functions as a mini-LOA. All items appearing on the LOI will also appear on the LOA. Items are placed on the LOI to permit the program to proceed on schedule. Examples of LOI items are the early procurement of castings or the start of critical training. The LOI and the corresponding LOA will use the same case designator. If and when the corresponding LOA is accepted by the customer, the LOI is superseded in authority by the LOA and the LOI becomes ineffective. On the other hand, if the Purchaser requests cancellation of the program associated with an implemented LOI, the LOI will be converted into an LOA document that will be implemented and closed at actual costs. LOIs can be generated either prior to the issuance of a system sale LOA or during the period between LOA issuance and LOA acceptance. Policy on the use of LOIs is contained in SAMM, Section C5.5. Letter of Intent Other Considerations Use of the LOI does not constitute authorization to take implementing action in advance of compliance with the statutory reporting requirement of Section 36(b), AECA. If the associated LOA requires congressional notifi cation, DSCA must approve the use of an LOI. If the LOI data falls within the congressional reporting thresholds, such reporting must be completed prior to LOI implementation. The procedures for LOI congressional notifi cation are in SAMM, Section C5.5.6. 8-17 Foreign Military Sales Contractual Agreements Attachment 8-1 provides a sample LOI. The LOI format is very similar to the LOA format. LOIs, like LOAs, are prepared using the Defense Security Assistance Management System (DSAMS). LEASE OF DEFENSE ARTICLES Normally, the USG makes defense articles available to foreign governments by FMS under the AECA. However, there are instances where a lease, rather than sale, to eligible foreign countries or international organizations is appropriate. Such arrangements are authorized under the AECA when it is determined that there are compelling foreign policy and national security reasons for leasing rather than selling, and the articles are not needed for U.S. use during the proposed lease period. For example, a foreign government may desire to obtain a defense article for a short period under a lease for testing purposes to assist it in determining whether to procure the article in quantity. As another example, the USG may only be able to respond to an urgent foreign requirement for defense property by making it available from inventory, but for national defense reasons cannot sell the property and must require its return to the inventory after a specifi ed term. Attachment 8-2 provides a sample lease. Section C11.10 of the SAMM provides lease policy. Approval The approval of the director of DSCA must be obtained before any DoD component may enter into a lease of a defense article with a foreign country or international organization. DoD components obtain DSCA concurrence before indicating to a foreign country or international organization that a lease is being favorably considered or is an available option. The cognizant DoD component will provide a determination and forwarding memorandum in the format at SAMM, Section C11.F11, along with the draft lease. A detailed rationale must be provided for any proposed lease outlining the reasons why the defense articles are being leased rather than sold. Security Assistance Organization Responsibility The security assistance organization (SAO) or defense attach offi ce (DAO) where no SAO is assigned in the partner country should receive a copy of each lease entered into with that government. The SAO should assist DoD components in monitoring of the use of USG-owned equipment in the country. Lease Terms and Conditions The basic lease format is at Attachment 8-2. Additional provisions may be added with the concurrence of the appropriate legal offi ce of the DoD component concerned and with DSCA approval. The lease will be signed by the appropriate IA and provided to DSCA for countersignature. A separate LOA will be used for packing, crating, handling, transportation, and the sale of associated articles and services, including any refurbishment of the defense article(s) required prior to, during, or after the lease period. The LOA will also be used to recover applicable costs if the article is lost or destroyed during the lease period. Lease Identifi cation Using the DSAMS, the IA assigns a unique designator to each lease. The lease designator is composed of the country code, the IA code, and a 3-position code assigned by the IA. The lease designator is included on each lease page, including schedules, appendices, and accompanying documents. FMS cases associated with leases must reference the lease designator. 8-18 Foreign Military Sales Contractual Agreements Duration Leases may be written for a maximum of 5 years and a specifi ed period of time required to complete major refurbishment work prior to delivery. Leases may include multiple items with different lease duration periods. The shortest lease period is 1 month and the longest lease period is 60 months. Leases shall provide that, at any time during the lease period, the USG may terminate the lease and require the immediate return of the defense article. Leases of less than 5 years may be extended via an Amendment but the total period under a specifi c lease may not exceed 5 years plus the time needed for refurbishment. Amendments Lease amendments may be used to extend or change existing leases. Such changes include variations to payment schedules, Schedule A items, or periods of performance. Each amendment includes the original lease designator and undergoes the same staffi ng process as the original lease. If a lease for less than 1 year is amended so that the total period of the original lease and the amendment equals or exceeds 1 year, the amendment must be reported to the Congress before entering into the lease amendment. Loss, Destruction or Damage The lessee must agree to pay the costs of restoration or replacement if the articles are lost, damaged, or destroyed while leased. In this case, the customer is charged the replacement cost (less any depreciation) if the U.S. intends to replace the articles or the actual article value (less any depreciation) if the U.S. does not intend to replace the articles. These charges are recouped under an FMS transaction via the LOA. Lease Payment The lessee must agree to pay in U.S. dollars all costs incurred by the USG in leasing articles, including reimbursement for depreciation (rent) of articles while leased. The rental payment is calculated in accordance with DoD 7000.14-R, Volume 15, Chapter 7. Rental payments do not include an administrative charge. Schedule A of each lease identifi es the replacement costs of the items being leased and the schedule for rental payment due to the USG. Billings to the foreign lessee are based on this schedule of payments and are included on a separate DD Form 645 with the country's quarterly FMS billing statement. Defense Finance Agency Service deposits receipts from lease rental payments in the Miscellaneous Receipts Account 3041 (FMS Recoveries, DoD Lease Costs). The use of foreign military fi nancing program (FMFP) funds is not authorized for payments of lease rental charges. When authorized by DSCA, FMFP funds may be authorized for FMS cases prepared in support of a lease. Exceptions The provisions regarding lessee rental payment shall not necessarily apply to leases entered into for purposes of cooperative research or development, military exercises, or communications or electronics interface projects, or to any defense article which has passed three quarters of its normal service life. Where a DoD component recommends an application of authorized exceptions, express authority will be requested from DSCA, identifying the authorized exception. 8-19 Foreign Military Sales Contractual Agreements U.S. Navy Ships For leases of U.S. Navy ships, the guidance in SAMM, Section C11.10.3.1, applies. Ship leases are authorized under separate, specifi c legislation as required by 10 U.S.C. 7307. LOANS Under the AECA Section 65 and the FAA, the DoD may lend materiel, supplies, and equipment to the North Atlantic Treaty Organization (NATO) and major non-NATO allies for research and development purposes. Loans that support cooperative research, development, test, and evaluation (RDT&E) programs, strengthen the security of the U.S. and its allies by promoting standardization, interchangeability, and interoperability of allied defense equipment. Each loan or gift transaction must be recorded in a written agreement between the Secretary of Defense and the country. Policy regarding loans is contained in SAMM, Section C11.11. INTERNATIONAL AGREEMENTS For most foreign military sales of defense articles and services, the LOA is suffi cient to establish the rights and obligations of each party to the agreement. However, in exceptional instances, it may be in the USG interest to negotiate and conclude an international agreement, memorandum of understanding (MOU), memorandum of agreement (MOA), or similar document before, concurrent with, or after conclusion of the LOA. SAMM, Section C11.9, provides guidance on the use of international agreements for security assistance programs involving commercial or government coproduction agreements. International agreements for security assistance include standard provisions, some of which refl ect the requirements of law or regulation. These agreements may also include unique provisions refl ecting the interests of the involved parties. The fi nal content of each agreement is determined during negotiations. An international agreement generator has been adopted by the secretary of defense and the implementing agency legal advisors to establish a standard and uniform format for DoD-wide application. International agreements are further described in later Chapter 13, "International Armaments Cooperation." The Defense Acquisition University offers a course in preparing international agreements. SUMMARY The basic contractual instrument used in FMS transactions is the LOA. The LOA standard terms and conditions establish specifi c rights and obligations for both the USG and the foreign purchaser. These standard terms and conditions are used in all LOAs regardless of the customer. Minor changes of scope within an LOA are accomplished through an amendment. A modifi cation is used to record non-scope changes of the LOA, i.e., price changes or changed payment schedules, deletions of items or decreases in quantities, etc. Another type of document used in FMS is the LOI which deals with the fi nancing the procurement of long lead time materials and components associated with a major system sale. Leases and loans of defense articles may also be made to international purchasers. For complex FMS sales, an international agreement may be required to defi ne how issues beyond the scope of the LOA will be handled. REFERENCES U.S. Department of Defense. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapters 5, 6, 9, and 11. 8-20 Foreign Military Sales Contractual Agreements 8-21 Foreign Military Sales Contractual Agreements Attachment 8-1 Sample Letter of Intent Based on Embassy of Bandaria Letter, dated 1 February 2007. The Bandaria Defense Procurement Offi ce 1234 Massachusetts Ave Washington, D.C. 2001, acting through its Ministry of Defense (hereafter referred to as the Purchaser), hereby declares its fi rm intent to procure, under United States Arms Export Control Act (AECA) procedures, from the Government of the United States (USG), the defense articles or defense services set forth herein. This LOI is for acquisition of critical long lead time engine and aircraft parts in support of the FX-99 aircraft. Less than normal expiration data is assigned to (continued on page 2) Estimated Cost: $79,340,428 Initial Deposit $2,854,268 Terms of Sale: Cash Prior to Delivery Dependable Undertaking Congressional Notifi cation: 07-10 Standard Terms and Conditions - United States (U.S.) Department of Defense (DoD) Letter of Intent (LOI), attached are hereby made part of this agreement. In order to permit the USG to proceed immediately with the purchase described herein and to cover associated administrative expenses, the U.S. DoD is herewith authorized to incur obligations and expend up to the sum of $79,340,428 (which includes estimated administrative and termination costs) on a Foreign Military Sales dependable undertaking basis, to be exceeded only in the event of a decision by either a Court or Board which increases the contractor's entitlement. It is understood that the U.S. Department of the Air Force plans to present to the Purchaser a Letter of Offer and Acceptance within 60 days after signature of the Letter of Intent. This LOI consists of page 1 through page 4 and expires on 9 September 2007. The undersigned are authorized representatives of their governments and hereby commit their governments to this Letter of Intent (LOI): 25 Jul 2007 7 Sep 2007 U.S. Signature Date Purchaser Signature Date _________________________________ Typed Name and Title Typed Name and Title HQ AFSAC/CO Implementing Agency Agency DSCA Reviewed/Approved 27 Jul 2007 DSCA, Offi ce of the Comptroller United States Department of Defense Letter of Intent BN-D-QAA 8-22 Foreign Military Sales Contractual Agreements Case Description continued: meet contract award date, 15 September 2007 This LOI pertains to the following: (3) (1) Qty, Item (2) Unit of (4) Nbr Description/Condition Issue Total Costs 001 A9C 9A9C00ACPARTS (N)(N)(R) XX $76,435,865 B4 A/C CCOMP, PARTS, (VIII) ACCESSORIES 47 FX-99 Long Lead Time Engine and other Aircraft Parts (Note(s) 1) Estimated Cost Summary: (5) Net Estimated Cost $76,435,865 (6) Administrative Charge $2,904,563 (7) Total Estimated Cost $79,340,428 To assist in fi scal planning, the USG provides the following anticipated costs of this LOI: Estimated Payment Schedule Payment Date Quarterly Cumulative Initial Deposit LOI $2,854,268 $2,854,268 15 Dec 2007 $2,492,421 $5,346,689 15 Mar 2008 $3,894,407 $9,241,096 15 Jun 2008 $5,841,611 $15082,707 15 Sep 2008 $8,100,367 $23,183,074 15 Dec 2008 $10,437,012 $33,620,086 15 Mar 2009 $11,994,774 $45,614,860 15 Jun 2009 $12,072,663 $57,687,523 15 Sep 2009 $10,125,459 $67,812,982 15 Dec 2009 $6,776,269 $74,589,251 15 Mar 2010 $3,582,855 $78,172,106 15 Jun 2010 $1,168,322 $79,340,428 Signed Copy Distribution: 1. Upon acceptance, the Purchaser should return one signed copy of this LOI to Defense Finance and Accounting Service - Denver, ATTN: DFAS-JY/DE, 6760 E. Irvington Place, Denver, CO 80279-2000. Simultaneously, wire transfeer of the initial deposit or amount due with acceptance of this LOI document (if required) should be made to ABA# 021030004, U.S. Treasury NYC, Agency Location Code: 00003801, Benefi ciary: DFAS-JY/DE Agency, showing "Payment from Government of Bandaria for BN-D-QAA"; or a check for the initial deposit, made payable to the U.S. Treasury, mailed to DFAS-JDT/DE, P.O. Box 173659, Denver, CO 80217-3659, showing "Payment from Government of Bandaria for BN-D-QAA". Wire transfer is preferred. 2. One signed copy should be returned to Department of the Air Force, Air Force Security Assistance Center, 555th ISPTS/CC, 1822 Van Patton Drive, Building 210, WPAFB, OH 45433-5337. 8-23 Foreign Military Sales Contractual Agreements Note 1: Line 001 - Long Lead Time Aircraft and Engine Parts. This line is for procurement of critical FX-99 aircraft and J99-C11-100 engine parts with a lead time over 36 months. These parts are required to ensure that delivery of the complete aircraft can be accomplished in accordance with the purchasers need date. Spares with a lead time of less than 36 months will be procured after the Letter of Offer and Acceptance is implemented. Note 2. Contract Administrative Surcharge. For any lines on this LOA document with a Source of supply of "X: or "P", the Contract Administrative Surcharge (CAS) rates apply: for contract administration 0.65%; for quality assurance and inspection 0.65%; and for contract audit, 0.20%. Note 18. Sole Source Procurement. Paragraph 1.2 of the Letter of Offer and Acceptance Standard Terms and Conditions states in part: "Unless the Purchaser has requested, in writing, that a sole source contractor be designated, and this LOA refl ects acceptance of such designation by DoD, the Purchaser understands that selection of the contractor source to fi ll requirements is solely the responsibility of the USG." By letter dated 1 February 2007 the Purchaser has requested that Grafton Aircraft Industries, Cedarville, Ohio be designated as prime contractor for line item 001 of this Letter of Offer and Acceptance. This note is evidence that DoD has accepted such request of the Purchaser and that such designation is required at the written direction of the Purchaser. Note 3. Offset Costs. The DoD is not a party to any offset agreements/arrangements that may be required by the Purchaser in relation to the sales made in this LOA and assumes no obligation to administer or satisfy any offset requirements or bear any of the associated costs. To the extent that the Purchaser requires offsets in conjunction with this sale, offset costs may be included in the price of contracts negotiated under this LOA. If the Purchaser desires visibility into these costs, the Purchaser should raise this with the contractor during negotiation of offset arrangements. Note 4. Administrative Surcharge. An Administrative surcharge of 3.8% has been applied to Line 001. 8-24 Foreign Military Sales Contractual Agreements Letter of Intent Standard Terms and Conditions 1. Except to the extent directly inconsistent with the provisions hereof, the terms and conditions set forth in "Letter of Offer and Acceptance Standard Terms and Conditions" of the Letter of Offer and Acceptance on which this LOI is based will apply to all activities undertaken pursuant to this LOI, and the estimated costs of such activities will be included in the Letter of Offer and Acceptance. In particular, Conditions 2.2, 2.3, and 3 are hereby incorporated by reference and made an integral part of this LOI. This LOI shall be superseded upon Purchaser's signature of the Letter of Offer and Acceptance. 2. In anticipation of the Purchaser's signature of the above mentioned Letter of Offer and Acceptance, the Purchaser Government commits to the following: 2.1. If, prior to Purchaser signature of the above mentioned Letter of Offer and Acceptance, the US DoD has reason to believe that the costs which it expects to incur in the performance of this LOI will exceed the amount set forth in block Section B, it shall promptly notify the Purchaser in writing to that effect. The notice shall state the estimated amount of and the date by which the additional obligational authority (by a new or amended LOI) will be required from the Purchaser in order to continue performance. 2.2. If, after such notifi cation, the additional obligational authority is not granted by the date set forth in the notifi cation, the USG is authorized, at its discretion, to terminate any and all activities under this LOI at Purchaser's expense, in accordance with section 2.3 below, in an amount not to exceed the amount set forth in section B. 2.3. The Purchaser agrees to pay the full amount of such authorized obligations and to make funds available in such amounts and at such times as may be requested by the USG for expenditures against such obligations. 3. This LOI does not prejudice the Purchaser's decision on the acceptance of the Letter of Offer. Moreover, the Purchaser may cancel all or any part of this LOI at any time by notifying the USG. Upon receipt of such notifi cation the USG is authorized to terminate any and all activities initiated hereunder, at Purchaser's expense, in accordance with section 2.3 above, in an amount not to exceed the amount set forth in Section B. 4. Certain items for which procurements may be initiated hereunder are normally the subject of defi nitization conferences, at which specifi c items and quantities are agreed upon. If it is necessary to place any such items on order prior to any such conference, the US DoD is authorized to do so, using its best judgment, and will furnish a list of the items so ordered at the conference. 8-25 Foreign Military Sales Contractual Agreements This LEASE, made as of XX XXX 200X, between the United States Government (hereinafter called the "Lessor Government") represented by its Department of the Air Force and the Government of Bandaria (hereafter called the "Lessee Government") represented by its Offi ce of Defense, Air and Defense Cooperation Attach, Government of Bandaria. Witnesseth WHEREAS, The Lessor Government has determined that the lease of fi fteen (15) F-16A ADF Aircraft and two (2) F-16B OCU Aircraft and, if applicable, all associated nonexpendable support equipment as listed in Schedule A of this lease (including but not limited to tools, ground support equipment, test equipment, and publications) (hereinafter referred to as the Defense Articles) are not for the time needed for public use, and WHEREAS, The Lessor Government has determined that there are compelling foreign policy and national security reasons for providing such Defense Articles on a lease basis rather than on a sales basis under the Arms Export Control Act, and WHEREAS, The Lessor Government has considered the effects of the lease of the articles on the technology and industry base, particularly the extent, if any, to which the lease reduces the opportunity of entities in the national technology and industrial base to sell new equipment, and WHEREAS, This lease is made under the authority of Chapter 6 of the Arms Export Control Act. NOW THEREFORE, The parties do mutually agree as follows: 1. In consideration of a rental charge as indicated in Schedule A, and the maintenance and other obligations assumed by the Lessee Government, the Lessor Government hereby leases to the Lessee Government and the Lessee Government hereby leases from the Lessor Government the Defense Articles for the period of sixty (60) months commencing on the date fi rst above written (unless otherwise agreed under term of this lease) and under the terms and conditions set forth in the General Provisions hereto annexed. 2. The Lessor Government shall deliver the Defense Articles to the Lessee Government at such time and place as may be mutually agreed upon. Such delivery shall be evidenced by a certifi cate of delivery. IN WITNESS WHEREOF, Each of the parties hereto has executed this lease as of the day and year fi rst above written, unless otherwise agreed under term of this lease. ______________________________ _________________________________ The Government of Bandaria The United States Government By ___________________________ By ______________________________ ______________________________ _________________________________ (Typed Name) (Typed Name) ______________________________ _________________________________ (Title) (Title) ______________________________ _________________________________ (Date) (Date) COUNTERSIGNATURE: By __________________________ (Typed Name) Director, Defense Security Cooperation Agency Attachment 8-2 Lease Agreement Lease of F-16 A/B Between The United states Government and The Government of Bandaria, BN-D-ZAA 8-26 Foreign Military Sales Contractual Agreements General Provisions 1. Operations and Use. a. Except as may be otherwise authorized by the Lessor Government and except for the purposes of transfer from and return to the Lessor Government, the Lessee Government shall keep the Defense Articles in its own possession, custody, and control. The Lessee Government shall not transfer title to or possession of the Defense Articles to anyone not an offi cer, employee, or agent of the Lessee Government and shall not permit any encumbrance or other third party interest in the defense articles. b. The Lessee Government shall, except as may be otherwise mutually agreed in writing, use the items leased hereunder only: (1) For the purposes specifi ed in the Mutual Defense Assistance Agreement, if any, between the Lessor Government and the Lessee Government; (2) For the purposes specifi ed in any bilateral or regional defense treaty to which the Lessor Government and Lessee Government are both parties, if subparagraph (1) of this paragraph is inapplicable. (3) For internal security, individual self-defense, and/or civic action, if subparagraphs (1) and (2) of this paragraph are inapplicable. c. To the extent that any Defense Articles may be classifi ed by the Lessor Government for security purposes, the Lessee Government shall maintain a similar classifi cation and employ all measures necessary to preserve such security, equivalent to those employed by the Lessor Government, throughout the period during which the Lessor Government may maintain such classifi cation. The Lessor Government will use its best efforts to notify the Lessee Government if the classifi cation is changed. 2. Initial Condition. The Defense Articles are leased to the Lessee Government on an "as is, where is" basis without warranty or representation concerning the condition or state of repair of the Defense Articles or any part thereof or concerning other matters and without any agreement by the Lessor Government to alter, improve, adapt, or repair the Defense Articles or any part thereof. 3. Conditioning and Transfer Cost. The Lessee Government shall bear the cost of rendering the Defense Articles operable and transferable and of transferring the Defense Articles from the United States or other point of origin and back to the place of re-delivery. In the event the Defense Articles are transported by vessel, only U.S. fl ag vessels may be used, unless waived by the Lessor Government. 4. Inspection and Inventory. Immediately prior to the delivery of the Defense Articles to the Lessee Government, an inspection of the physical condition of the Defense Articles and an inventory of all related items may be made by the Lessor Government and the Lessee Government. A report of the fi ndings shall be made which shall be conclusive evidence as to the physical condition of said Defense Articles and as to such items as of the time of delivery. A similar inspection, inventory, and a report may be made by the Lessor Government upon the termination or expiration of this Lease. The fi ndings of that report shall be conclusive evidence as to the physical condition of the Defense Articles and as to such items as of the date of termination or expiration of this Lease. At the election of the Lessor Government, the Lessee Government at its own cost shall either promptly correct any defi ciency or rebuild, replace, or repair any loss of or damage to the Defense Articles or compensate the Lessor Government for the restoration or replacement value (less any depreciation in the value as determined by the Lessor Government) of such correction, rebuilding, replacement, or repair. At the Lessor Government's choice, the Lessee Government at its own cost will remove any alterations or additions to the Defense Articles or pay the Lessor Government the cost of such removal, as determined by the Lessor Government. In the absence of removal by the Lessee Government, title to any such alterations or additions shall vest in the Lessor Government. 5. Maintenance. The Lessee Government shall maintain the Defense Articles in good order, repair, and operable condition and except as provided in paragraph four, shall upon expiration or termination of this Lease return the Defense Articles in operable condition and in as good condition as when received, normal wear and tear excepted. 6. Risk or Loss. All risk or loss of or damage to the Defense Articles during the term of this Lease and until their return to the place of re-delivery shall be borne by the Lessee Government. 7. Indemnifi cation. The Lessee Government renounces all claims against the Lessor Government, its offi cers, agents, and employees arising out of or incidental to transfer possession, maintenance, use, or operation of the Defense Articles or facilities and will indemnify and hold harmless the Lessor Government, its offi cers, agents, and employees for any such claims of third parties and will pay for any loss or damage to Lessor Government property. 8. Alterations. 8-27 Foreign Military Sales Contractual Agreements The Lessee Government shall not make any alterations or additions to the Defense Articles without prior consent of the Lessor Government. All such alterations or additions shall become the property of the Lessor Government except items paid for by the Lessee Government which can be readily removed without injury to the Defense Articles and are removed by the Lessee Government prior to re-delivery of the Defense Articles. As a condition of its approval of any alteration or addition, the Lessor Government may require the Lessee Government to restore the Defense Articles to their prior condition. 9. Termination. This Lease may be terminated without cost to the Lessor Government: a. By mutual agreement of the parties; b. By the Lessee Government on 30-days written notice; or c. By the Lessor Government at any time. The Lessee Government shall immediately return the leased Defense Articles at the direction of the Lessor Government. Termination will be subject to the Lessee Government's residual responsibilities hereunder (such as, duty to return leased Defense Articles promptly, to pay costs required hereunder, to indemnify and hold harmless the Lessor Government). 10. Place of Re-delivery. Upon expiration or termination of this lease, the Defense Articles shall be returned to the Lessor Government at Davis-Monthan AFB, AZ, or as mutually agreed. 11. Title. Title to the Defense Articles shall remain in the Lessor Government. The Lessee Government may, however, place the Defense Articles under its Flag, or display its national insignia when appropriate. 12. Reimbursement for Support. The Lessee Government will pay the Lessor Government for any services, packing, crating, handling, transportation, spare parts, materials, or other support furnished for the Defense Articles by the Lessor Government pursuant a Letter of Offer and Acceptance under the Arms Export Control Act. FMS Case BN-D- ZAA applies. 13. Covenant against Contingent Fees. The Lessee Government warrants that no person or selling agency has been employed or retained to solicit or secure this Lease upon an agreement or understanding for a commission, percentage, brokerage or contingent fee. 14. Offi cials Not to Benefi t. No members of or delegate to the Congress of the United States, or Resident Commissioner of the United States shall be admitted to any share or part of this Lease or to any benefi t that may arise there from. 15. Proprietary Rights. The Lessee Government will ensure, by all means available to it, protection of proprietary rights in any Defense Article and any plans, specifi cations, or information furnished, whether patented or not. 16. Reports. When the Lessee Government performs tests and evaluations on the leased Defense Articles and prepares a formal report of the resulting data to be released to a third party, the Lessee Government will allow the Lessor Government to observe the test and evaluation and to review the report. The Lessee Government will obtain Lessor Government approval of any release to a third party. 17. Cost of Lessor Government. The Lessee Government agrees to pay in United States dollars all costs incurred by the Lessor Government in leasing the Defense Articles covered by this Lease including, without limitation reimbursement for depreciation of such Defense Articles while leased. The Lessee Government also agrees to pay the costs of restoration or replacement, less any depreciation in the value during the term of the lease, to the Lessor Government under the Lessor Government's foreign military sales procedures. The rental charge shown in Schedule A is based on costs identifi ed at the time of signature of this Lease and does not relieve the Lessee Government from liability for other costs in accordance with the provisions of this Lease. 18. Distribution. Copies of the accepted Lease will be distributed by the Lessee as follows: a. EUCOM Regional Management Division - Original b. Commander - copy c. DSCA Europe, Russia, Americas and Sub-Saharan Africa d. DFAS - copy e. European Division 8-28 Foreign Military Sales Contractual Agreements Lease Agreement Schedule A To Lease Agreement Between the United States Government, Department of the ____________________________ (LESSOR) and the Government of ______________________________________(Lessee). I. This Lease Agreement Authorizes the use of U.S. government property identifi ed herein: Rental Charge (Including Line Replacement Costs Depreciation) Item Description Qty Duration Unit Value Total Value Per Month A. B. C. D. E. _______________________________________________________________________________ Total Value $ II. Rental Payment Initial Payment (with acceptance - as applicable): ____________________Qtr FY ______: (Amount due) Date Due: (15th day of month preceding quarter) ____________________Qtr FY ______: (Amount due) Date Due: (15th of month preceding quarter) ________________________________________________________ Total Rental $ III. Related FMS Case Designator: BN-D-ZAA 9-1 Foreign Military Sales Acquisition Policy and Process INTRODUCTION The foreign military sales (FMS) process fundamentally is an acquisition process. Under FMS, a foreign government or international organization identifi es a need for a military-related item or service and chooses to acquire from the U.S. government (USG). The government-to-government sales agreement governing the acquisition is the letter of offer and acceptance (LOA). To fulfi ll the LOA requirements, the USG may supply items or services from on-hand Department of Defense (DoD) resources or the USG may purchase from industry for subsequent delivery to the FMS customer. This chapter primarily examines acquisition as it relates to the USG's process for purchasing material or services by means of contracts with industry. The goal of the contracting discussion is to highlight where and how FMS procurements fi t into the normal DoD procurement process. Additionally, this chapter will discuss the international business agreement referred to as an offset. The offset concept is defi ned, the USG policy regarding offsets is presented, and the means to address offsets within FMS are explained. Within DoD, the term acquisition is also used to refer to the entire lifecycle process DoD uses to develop, test, evaluate, produce, and sustain weapon systems to satisfy formally identifi ed DoD military capability requirements. This formalized acquisition process is referred to as the defense acquisition system (DAS). Chapter 13, "International Armaments Cooperation" of this text discusses how issues that affect future foreign sales of major systems are addressed within the DAS during the system development process. The DoD uses the term acquisition to encompass multiple functional areas. In fact, the Defense Acquisition University (DAU) offers a variety of courses for personnel within thirteen different career fi elds that support acquisition. These acquisition career fi elds include the following: lifecycle logistics, auditing, contracting, facilities engineering, contract property management, information technology, cost estimating and fi nancial management, manufacturing and production, program management, purchasing, science and technology, systems engineering, and testing and evaluation. To review the courses offered by the DAU, visit their web site at: http://www.dau.mil/schedules/schedule.asp. GLOBAL MILITARY MARKETPLACE When an international customer requires a military item or service, it must fi nd a source to fulfi ll that need. Ideally, from its national perspective, there are many economic and political factors that make acquisition from a domestic source the preferred choice. However, in today's high technology military environment, a substantial fi nancial investment is required to conduct the research, development, testing, and to establish production capability for a military system. In addition to the fi nancial investment, considerable time is required to accomplish this process. Given these considerations, many nations fulfi ll certain military needs by procuring from other governments or from foreign commercial fi rms. FOREIGN MILITARY SALES ACQUISITION POLICY AND PROCESS Chapter 9 9-2 Foreign Military Sales Acquisition Policy and Process United States Item Preference From a security assistance perspective, the potential foreign customer must fi rst determine whether to acquire a United States (U.S.) system rather than developing a domestic system or purchasing some other country's system. If the foreign customer selects a U.S. system, it must next decide whether to purchase through the government-to-government security assistance process or to make the purchase through the government-to-industry direct commercial sales (DCS) process. The DoD is generally neutral regarding whether a foreign customer chooses to purchase via FMS or DCS. Although offi cially neutral regarding the procurement method (FMS or DCS), DoD does have a specifi c preference that friendly nations chose to purchase U.S. systems. The reason for the U.S. preference relates to the political, military and economic benefi ts resulting from the U.S. and its friends using the same military equipment. Foreign Military Sales Procurement Rationale Chapter 15, "A Comparison of Foreign Military Sales and Direct Commercial Sales", compares some of the advantages and disadvantages of FMS and DCS procurements. This chapter will not review all the pros and cons; however, the Security Assistance Management Manual (SAMM) states that a primary reason that international customers choose the FMS system is because the DoD makes purchases on the customer's behalf using the same USG regulations and procedures that DoD uses to make procurements for itself. As a result, the customer receives the same benefi ts and protections that are built into the DoD acquisition process. This can be a considerable benefi t when the customer may be spending hundreds of millions or perhaps billions of dollars to acquire a military system. This chapter examines how the DoD uses its existing acquisition policies and procedures to procure articles and services in fulfi llment of LOA agreements. Foreign Military Sales Content Typically, FMS system sales consist of weapon systems that DoD has already developed, produced and fi elded for its own use. DoD policy states that the USG will only agree to sell systems through FMS that have been approved for full rate production for U.S. forces. The key acquisition decision point, from an FMS perspective, is the full rate production review. If a foreign customer requests an LOA for a system that has not yet been approved for full rate production, a policy waiver is required. In this situation, the Defense Security Cooperation Agency (DSCA) will request concurrence from the Under Secretary of Defense for Acquisition, Technology, and Logistics [USD (AT&L)] before offering an LOA for a system that is still under development. The reason for this policy concerns future supportabiliy and interoperability issues. Prior to the full rate production decision, there is the risk that the U.S. may decide not to produce the system. This would present an undesirable situation if the U.S. has committed under an LOA to deliver a system to an FMS customer but decided not to deliver this same system to U.S. forces. The FMS customer would be faced with nonstandard support to sustain the system and might lack interoperability with U.S. forces. If the waiver is approved, the LOA for the FMS must include a special note identifying the risk that the USG may not place this system into production. This waiver policy is often referred to as the Yockey waiver named after a former Under Secretary of Defense for Acquisition. Although some FMS customers may purchase specifi c items or services independent of a major DoD end item system, most security assistance programs are built around the sale of one or more major DoD weapon systems. Under the FMS approach, major weapon system sales are accomplished using the total package approach (TPA). TPA provides the FMS customer the weapon system plus 9-3 Foreign Military Sales Acquisition Policy and Process all the necessary support elements to operate and sustain the system for an initial period. Subsequent FMS follow-on support cases continue to sustain the system throughout its operational life. Because the FMS sales process is accomplished using existing DoD procurement regulations and policies, the material and services provided under FMS will generally be U.S. origin products. In the SAMM C4.4.1, it states that the DoD will not enter into LOAs that commit to procurement in foreign countries unless DSCA has approved an exception. CONTRACTING FOR FOREIGN MILITARY SALES It is important to recognize that the Arms Export Control Act (AECA) permits FMS sales both from DoD stocks and by means of DoD contracting to acquire material or services directly for the FMS customer. Generally, DoD inventory levels are established to support DoD's own level of operations as well as to provide a contingency reserve of material. When an FMS customer submits a requirement under the authority of an LOA, the DoD can only use its current inventory for FMS demands if it can do so without negatively impacting its own readiness. As a result, it may be necessary for DoD to procure the required FMS item by contracting with industry rather than supply from stock. There is an exception to this policy under a special program called the cooperative logistics supply support arrangement (CLSSA). More information on the CLSSA program is contained in later Chapter 10, "Logistics Support of International Military Sales" The overall process to contract for FMS is depicted in Figure 9-1. Buyer and Seller Relationship When an FMS customer accepts an LOA, it enters a government-to-government agreement to purchase military items or services from the USG. In regard to the LOA, the FMS customer is the buyer and the USG is the seller. The USG may provide the articles or services from stock but often must contract with industry to acquire the items or services for delivery to the FMS customer. In the procurement contract, the USG becomes the buyer and the vendor from industry is the seller. The Figure 9-1 Foreign Military Sales Contracting Process ! " " 9-4 Foreign Military Sales Acquisition Policy and Process FMS customer is not a legal participant in the procurement contract with industry. The USG is acting on the FMS customer's behalf. As far as the vendor is concerned, it is under contract and directly obligated to the USG and has no direct contractual relationship with the FMS customer. Letter of Offer and Acceptance and Contract Relationship The LOA documents the customer's requirement and provides both the authority and funding to initiate contracting actions. In preparing the LOA, the case manager must clearly understand the customer's requirement to ensure the LOA addresses all of the customer's requirements. At the same time, the case manager must also ensure that any special procurement issues from the contracting offi cer are adequately discussed with the customer and appropriately documented within the LOA. The goal is to have an LOA that can be implemented by means of a contract that both fulfi lls the customer's desires and is consistent with all U.S. contracting regulations. The key to success in this area is clear communication early in the LOA preparation process between the customer, the case manager and the applicable U.S. contracting organization. Department of Defense Infrastructure for Foreign Military Sales Acquisition Before discussing the contracting process, an introduction to the DoD's structure for FMS acquisition is required. The DoD does not maintain a separate acquisition infrastructure just for FMS. Instead, the DoD supports FMS by using the same acquisition infrastructure already established to support its own acquisition and logistics needs. Major System Acquisition For major weapon systems, the military departments (MILDEPs) establish program management offi ces responsible for developing and acquiring the initial system. The program management offi ce manages all the technical aspects of the systems delivered to U.S. forces, procures any additional quantities for DoD and engineers improved or modifi ed confi gurations. A program offi ce management team will typically consist of a weapon system program manager supported by personnel from several functional disciplines such as engineering, testing, contracting, logistics, and fi nancial management. When an FMS customer purchases a major weapon system, the same program management offi ce that oversees the acquisition of that system for the DoD will also manage the acquisition for the FMS customer. The system program management offi ce may acquire the FMS quantities either as individual procurements or by merging the FMS requirements with DoD's requirements on the same U.S. contract. The contracting offi cer within the overall program management offi ce is the only individual with the authority to enter into contracts on the behalf of the USG. In this role, the contracting offi cer will be supported by the functional expertise of the members of the program offi ce team in establishing source selection criteria, evaluation offers, and negotiating the terms and pricing of the contract. In order to accomplish successful program execution, major FMS system sales may require program offi ce services beyond those provided by the standard level of service discussed in the SAMM C.5. Additional management services will be funded by a well-defi ned services line on the LOA. The SAMM requires each service line to include a LOA line item note to describe the details of the services provided and to identify the length of the service performance period. Follow-on Support Acquisition In regard to standard follow-on support, FMS requirements will be routed to the DoD inventory control point (ICP) that manages the item for the DoD. The item manager with responsibility for the requisitioned item will decide whether the FMS order should be supported from on-hand stock, held on 9-5 Foreign Military Sales Acquisition Policy and Process back order for support from materiel due into stock, or placed on a purchase request for procurement. The purchase request, containing a fund cite from the applicable FMS LOA, will be routed to the ICP's contracting activity. A contracting offi cer will award a contract with industry to fulfi ll the FMS requirement. Based on the volume of FMS activity, the ICP's manpower may be augmented with additional positions funded by the overall FMS administrative fund. For standard follow-on support, the same DoD functional organizations that purchase the respective item for the DoD will also be responsible for FMS purchases. Nonstandard Acquisition For the FMS customer, the DoD decision to curtail or end operations of a given system may impact support. Many examples exist where DoD currently supports systems operated by FMS customers that the DoD no longer actively retains in its inventory, such as the F-5 and the F-4 aircraft. In these situations, components of the system may transition from being standard to nonstandard items. Nonstandard requirements are, by defi nition, items that are not actively managed in the DoD supply system for U.S. forces. Nonstandard FMS requirements have historically been diffi cult to support because there is no existing management or acquisition infrastructure within the DoD to reuse in support of FMS. Because no ICP activity manages or buys these items for DoD, the MILDEPs have contracted with commercial buying services (CBS) to procure most nonstandard items in lieu of DoD directly contracting for nonstandard items. More information on CBS is presented in Chapter 10, "Logistics Support of International Military Sales" of this textbook. Contracting Regulations The Federal Requisition Regulation (FAR) system was established for the codifi cation and publication of uniform acquisition policies and procedures to be used by all USG federal agencies. The federal acquisition regulation is the primary document governing contracting actions undertaken by the USG. Many of the FAR requirements originate in various laws passed by Congress. One of the best known legislated requirements is the Competition in Contracting Act (CICA). Like other federal regulations, the FAR is considered to have to force and effect of law. The current version of the FAR is publicly available at: http://www.arnet.gov/far/. In the LOA, standard term and condition 1.2 states that the USG will follow the same regula- tions and policies when procuring for FMS as it does when procuring for itself. This condition in the LOA is referring to the FAR. The SAMM which provides overall policy for the conduct of FMS states that FAR provisions applicable to DoD will apply to FMS procurements. Given that the DoD procures many unique items, the Defense Federal Acquisition Regulation Supplement (DFARS) was created to supplement the FAR. Each of the MILDEPs and their subordinate commands have, in turn, issued further supplements to the DFARS to aid contracting personnel in implementing FAR and DFARS provisions. It is important to recognize the hierarchy in the contracting regulations. The FAR remains the overarching authority. Each subordinate supplement may amplify and expand on the principles of the FAR but cannot contradict. Accordingly, each supplement issued by the MILDEPs can only amplify on the principles in the DFARS. It is interesting to note that within the DFARS itself, Subpart 201.104, it specifi cally states that the DFARS applies to contracts issued by the DoD in support of FMS. The current version of the DFARS is available at: http://www.acq.osd. mil/dpap/dars/dfars/. 9-6 Foreign Military Sales Acquisition Policy and Process CONTRACT SOURCE SELECTION The CICA requires USG agencies to promote the use of full and open competition in procurements. This legislated requirement is detailed in the FAR Part 6 which discusses contract competition. In a competitive procurement, the USG makes public notifi cation of its intent to purchase. This public notifi cation used to be accomplished via a publication, the Commerce Business Daily. The USG currently electronically posts these notifi cations on its Federal Business Opportunities web site: http:// www.fedbizopps.gov. These public notifi cations are commonly referred to as solicitations. Any interested vendor has the opportunity to submit a bid or proposal to the USG in accordance with the solicitation instructions to be considered in the contract source selection process. Per the FAR, all federal agencies are required to use competitive procurement procedures as the normal method of acquisition. Competition is the typical or default method of procurement. Under certain circumstances, the FAR does permit, as an exception, the use of noncompetitive procurement procedures. In a non-competitive procurement, the USG negotiates with a single source at the exclusion of all other potential sources. In order to use the exception to normal procurement procedures, a justifi cation must be prepared to document the reasons why a noncompetitive procurement is required rather than conducting a competitive procurement. According to the FAR, noncompetitive procurements are permitted only when justifi ed based on one or more of the following seven conditions. When property or services required are available from only one responsible source and no other type of supply or services will satisfy agency requirements When the agency's need for the supply or services is of an unusual and compelling urgency It is necessary to award the contract to a particular source or sources in order to: Maintain a facility, producer, manufacturer, or other supplier available for furnishing supplies or services in case of a national emergency or to achieve industrial mobilization Establish or maintain an essential engineering, research, or development capability to be provided by an education or other nonprofi t institution or a federally funded research and development center Procure the services of an expert for use in any litigation or dispute involving the federal government When the terms of an international agreement or a treaty between the U.S. and a foreign government or international organization specify a source If a statute expressly authorizes or requires that the procurement be made through another agency or from a specifi ed source When the disclosure of the agency's needs would compromise the national security When the head of the agency determines that it is necessary in the public interest to use procedures other than competitive procedures 9-7 Foreign Military Sales Acquisition Policy and Process Foreign Military Sales Competitive Source Selection The LOA standard terms and conditions refl ect a preference for competition in contract award as mandated by the CICA. LOA condition 1.2 states that the USG is responsible for selecting the contractor to fulfi ll the LOA requirements. Additionally, condition 1.2 states that the U.S. will select the contractor on the same basis as it makes contractor selections to fulfi ll its own requirements. In other words, the norm for conducting FMS contract awards is for the U.S. to use its competitive contract award process to select the contractor to fi ll the FMS customer's requirement. The SAMM states that competitive source selection will be utilized to the maximum extent possible in support of FMS. [SAMM, Section C6.3.4] Foreign Military Sales Sole Source by Customer Request Section 1.2 of the LOA standard terms and conditions does permit the FMS customer to formally request a noncompetitive procurement be conducted on its behalf. Within the FMS community, a customer's request for a noncompetitive contract award is commonly referred to as a sole source request. A customer's sole source request must comply with the criteria in the SAMM, Section C6.3.4.3, and should be submitted with the LOR. The sole source request must have suffi cient justifi cation to demonstrate that sole source procurement is necessary to meet the objective needs of the customer. The SAMM, Table C6.T2, identifi es the following situations where sole source procurement may be considered to meet objective customer needs. The SAMM does not limit the customer to these fi ve reasons but most customer sole source requests will fall into one of these areas. One of the numerous suppliers can deliver faster, and the situation is urgent enough to forego the benefi ts of the competitive process. Procurement is for a non-standard item which is not active in the DoD supply system, and the customer country knows of a specifi c source for the item. A country has an established history of procurement for articles or services from a particular source and to change would adversely affect an ongoing program For example, this could include an ongoing maintenance program where a particular contractor is providing technical services and the customer country desires to continue with this same contractor for the next contract period. The foreign purchaser has conducted its own source selection competition but desires to procure using the FMS process. In using this sole source justifi cation, the customer country must provide the following: a copy of the country's request for proposal, invitation for bid, or request for tender; a description of the method used to advertise the requirement and any restrictions placed thereon; and a narrative summary of the country's source selection criteria and method of evaluation. If price is not the sole selection criterion, the country must identify the weight that was given to each criterion. When a country has established a history of procurement for articles or services from a particular source and needs to continue procurement from that source to continue standardization of equipment with consequent benefi ts of logistics support. Sole source requests are received by the implementing agency (IA) responsible for preparing the LOA. The IA determines whether the request meets the requirements of the SAMM. Sole source 9-8 Foreign Military Sales Acquisition Policy and Process requests determined to be patently arbitrary or a discriminatory exclusion are to be disapproved. All responses informing of a sole source disapproval must be coordinated with DSCA. In addition to reviewing the customer's sole source justifi cation, the SAMM also recommends that the sole source request be forwarded to the applicable contracting offi ce for information and advice. Typically, the contracting offi cer will have experience procuring this same item or service for DoD. DoD maintains data on past procurements. Based upon the contracting offi cer's experience and access to procurement data, the USG may possess additional information that indicates the customer's sole source selection may not be a prudent procurement choice. In these instances, the contracting offi cer can inform the case manager, who would, in turn, provide this additional information to the FMS customer for consideration. Sole source requests typically specify a particular prime contractor. A sole source request may also request that specifi c subcontractor be utilized by the prime contractor. Specifying sole source subcontractors limits the ability of DoD to hold prime contractors to specifi c performance and cost parameters. The reason is that the prime contractor normally would be responsible for selecting and overseeing subcontractor work to ensure all contract targets are achieved. When a sole source subcontractor is specifi ed, the prime contractor will be required to use certain subcontractors. This removes the prime contractor's ability to shift work away from under performing subcontractors and can relieve him from certain contract liabilities. If the FMS customer chooses to request specifi c subcontractors, the purchaser should be advised of the additional risk. [SAMM C6.3.4.2] Per SAMM, Section C6.3.4.6, approved sole source requests must be documented in an LOA sole source note. The reason for documenting the sole source approval in the LOA is to comply with the CICA and FAR. The fourth CICA exception permits a noncompetitive procurement when the terms of an international agreement call for procurement from a specifi c source. For FAR and CICA purposes, the LOA is considered an international agreement. As such, an LOA containing an approved sole source permits the USG contracting offi cer to initiate a noncompetitive procurement at the FMS customer's request and still be in compliance with the FAR. A copy of the accepted LOA containing the sole source note should be forwarded to the applicable contracting offi cer to permit compliance with the FAR 6.3 requirements for noncompetitive procurements. As an exception to policy, a sole source request may be considered after LOA acceptance. The same sole source review and decision process would occur. If approved, the accepted LOA would require an amendment to be issued to incorporate the sole source note. However, if the request for sole source is submitted by a customer offi cial known to have equivalent or greater authority than the offi cial who signed the LOA, then the sole source note can be added to the LOA by a modifi cation. [SAMM, Section C6.3.4.1] Foreign Military Sales Sole Source without Customer Request Although most FMS sole source procurements originate with the foreign customer, such procurements can originate unilaterally with the USG. In this situation, although the FMS customer did not have any specifi c desires for a particular sole source, the USG managers conducting the procurement may determine that the FMS procurement needs to be conducted on a noncompetitive basis. In this case, the USG managers must generate a written justifi cation for the noncompetitive procurement based on one of the other CICA exceptions (i.e., other than international agreement). An example of a sole source without a FMS customer's request would be a major system acquisition. If the customer wanted to purchase F-16s through FMS, the customer would not need to submit a sole source request that the F-16s be purchased from Lockheed-Martin. Under the FAR, after initial source 9-9 Foreign Military Sales Acquisition Policy and Process selection, major weapon systems are considered to be single source items. The USG will not conduct a competitive procurement for these type items. The USG would unilaterally justify a noncompetitive procurement based the item being a single source. Competitive Source Selection Unless the LOA refl ects an approved customer sole source request or the contracting offi cer has justifi ed a noncompetitive award in accordance with another of the CICA exceptions, a competitive source selection process will be conducted. It is important for the FMS customer to recognize that the competitive process requires time to accomplish. Foreign customers often wonder why it may take so long to deliver an item under FMS. Part of the item lead time concerns the time necessary to plan and conduct the competitive source selection process. Per the FAR, competitive source selection can be accomplished using one of three methods: simplifi ed acquisition procedures, sealed bids or by negotiation. This represents a hierarchy of preferred use. For any given procurement, the fi rst option should be to consider whether the procurement qualifi es to be accomplished under simplifi ed acquisition procedures (SAP). If it does not meet the criteria for SAP, the next option is to evaluate whether sealed bidding criteria can be met. The fi nal option, when the fi rst two types cannot be applied, is to use negotiation. This hierarchy refl ects the degree of diffi culty and cost invested by the USG in the procurement. The SAP is the easiest and least costly type whereas negotiation involves the most government resources and incurs most cost. Simplifi ed acquisition procedures are aimed at streamlining government procurement. Price quotes are solicited from vendors, and the government then issues an order to the vendor determined to provide the best value. Given the reduced bureaucratic approach, dollar value limitations have been placed on the situations in which this method can be used. Purchases up to $100,000 in noncommercial items are permitted. Because of the price regulating infl uences of the commercial marketplace, this method can be used for purchases of commercial items up to $5.5 million. FAR Part 13 describes this process. Sealed bids are used if time permits the solicitation, submission, and evaluation; if the award can be made on the basis of price and other price-related factors; if it is not necessary to conduct discussions; and if there is a reasonable expectation of receiving more than one sealed bid. Under sealed bidding, the government advertises its requirements and invites interested fi rms to submit a bid. Vendors interested in competing for this business submit their respective bids in accordance the invitation for bid instructions. Generally, there will be a deadline date for bid submission and a date established when the government will open the bids. On the bid opening day, the USG will open and review all the bids submitted. The contract will most likely be awarded to the fi rm that submitted the lowest price bid that was responsive to the requirements. Responsive means that the bidder offered what the government requested and not something else. FAR Part 14 describes this process. Negotiation is used if any of the above conditions for simplifi ed acquisition or sealed bidding cannot be met, and when it is necessary to conduct discussions with prospective contractors. The main steps in this processes as described in FAR Part 15 are: USG solicits competitive proposals 9-10 Foreign Military Sales Acquisition Policy and Process Offerors prepare and submit proposals Competitive range determination is made by the USG to decide which offerors to conduct written or oral discussions USG technical and price evaluation of proposals. In this process, the USG typically has two evaluation teams separately consider the merits of each proposal. One team will be comprised of technical type individuals capable of distinguishing between the relative technical and qualitative benefi ts presented by each proposal. The other team, comprised primarily of fi nancial and business type individuals, will review the price related factors of each proposal. USG selects and awards a contract to that offeror whose offer is most advantageous to the government. The most advantageous or best value offer is the one determined to provide the best combination of performance and price. It is not necessarily the lowest price offer or the best performing product/service. Advertising for Competition The federal government has entered the electronic age and now offi cially advertises all federal contracting opportunities valued over $25,000 from a single web site at http://fedbizopps.gov. FMS requirements will also be advertised on this web site for interested vendors. Set-aside Procurements As previously stated, all procurements for FMS will be conducted in compliance with FAR and DFARS policy and procedures. As such, the potential does exist for certain FMS procurements to be set-aside for special classifi cations of businesses to exclusively compete. This is another example of the USG conducting FMS procurements in the same manner as it conducts procurements for itself. Although procurements may be set-aside, the FAR also requires that contract awards be made to responsible contractors. A responsible contractor is one that the government believes to possess the ethics, resources, capability and capacity to successfully deliver the contract requirements in a timely manner. Contract Types The decision concerning the type contract to use in an FMS procurement is an internal USG decision. The USG will select the contract type for FMS in the same manner that it selects contract types for itself. Often, the USG will combine its own requirements with FMS requirements on a single contract. Although the USG will select the type contract used to procure for FMS, the contract type may impact the customer when it comes to timely case closure. Under FMS, the fi nancial policy is for the USG to recover the total cost of performance against the FMS case. The type contract used in making FMS procurements can impact how long it will take to determine the total cost. As a result, the type contract can ultimately impact how long it will take to close the FMS case. More information on FMS case closure is contained in Chapter 12, "Foreign Military Sales Financial Management." There are two broad categories of contracts used in DoD procurement: fi xed-price and cost- reimbursement. Within these two broad categories a wide variation of contract types is available to the government and contractors. 9-11 Foreign Military Sales Acquisition Policy and Process Fixed-price contracts provide for a price that is generally not subject to any adjustment, regardless of the contractor's costs experienced in performing the contract. This contract type makes the contractor responsible for cost risk and the resulting profi t or loss. It imposes a minimum administrative burden upon the contracting parties. Under these contracts, the contractor has greater responsibility for the costs with little or no cost risk to the government. When a contractor delivers materiel or services under a fi xed-price contract and the USG accepts the product, no signifi cant further action is required by either party. The government will pay the predetermined fi xed price and the contract can be closed. The FAR standard for closing fi xed price contract is within six months following fi nal delivery. Cost-reimbursement contracts provide for payment of allowable incurred costs to the extent prescribed in the contract. These contracts are suitable for use only when uncertainties involved in contract performance do not permit costs to be estimated with suffi cient accuracy to use a fi xed-price type of contract. Under these contracts, the contractor has less responsibility for the fi nal cost and the cost risk to the government is higher. Under a cost-reimbursable contract, the contractor will submit contract per- formance cost data to the USG. The USG must then review this cost data to vali- date that the costs claimed by the contractor are allowable, allocable, and reasonable. Allowable means the cost category being claimed is considered to be a legitimate expense category by FAR cost standards. Allocable means the proportion of the overall cost being claimed under the respective contract is an appropriate share representative of the resources actually applied to the respective contract. Reasonable means that the amount claimed by the contractor for an allowable and allocable share does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Due to the time necessary for the contractor to gather and report supporting cost data and for the USG to perform any necessary review and audits of the cost data, it may take a lengthy amount of time to close out a cost reimbursable contract. The FAR standards for closing cost contracts, following fi nal delivery, is within twenty months for contracts without indirect rates and within thirty-six months for contracts with indirect rates. SPECIAL FOREIGN MILITARY SALES CONTRACTING CONSIDERATIONS Throughout this chapter, it has been emphasized that contracting for FMS will be in accordance with normal FAR and DFARS policies and procedures. As a result, contracting for FMS essentially mirrors the process DoD uses in contracting for itself. As may be expected, there are a few peculiarities associated with FMS contracts. The DFARS contains a special subpart that addresses these peculiarities. This subpart is DFARS 225.7300, "Acquisitions for Foreign Military Sales." Foreign Military Sales Solicitation and Contract Marking DFARS states that all solicitations to industry for FMS requirements should separately identify the requirement as being for FMS and also indicate the specifi c FMS customer. It is important for industry to know this information because special rules concerning cost allowability for FMS may apply as 9-12 Foreign Military Sales Acquisition Policy and Process discussed later in this chapter. Additionally, all awarded contracts containing FMS requirements are to be marked "FMS Requirement" and are to include the FMS case identifi er code. Contracting Offi cer Involvement in Letter of Offer and Acceptance The only individual legally authorized to contractually commit the USG is a warranted contracting offi cer. A warrant is a specifi c certifi cation provided to a federal employee or military offi cer that authorizes that person to commit the USG in contracts. The contracting offi cer along with other procurement professionals on the team will take the requirement identifi ed on the LOA along with the LOA funding to ultimately award a contract with industry that is compliant with the FAR and DFAR requirements. Potential future problems arising when the LOA is implemented for procurement can be identifi ed and minimized through close coordination between the case manager and the contracting offi cer. The DFARS states that the role of the contracting offi cer is to assist the FMS case manager by: Assisting in preparing the price and availability data Identifying and explaining all unusual contractual requirements or requests for deviations Reviewing sales commissions and other unique fees Communicating with potential contractors Identifying any logistics support necessary to perform the contract Contract Pricing for Foreign Military Sales The FAR and DFARS provisions are intended to ensure procurement at fair and reasonable prices. In addition to protecting the USG interests, the FAR and DFARS also attempt to treat contractors fairly. The provisions of DFARS Subpart 225.7303-2 recognize that, in working to fulfi ll FMS contract requirements, contractors may incur legitimate additional business expenses that they normally do not incur in DoD only contracts. As a result, DFARS Subpart 225.7303-2 permits certain types of costs to be allowable for FMS contracts. Although the same pricing principles are used, FMS contract prices are not always identical to the DoD contract prices. Examples of such costs include: Selling expenses Maintaining international sales and service organizations Sales commissions and fees in accordance with FAR, Subpart 3.4 Sales promotions, demonstrations, and related travel for sales to foreign governments Confi guration studies and related technical services undertaken as a direct selling effort to a foreign country Product support and post-delivery service expenses Operations or maintenance training, training or tactics fi lms, manuals, or other related data 9-13 Foreign Military Sales Acquisition Policy and Process Technical fi eld services provided in a foreign country related to accident investigations, weapon system problems, operations/tactics enhancement, and related travel to foreign countries Offset costs which are further defi ned later in this chapter Although DFARS 225.7303-2 does permit certain costs for FMS to be allowable. DFARS 225.7303- 5 limits this special cost allowability provision to only apply to procurements originating from LOAs fi nanced with either customer funds or repayable credits. If the LOA is fi nanced by USG grant funds such as Foreign Military Financing Program (FMFP) funds or Military Assistance Program (MAP), then the cost allowability rules default back to the standard DoD criteria. Sales Commissions Sales commissions, referred to in the FAR as contingent fees, are generally allowable if the commission or fee is paid a employee or a selling agency engaged by the prospective contractor for the purpose of legitimately securing business. DFARS, 225.7303-4 permits contingent fees to exceed $50,000 only if the customer agrees to the fees in writing before contract award. The following countries must approve all contingent fees regardless of value before they can be considered allowable FMS contract costs: Australia, Egypt, Greece, Israel, Japan, Jordan, Republic of Korea, Kuwait, Pakistan, Philippines, Saudi Arabia, Taiwan, Thailand, Turkey, and the Venezuelan Air Force. SAMM, Section C6.3.7.1 states, if sales commissions are part of a contract proposal, the inclusion should be made known to the purchasing government prior to, or in conjunction with, the submission of the LOA to that government. The notifi cation should include the name and address of the agent; the estimated amount of the proposed fee, and the percentage of the sale price; and a statement either appropriate offi cials of DoD consider the fee to be fair and reasonable or the USG cannot determine the reasonableness of the proposed fee. This statement is normally included as an LOA note. LOAs that include contingent fees (regardless of value of the case) and all correspondence with a purchaser on the subject of contingent fees relative to price and availability data or an LOA, and all post-LOA notifi cations about contingent fees must be coordinated with DSCA. Foreign Military Sales Customer Involvement in Contracting The FMS process primarily involves the foreign customer in LOA related issues. After the LOA is accepted, internal USG processes are undertaken to fulfi ll the LOA requirements. Generally, these internal processes are accomplished without direct foreign purchaser involvement. The SAMM states that suffi cient details should be included in the LOA to allow the U.S. contracting offi cer to negotiate and award a contract without requiring foreign country representation or direct involvement in the formal negotiation process. However, FMS customers often desire to have greater involvement in DoD's procurement processes. The following outlines the areas that the customer may choose to have greater participation and other areas where customer participation is not permitted. Source Selection Competitive contract awards are the default procurement method for FMS. As discussed above, the FMS process does provide a process whereby the customer can request the USG contract on a non-competitive basis with a specifi c vendor in support of an LOA requirement. This process is referred to as a sole source request. Unless the customer submitted a sole source request, the customer 9-14 Foreign Military Sales Acquisition Policy and Process cannot provide input into source selection decisions. LOA standard term and condition 1.2 states the following: . . . the Purchaser understands that selection of the contractor source to fi ll requirements is the responsibility of the USG, which will select the contractor on the same basis used to select contractors for USG requirements. Additionally, the FMS purchaser is not permitted to interfere with a prime contractor's placement of its subcontracts or to direct the deletion of names of fi rms from potential bidder lists. Customers may suggest that certain additional fi rms be included because this has the effect of increasing competition. [SAMM, Section C6.3.5.2, and DFARS, 225.7304] Contract Negotiations Under FMS, the foreign purchaser has authorized the USG to solely negotiate the procurement contracts that originate from the LOA requirements. LOA standard term and condition 1.2 states the following: . . . the Purchaser agrees that the US DoD is solely responsible for negotiating the terms and conditions of contracts necessary to fulfi ll the requirements of this LOA. Although the USG should be able to accomplish contracting actions without FMS purchaser involvement, the SAMM C6.3.5.2 states that contracting offi cers should consult with the FMS purchaser any matter that could be perceived as inconsistent with or signifi cantly different from the LOA. Per DFARS 225.7304, FMS purchasers may participate with USG acquisition personnel in discussions with industry to develop technical specifi cations, to establish delivery schedules, to identify any special warranty provisions or other requirements unique to the FMS purchaser. Additionally, customers may participate in reviewing varying alternatives, quantities, and options needed to make price-performance trade-offs. The degree of participation of the FMS purchaser during contract negotiations is left to the discretion of the contracting offi cer after consultation with the contractor. USG personnel are not to release any contractor proprietary data unless approved by the contractor. [DFARS, 225.7304] Contract Pricing FMS policy states that information concerning FMS contract prices can be provided to the FMS customer in order to demonstrate the reasonableness of the price and to respond to relevant questions concerning contract price. Pricing information may include top level pricing summaries, historical prices, or an explanation of any signifi cant differences between the actual contract prices and the estimated contract price included in the initial LOA price. Per the DFARS 225.7304, the FMS customer is not permitted to observe or participate in negotiations between the USG and the contractor involving cost or pricing data, unless a deviation is granted. Contract Release The issue may arise as to whether copies of the USG procurement contract may be released to the foreign purchaser. As noted in the SAMM, Section C6.3.6.2, all pertinent information and contractual obligations between the DoD and the foreign purchaser are identifi ed in the LOA. Consequently, there normally should be no need to provide a copy of the contract to the foreign purchaser. However, if the contract is unclassifi ed and provides only for the requirements of the requesting country without including USG or other country requirements, release can be considered. This does not include negotiation or pricing data. 9-15 Foreign Military Sales Acquisition Policy and Process CONTRACT ADMINISTRATION SERVICES The contract administration function is an important part of the acquisition process. The scope of contract administration involves the monitoring of all facets of implemented contracts to insure total performance by both the contractor and the USG. Specialists in contract administration, quality assurance, industrial security, fi nancial management, and production management perform contract administration. FAR, 42.3, provides a detailed listing of 70 contract administration functions. Normally, there will be a procuring contracting offi cer (PCO) located at the MILDEP or defense agency. The PCO oversees the contract process through the contract award. Following contract award, the contractor may perform contract work at diverse and multiple geographic locations. It therefore becomes impractical for the PCO to be able to perform day-to-day oversight in administering the awarded contract. As a result, the PCO will generally delegate the contract administration functions to an administrative contracting offi cer (ACO) that is physically located near or at the contractor's facility. Within DoD, the Defense Contract Management Agency (DCMA) is responsible for contract administration services. DCMA has contract management offi ces (CMOs) that administer DoD contracts within specifi c geographic areas or by dedicated CMOs at major defense contractor facilities. The Defense Contract Audit Agency (DCAA) provides audit and fi nancial advisory services in support of DoD acquisitions for FMS. Foreign Military Sales Contract Administration Contract administration is an integral part of the FMS process. The customer is entitled to this service as part of the FMS purchase. LOA standard term and condition 1.2 states the following: When procuring for the Purchaser, DoD will, in general, employ the same contract clauses, the same contract administration, and the same quality and audit inspection procedures as would be used in procuring for itself. In the LOA, the customer is charged a contract administration service (CAS) fee for FMS materiel and services delivered from procurement. The CAS fee has three primary components: contract administration, quality assurance and contract audit. More information on the CAS fee is contained in later Chapter 12, "Foreign Military Sales Financial Management." In accordance with the AECA, the cost of quality assurance, inspection, audit and other contract administration services may be waived for North Atlantic Treaty Organization (NATO) members and for NATO infrastructure programs if a reciprocal CAS agreement exists whereby these same services are provided to the U.S. without charge. SAMM, Tables C9.T3 and C9.T5, identify the countries and organizations that have reciprocal CAS agreements with the U.S. A brief description of the content for each CAS fee element is provided below. Contract administration includes fi nancial services, contract management, review of contractor systems, price and cost analysis, negotiation of contract changes pursuant to the changes clause, fi nal determination of allowability of costs, convenience and default termination settlements, plant clearance and disposal of contract inventories, and administration of government property. Quality assurance consists of inspection, testing, evaluation, and continuous verifi cation of contractors' inspection systems or quality assurance programs. When unfavorable quality conditions are detected, requirements for corrective action by the contractor are 9-16 Foreign Military Sales Acquisition Policy and Process initiated. All FMS requirements have the same quality assurance processes applied that DoD utilizes for its own contracts. The quality assurance function includes the USG inspecting and ultimately accepting or rejecting the contractor's performance under the provisions of the contract. At the point of acceptance, the USG takes title to the material which subsequently transfers to the FMS purchaser at the manufacturer's loading facility prior to shipment per LOA standard term and condition 5.1. USG acceptance of per- formance is documented by either a DD Form 250 Material Inspection and Receiving Report or by generating a Receiving Report acceptance within the Wide Area Workfl ow system. Contract audit consists of fi nancial services provided by DCAA in connection with the negotiation, administration, and settlement of contracts and subcontracts. These include evaluating the acceptability of costs claimed or proposed by contractors and reviewing contractor cost control systems. 9-17 Foreign Military Sales Acquisition Policy and Process Figure 9-2 DD Form 250 9-18 Foreign Military Sales Acquisition Policy and Process Contract Financial Management DoD is responsible for making payments to contractors in accordance with the contract. Progress payments to contractors prior to delivery to cover a percentage of cost incurred as the work progresses is a common practice in DoD contracts. The customary progress payment rate on DoD contracts are 80 percent of the total estimated contract cost for large businesses, 90 percent for small businesses, and 95 percent for small disadvantaged businesses. [DFARS, 232.501-1] This rate schedule also applies to contracts awarded for FMS requirements. Progress payments are often predicted in advance, using cost expenditure curves developed from typical DoD contract expenditure rates. Therefore, the anticipated progress payments, plus any hold back for termination costs, form the basis for the FMS customer's LOA payment schedule. It is important that LOA data and the actual contract performance progress be kept in balance. The LOA documents the USG's best estimate of cost and delivery information. The FMS customer's expectations are based on the LOA. If deviations from the LOA estimates become apparent during contract performance, the customer should be notifi ed and an LOA amendment or modifi cation issued. Early notifi cation to the customer is important to permit it to decide and exercise any alternate options or to make internal adjustments to accommodate revised cost or delivery schedules. Any change from the original LOA commitments may be signifi cant to the FMS customer. In one case, a contractor offered the USG the opportunity for early delivery of a major FMS requirement. Historically, contract early delivery has generally been viewed as a positive situation provided there is no increase in total contract cost. In this situation, the government program manager agreed to the early delivery because there was no increase in contract cost. However, accepting early delivery generated an accelerated demand by the U.S. for LOA payments from the FMS customer. The customer's budget was already established to support the original estimate of payments. This decision actually turned out to cause signifi cant problems and dissatisfaction from the FMS customer. Contract Administration of Direct Commercial Sales Eligible governments may request contract administration and contract audit functions normally provided by DCMA offi ces and the DCAA auditors, for direct commercial sales purchases. The procedure is for the foreign customer to submit a letter of request for such services to DCMA. This service for DCS purchases is normally authorized and reimbursed through a blanket order LOA between the foreign purchaser and DCMA. The LOA establishes an estimated dollar value against which individual requests can be placed throughout a specifi ed ordering period. DCMA may also prepare a defi ned order LOA to respond to a foreign customer's request for services that are applicable to a specifi c contract. OFFSETS In layman's terms, an offset is a package of additional benefi ts that the seller agrees to provide or perform in addition to delivering the primary product or service. Offsets generally apply only to acquisitions of major systems. In the international marketplace, there are numerous weapons system producers that offer their system to prospective purchasing countries. When a country makes the decision to procure a foreign system, signifi cant amounts of a nation's cash are going to fl ow out of that country's economy. Given the cost of today's modern systems, the cash outfl ow is probably going to be in the hundreds of millions or even into the billions of dollars. As a result, purchasing countries often wish to leverage this huge foreign expenditure to obtain additional benefi ts for their 9-19 Foreign Military Sales Acquisition Policy and Process nation in addition to acquiring the weapon system itself. This package of additional benefi ts intended to compensate for the huge fi nancial outfl ow is referred to as an "offset". Offsets are a recognized legal arrangement found in international acquisitions. Offsets in defense trade began in the late 1950s. The fi rst example of U.S. offsets occurred in the early 1960's with the coproduction of the F-104 jet fi ghter and Hawk surface-to-air missile in the Western Europe. Today, offsets continue to be part of the defense trade with the aerospace industry representing the majority of all offsets. In terms of defense acquisitions, offset requirements may be established in conjunction with either FMS or a DCS. Types of Offsets Various terms are used to describe different types of offset arrangements. The terms offsets, coproduction, buy-backs, barter, counter-purchase, compensation, and counter-trade are often used interchangeably. However, all offsets can fundamentally be categorized into two types: direct offsets and indirect offsets. A direct offset is a form of compensation provided to a purchaser that involves goods directly related to the item being purchased. As an example, the U.S. contractor may agree to permit the purchaser to produce in its country certain components or subsystems of the weapon system the country is purchasing. An indirect offset is a form of compensation provided to a purchaser that involves goods which are unrelated to the item being purchased. For example, the contractor may agree to purchase, usually for resale, certain of the customer country's manufactured products, agricultural commodities, raw materials, or services. Congressional Interest and Notifi cation As the number and variety of offset programs has increased, so has the concern of many government agencies, private industries, labor offi cials, and the media over the impact of offsets on U.S. domestic industries. These concerns include the impact of these trade practices on American jobs, the U.S. balance of payments, technology transfer, and the long term consequences for the U.S. and foreign economies. The president is required to submit to Congress an annual report on the impact of offsets on defense preparedness, industrial competitiveness, employment, and U.S. trade. The secretary of commerce prepares the report in consultation with the secretaries of defense, treasury, and state, and the U.S. trade representative. This annual offset report to Congress is available at http://www.bis.doc. gov/DefenseIndustrialBasePrograms/OSIES/offsets/default.htm. The AECA, Section 36(g) to requires congressional notifi cation of proposed FMS and commercial export sales with offset agreements. The information provided to Congress includes a general description of the performance required for the offset agreement. This description should indicate whether or not a known offset requirement exists, whether the country has a standard offset requirement, and whether offsets provided will be direct or indirect and the estimated percentage of each. If there is no offset agreement at the time of the notifi cation, that should be so stated. Reporting of offset agreements is treated as confi dential information and remains classifi ed even after the statutory notifi cation is complete. United States Government Offset Policy Offsets are permissible under FMS. However, it must be emphasized that the offset agreement is between the purchasing country and the U.S. contractor. The USG is not a party to the agreement 9-20 Foreign Military Sales Acquisition Policy and Process and does not retain any obligation to enforce the contractor's performance of the agreement. Figure 9-4 illustrates the offset relationship. This seems like and, in fact, is an odd arrangement. In an ideal world, the USG would prefer that offset agreements did not exist. However, the reality of the marketplace is that other countries are competing for international business and are willing to provide offset packages to prospective purchasers. If the USG would prohibit offsets from being offered under FMS, the U.S. fi rms would be at an enormous disadvantage in attempting to compete internationally. As stated earlier, it is DoD's preference to sell American equipment, so, in this environment, the USG must permit American fi rms to offer offsets to be competitive in the international arena. The Presidential Policy on Offsets in Military Exports was announced by President George H.W. Bush on 16 April 1990 and was subsequently codifi ed into law by the Defense Production Act Amendments of 1992. The key provisions of the policy on offsets are: No USG agency shall encourage, enter directly into, or commit U.S. fi rms to any offset arrangement related to the sale of U.S. defense articles or services USG funds shall not be used to fi nance offsets in security assistance transactions Negotiations or decisions regarding offset commitments reside with the companies involved Exceptions require presidential approval through the National Security Council (NSC) Offset Costs When a customer requires an offset in association with a major procurement, do they actually obtain the offset benefi t at no cost? The fundamental principle of business dictates that any enduring enterprise cannot incur more expenses than revenue it collects. The same is true in offsets. Firms may agree to perform an offset to win an acquisition competition. However, they must recover the cost to perform the offset through the price charged for performing the primary system contract. In a direct commercial contract, the contractor must build the anticipated cost for performing the offset into its contract prices. Under FMS, the offset cost recovery process is awkward. The USG wants U.S. fi rms to successfully compete for international business and permits offset arrangements as a legal business activity. Likewise, the USG wants international customers to have the option to purchase military systems using either the FMS process or the direct commercial sales process. Under FMS, the contractor is actually working directly for the DoD, but the USG permits this same contractor to concurrently enter an offset agreement directly with the FMS purchaser. Although DoD is clearly not a party to the offset agreement, the DFARS permits the contractor to build the cost of performing the offset into the contract sale price it charges the USG. Under FMS pricing policy, the USG must recover all costs of conducting FMS through the LOA. As a result, the LOA price will actually be incrementally higher in order to cover the cost of the offset required by the purchaser. So, on the surface, it may appear that the customer is receiving the offset at no cost. This is not true. Offset costs are included as part of the applicable line item unit cost in price and availability (P&A) data and in estimated prices quoted in the LOAs. It is the contractor's responsibility to inform the MILDEP when estimated offset costs have been included in the FMS pricing. The additional cost to perform the offset will result in a higher contract cost which, in turn, results in a higher FMS cost under the LOA. Although not a party to the offset agreement, the USG serves as the banker for the offset. Although the DFARS states that offset costs will be considered allowable, it does not mean that the contractor does not have to exercise caution in offset performance. The 9-21 Foreign Military Sales Acquisition Policy and Process DFARS requires the contracting offi cer to review and determine that the contract costs claimed by the contractor are reasonable. It is important to note that the DFARS provision permits offset costs to be included in the costs billed to the USG under the procurement contract only if the LOA is funded with customer funds. If the LOA is funded with FMFP funds, offset costs are unallowable. It is inappropriate for USG personnel to discuss with the foreign government the nature or details of an offset arrangement with a U.S. contractor; however, the fact that offset costs have been included in the P&A or LOA price estimate will be confi rmed should the customer inquire. The customer should be directed to the U.S. contractor for answers to all questions regarding its offset arrangement, including the offset costs. Figure 9-3 Offset Relationships Letter of Offer and Acceptance Offset Note All LOAs involving articles or services sourced from procurement and fi nanced wholly with customer funds or with repayable credit are required to contain the following offset note. This note summarizes the USG policy regard offsets in association with FMS. The DoD is not a party to any offset agreements/arrangements which may be required by the Purchaser in relation to the sales made in this LOA and assumes no obligation to administer or satisfy any offset requirements or bear any of the associated costs. To the extent that the Purchaser requires offsets in conjunction with this sale, offset costs may be included in the price of contracts negotiated under this LOA. If the Purchaser desires visibility into these costs, the Purchaser should raise this with the contractor during negotiation of offset arrangements. SUMMARY The fundamental principle regarding contracting for FMS requirements is that the USG essentially treats the FMS customer's requirements as if they were USG requirements. In contracting for FMS, ! "# $ # ! 9-22 Foreign Military Sales Acquisition Policy and Process the same contracting regulations, policies and procedures are applied. Per the SAMM, this is one of the principal reasons why customers select the FMS system rather than contracting themselves using direct commercial processes. The unique aspects of the procurement process that pertain to FMS are few in number, but they have a major impact on the FMS process. Competitive source selection is the norm; however, the FMS customer has the option to use the sole source process if they desire the USG to contract with a specifi c fi rm. Under sole source procedures, the FMS customer must include some reasonable justifi cation to support the sole source request. The USG also has established a comprehensive contract administration infrastructure that will be used to oversee the execution of contracts awarded in support of FMS requirements. Again, the USG uses the same contract administration, quality assurance and contract audit processes for FMS that it uses for normal DoD business. Offsets are a market reality. Offsets are permitted in association with FMS when the LOA funding the procurement contract is fi nanced by customer cash or repayable credit. If the LOA is funded by USG provided grant funds, offset costs claimed by the contractor will be considered unallowable. REFERENCES DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapter 3, 5, 6, and 9. Federal Acquisition Regulations (FAR), Parts 6, 14, 15, 16, 25, and 31. Defense Federal Acquisition Regulation Supplement (DFARS), Part 225 Foreign Acquisition. Department of Commerce, Offsets in Defense Trade, Eleventh Report. 10-1 Logistics Support of International Military Sales INTRODUCTION For foreign military sales customers, the weapon system acquisition phase begins with confi g- uration identifi cation of the weapon system and the ordering of all related logistics products and services needed to fi eld the weapon system in-country. It includes the monitoring of procurement milestones and the tracking of deliveries in-country. This phase ends with the delivery of the weapon system to the foreign purchaser. Initial support is an extension of the weapon system acquisition phase. It is the establishment of initial maintenance capability and materiel support. The Department of Defense (DoD) does not have a separate logistics system to support foreign military requirements resulting from security assistance efforts. Rather, these requirements are satisfi ed by using existing DoD logistics systems. Therefore, understanding how the basic DoD logistics system components fi t together and function is a prerequisite to understanding the relatively minor system adaptations that have been made to accommodate security assistance requirements. Since many of the unique security assistance topics introduced here are covered in considerable detail in subsequent chapters, the following discussion is presented as a DoD logistics system overview. THE TOTAL PACKAGE APPROACH The DoD policy is to offer the foreign military sales purchaser a complete sustainability package when developing a letter of offer and acceptance for non-excess systems. The total package approach (TPA) ensures items can be operated and maintained in the future, and ensures that foreign military sales (FMS) purchasers can obtain support articles and services required to introduce and sustain equipment. In addition to the system itself, other items to consider in a total package include training, technical assistance, initial support, ammunition, follow-on support, etc. The necessary planning for follow-on support, training, and other elements of continuity should accompany the transfer of end- items. LOGISTICS Before discussing the function of DoD logistics, it is appropriate to examine what is generally meant by the term logistics. The DoD Dictionary of Military and Associated Terms (Joint Pub 1-02) defi nes logistics as "The science of planning and carrying out the movement and maintenance of forces." In its most comprehensive sense it is those aspects of military operations which deal with design and development, acquisition, construction, storage, movement, distribution, maintenance, disposition or disposal of materiel, or furnishing of services. Logistics is a full system, an integrated whole, which involves four elements acquisition, distribution, sustainment, and disposal. Thus, as a model for briefl y examining the relationship between international logistics and the DoD logistics system, attention shall be focused on the functional areas of transportation, maintenance, and supply. LOGISTICS SUPPORT OF INTERNATIONAL MILITARY SALES Chapter 10 10-2 Logistics Support of International Military Sales Transportation Transportation involves the movement of equipment from point of origin to fi nal destination. United States (U.S.) government policy is that FMS purchasers should be responsible for as much of the transportation process as possible past the continental U.S. port of exit. The DoD becomes involved as an exception in certain complex FMS transportation actions. To help accomplish these tasks, the procedures prescribed in DoD 4500.9-R, Defense Transportation Regulation, Part II, Cargo Movement, are applied. These procedures standardize and automate document fl ow. The Army's Surface Deployment and Distribution Command is responsible for the administration of the procedures prescribed by DoD 4500.9-R, which uses military standard requisitioning and issue procedures to create and exchange standard shipping data for recording and reporting shipping status and to control materiel movements in the defense transportation system. Maintenance Each military service is delegated the responsibility for defi ning tasks to be performed at the various levels of the maintenance organization chain. To ensure effective and economic support of weapons and equipment. An analytical system is used to identify the maintenance level at which an item will be replaced, and repaired or thrown away based on economic considerations and operational readiness requirements. This level of repair analysis is usually performed by a prime contractor or original equipment manufacturer, and is subsequently approved by the weapon system program manager. There are three generic levels of maintenance in the DoD. The level of maintenance employed by each of the U.S. military services is dependent upon the weapon system being maintained. Not all FMS customers employ these three levels all the time. Each weapon system sale must take into consideration the purchaser's operating requirements, maintenance capability and investment cost, and a tailored maintenance plan must be developed for that specifi c purchaser. Organizational or Field Level Maintenance This level of maintenance is performed by individual organizations on their own equipment. Organizational maintenance duties include inspecting, servicing, lubricating, adjusting, and replacing parts, minor assemblies, and subassemblies. Intermediate Level Maintenance This level of maintenance is performed by separate maintenance activities to support users. Intermediate maintenance is normally accomplished in fi xed or mobile shops, tenders, shore-based repair facilities, or by mobile teams. Its phases include calibration, repair, or replacement of damaged or unserviceable parts, components, or assemblies, the manufacture of critical non-available parts, and providing technical assistance. Depot Level Maintenance This level of maintenance is performed by designated maintenance activities to support organizational and intermediate maintenance activities. It employs more extensive shop facilities, equipment, and personnel of higher technical skill than are available at the lower levels of maintenance. Its phases include inspection, test, repair, modifi cation, alteration, modernization, conversion, overhaul, reclamation, or rebuild of parts, assemblies, subassemblies, components, equipment end items, and weapon systems. It is normally accomplished in fi xed shops, shipyards, and other shore-based facilities, or by depot fi eld teams. It can be performed by DoD personnel or by commercial contractors. 10-3 Logistics Support of International Military Sales Purchasing countries can establish FMS cases to get items repaired, most commonly at the depot level. Purchaser country repair requirements are integrated with the repair programs of the military services and are accomplished by organic military repair facilities (i.e., Army maintenance depots, Air Force logistics centers, Naval aviation depots, Naval shipyards) or by civilian contractors. Supply Supply is another term that has a variety of meanings. Often, the term supply is used in a collective sense, much like logistics, to include acquiring, managing, receiving, storing, and issuing materiel to required forces. Logistics support to FMS cases potentially encompasses all of these functions. Within the services and the Defense Logistics Agency (DLA) are the organizations responsible for acquiring/managing supplies and for the materiel management functions of receiving, storing, and distributing items. Item Classifi cation There are several ways to classify and manage items in the DoD supply system. Primary items, also called major items, are a fi nal combination of end products, component parts, and/or materials which are ready for their intended use, e.g., aircraft, ships, tanks, weapon systems, etc. Each of the military services manages its own major items. Due to the high acquisition costs involved and the attendant absence of available stocks, major items acquired through FMS are usually a procurement lead-time away. Note that aircraft engines are managed as primary items. Secondary items are all items not defi ned as primary or major items. These include repairable components, sub-systems and assemblies, consumable repair parts, bulk items and materiel, subsistence, and expendable end items (including clothing and other personal gear). Secondary items generally fall into two categories. Repairable items are generally repairable and non expendable items, e.g., radios, generators, etc. Consumable items are usually low-cost and expendable items, such as gears, bearings, and gaskets. Integrated Materiel Management One objective of integrated materiel management is to minimize or eliminate duplication of item management. The wholesale management of a given item for all of the DoD is assigned to a single inventory control point (ICP). Approximately 90 percent of the items in the DoD supply system have a single manager. The majority of these items are managed by DLA and its supply centers. However, the ICPs in the military also serve as single item managers. Most of the items which remain under military service management are peculiar to the individual service or directly related to the operation of a particular weapon system, or are identifi ed as high cost items worthy of service management. Retail versus Wholesale Item Management The term retail item refers to those stocks at the base or activity level which are available for local area support. Wholesale items are those stocks that are available for resale, e.g., for further distribution by an ICP to a base or unit. Purchasers are expected to establish their own retail supply system in-country and replenish their retail stocks from the wholesale or ICP management level via an FMS blanket order case or a cooperative logistics supply support arrangement (CLSSA). 10-4 Logistics Support of International Military Sales DEPARTMENT OF DEFENSE LOGISTICS ORGANIZATIONS Inventory Control Points The primary players in the DoD wholesale system are the inventory control points, i.e., Army life- cycle management commands, Air Force air logistics centers and product centers, the Navy inventory control point, the Navy systems commands, the DLA supply centers (and various depots or stock points). ICPs play a major role in satisfying both U.S. and foreign military requirements placed on our logistics systems. Prior to discussing the role of ICPs and depots in satisfying these requirements, it is helpful to understand the functions of these activities. Each stock numbered item is controlled by an item manager (IM), usually located at the ICP. The IM's functions include determining requirements; establishing stock levels; initiating procurements; and providing distribution, overhaul, and disposal management for secondary items. While the ICPs participate in the management of major end items/ systems, i.e., tanks, aircraft, ships, etc., they do not have primary responsibility for determining the requirements for these items. An ICP's role in security assistance begins with the receipt of taskings from agencies that write FMS letters of offer and acceptance for those items managed by the ICP. ICPs help develop letters of offer and acceptance (LOAs) by providing pricing information for items such as ammunition and support equipment. Major item sales cases usually include the repair parts required to support the major item for a 12- 24 month period. Those repair parts are considered "initial support" or " concurrent spare parts." The ICPs are responsible for recommending the range and quantity of repair parts to be included for initial support, based upon operational use factors provided by the purchaser. CLSSAs require a recommended list of repair parts to be stocked in support of the purchasing country. The ICPs develop the list which includes recommended quantities and the cost for each item. Upon acceptance and implementation of the LOA, the ICPs and the DLA supply centers are the supply activities responsible for satisfying the foreign purchaser's request for items which they manage. Within guidelines established by DoD, they may either issue items directly from available stocks or, when necessary, by procuring the materiel. Navy Inventory Control Points Within the Department of the Navy, there are fi ve systems commands that manage primary and secondary Navy or Marine Corps (USMC) assets. The Navy Supply Systems Command (NAVSUPSYSCOM) provides material support needs of the Department of the Navy, such as supply management policies and methods. A subordinate activity of NAVSUP is the Navy Inventory Control Point (NAVICP) situated in two locations. An activity located at Mechanicsburg, Pennsylvania manages ship spares, and the activity located at Philadelphia, Pennsylvania manages aircraft spares. The Naval Air Systems Command (NAVAIRSYSCOM) headquartered in Patuxent River, Maryland, manages Naval aircraft and air-to-air missiles, as well as their associated support equipment and repair depots. 10-5 Logistics Support of International Military Sales The Naval Sea Systems Command (NAVSEASYSCOM) headquartered in Washington, D.C. manages Navy ships, boats and submarines, as well as surface-to-air missiles and their associated support equipment and repair depots. The Naval Space and Warfare Systems Command (SPAWARSYSCOM) headquartered in San Diego, California, manages the Navy's communications-electronics systems. The Marine Corps Systems Command (MARCORSYSCOM) headquartered in Quantico, Virginia, also develops and manages Marine Corps FMS cases for the Department of the Navy. Army Inventory Control Points Within the Army structure, there are four ICPs with security assistance management directorates (SAMD). The Tank Automotive and Armaments Command (TACOM), headquartered in Warren, Michigan, manages tracked and wheeled vehicles and associated support equipment. The Aviation and Missile Command (AMCOM), located in Huntsville, Alabama, manages missiles, helicopters, and associated equipment. The Communications-Electronics Command (CECOM), located at Fort Monmouth, New Jersey, is responsible for the Army's communications and cryptographic equipment. The Joint Munitions and Lethality Command (JM&L), headquartered at Rock Island Arsenal, Illinois, is the single manager of munitions for the DoD. These ICPs all belong to the Army Materiel Command. The Army ICPs manage not only the primary (major) end-items, but also the secondary and support equipment and repair facilities for their respective major items. Air Force Inventory Control Points Within the Air Force, materiel management responsibility overlaps among the three products centers and the three air logistics centers (ALCs). Primary items are managed at the product centers, while depot repairables and secondary support items are managed by the air logistics centers. The product centers include: The Aeronautical Systems Center (ASC) at Wright-Patterson Air Force Base, Ohio, manages a wide variety of aircraft and related equipment. These include the B-2 bomber, the F-17A Nighthawk, the C-17 Globemaster and C-5 Galaxy and C-130 Hercules upgrades. The center also manages unmanned aircraft systems. The Air Armaments Center (AAC) at Eglin Air Force Base, Florida develops, tests and fi elds all air-delivered weapons. The center plans, directs, and conducts tests and evaluations of U.S. and allied air armament, navigation/guidance systems, and command and control systems. The Electronic Systems Center (ESC) at Hanscom Air Force Base, Massachusetts, manages the development and acquisition of electronic command and control (C2) systems. One of the ESC's best known programs is the Airborne Warning and Control 10-6 Logistics Support of International Military Sales System. The center manages more than 150 programs, including developing air defense systems for allied forces and North Atlantic Treaty Organization (NATO) partners. The air logistics centers include: The Warner Robins Air Logistics Center, Robins Air Force Base, Georgia, supports several Air Force weapons systems, including the C-5 Galaxy, the F-15 Eagle, the C-141B/C Starlifter, and the C-130 Hercules. It is one of the most important avionics centers in the Air Force, supporting over 70 FMS programs. The Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma, provides depot maintenance, product support, services and supply chain management, and information support for 31 weapon systems in the U.S. Air Force and for 46 foreign nations. The center performs depot maintenance on various aircraft and overhaul and repair on numerous jet engines, and is the technology repair center for automatic fl ight control and engine instruments. The Ogden Air Logistics Center, Hill Air Force Base, Utah, performs depot level overhaul and repair for all types of landing gear, wheels, brakes and tires. The center supports the C-130 Hercules, the F-16 Falcon, and the A-10 Thunderbolt, and it is responsible for program management of the KC-135 Stratotanker. All these organizations belong to the Air Force Materiel Command (AFMC) and have security assistance responsibilities. Additionally, the Space and Missile Systems Center (SMC) in Los Angeles, California, a subordinate unit of the Air Force Space Command, is the center for researching, developing and purchasing military space systems. SMC's internationally known NAVSTAR global positioning system provides highly accurate three-dimensional position, velocity and time to U.S. forces and a wide variety of allied fi eld forces via the foreign military sales program. International Logistics Control Organizations Annual security assistance demands on the military supply systems have grown to nearly one million requisitions per service. In order to manage these requisitions, as well as to ensure a smooth interface with the normal service supply organizations, each of the providing services has established a central control point for security assistance supply actions. Unlike other organizations in the logistics system that serve both U.S. and foreign requirements, these organizations are devoted completely to security assistance. These organizations are generally called international logistics control organizations (ILCOs). International Logistics Control Organizations Functions The U.S. Army Security Assistance Command, New Cumberland, Pennsylvania (USASAC-NC) serves as the Army ILCO. The USASAC operates at two geographically separated locations. The headquarters and deputy for plans and management is located at Fort Belvoir, Virginia (USASAC- FB). The USASAC commander also serves as the director of security assistance on the Army Materiel Command headquarters staff. The deputy for operations is the ILCO, USASAC-NC. The U.S. Navy International Programs Directorate (NAVICP-OF) of the Navy Inventory Control Point is the Navy's ILCO. NAVICP is a subordinate organization of the U.S. Navy Supply Systems Command. 10-7 Logistics Support of International Military Sales The Air Force Security Assistance Center (AFSAC), the Air Force ILCO, is a major component of the Air Force Materiel Command. Both are located at Wright-Patterson Air Force Base, Ohio. Although each of the ILCOs has its individual responsibilities, operating techniques, and interfaces, there are many functions generally applicable to all three. They serve as the connecting link between the security assistance customer and the service supply systems. In this role, each ILCO employs a country desk offi cer (or country program manager, or country case manager), who is the primary contact point for materiel support for assigned countries. The country desk offi cer monitors current FMS cases status and is the focal point for resolving logistics problems. In order to manage their programs, the ILCOs each operate unique security assistance computer data systems: the Army centralized integrated system for international logistics (CISIL), the Navy management information system for international logistics (MISIL), and the Air Force security assistance management information system (SAMIS). The ILCOs establish programs and cases, validate and pass requisitions, account for obligation/ expenditure authority, record supply status, interface with service accounting and supply data systems, and produce program reports and statistics. These systems are discussed further in Appendix 3, "Security Assistance Automation," in this text. Once the program data is available and obligation authority has been established, the ILCO may then start to process requisitions. All security assistance requisitions must be prepared in accordance with standard military standard requisitioning and issue procedures (MILSTRIP). Requisitions for defi ned order cases are prepared at the ILCOs normally upon receipt of an implemented case. Requisitions for CLSSA and blanket order cases are prepared by the purchaser. Every requisition for security assistance must be validated and passed by the ILCO before it can enter the U.S. supply system. This is usually done automatically by the ILCO management information system, which checks the requisition against an authorized FMS case, ensures that the required funding is available, records the estimated cost of the requisitioned materiel against the appropriate account, and routes the requisition to the appropriate ICP. If all checks are not met, the requisition is routed for manual review by the country desk offi cer or case manager. It is important to note that the ILCO is not a supply activity. No materiel is controlled by the ILCO and no decisions are made to issue materiel from stock or from procurement. After the validation of the requisition, the ILCO passes it to the normal source of supply, an ICP. In accordance with the MILSTRIP procedures, supply and shipment status are provided to the purchaser to advise of the progress in fi lling any requisitions. This information is provided by the supply activity to the ILCO, which records this status in the computer data system and in turn provides the status to the purchaser. By maintaining the status of all requisitions in process and the fi nancial status of each case, the ILCO can produce a variety of management reports for use by the military departments (MILDEPs), the overseas security cooperation organization, and customer country managers. These reports are used for day-to-day monitoring of the program as well as periodic country or program reviews. The ILCOs also report FMS deliveries monthly to Defense Finance and Accounting Service - Indianapolis (DFAS-IN) for billing and record purposes. In some instances, the ICPs report their deliveries directly to DFAS-IN, and provide the ILCOs with copies of the reports. The ILCOs use these reports to maintain current requisition, case, and fi nancial records. In other situations, delivery information is provided fi rst to the ILCO which, in turn, provides consolidated delivery status to DFAS-IN. Customer countries may maintain liaison offi cers to review program and requisition status with the ILCO desk offi cers. These liaison offi cers may, in some instances, initiate or modify requisitions 10-8 Logistics Support of International Military Sales on behalf of their government. Country purchasing offi ce representatives or foreign embassy personnel from Washington, D.C., often conduct the required liaison with the ILCO. However, for a growing number of countries, a foreign liaison offi cer (FLO), security assistance foreign representative (SAFR), or security assistance liaison offi cer (SALO) is located at the ILCO. Defense Logistics Agency The DLA has inventory management responsibility for about 93 percent of active national stock numbers (NSN) in the DoD supply system. DLA supplies more items and processes more requisitions than all of the other services combined. It is therefore important for supply personnel in any of the services to understand the DLA system and how it supplies the items assigned to it. The DLA maintains a weapon systems approach toward materiel management. There are three inventory control points. Each ICP is assigned responsibility for a portion of the same three million items used by the services but supplied by DLA. The three DLA ICPs and their responsibilities are as follows. The Defense Supply Center Columbus, at Columbus, Ohio, is the lead ICP for land, maritime and missile weapon systems. The Defense Supply Center Richmond, at Richmond, Virginia, is DLA's lead center for aviation support, and environmental products. The DSCR also serves as the storage and distribution center of maps. The Defense Supply Center Philadelphia at Philadelphia, Pennsylvania, provides food, clothing, textiles, medicines, medical equipment, general and industrial supplies and services to the DoD, to other government agencies, and to FMS purchasers. These three DLA ICPs receive and process incoming requisitions from purchasers worldwide and direct shipment of goods from their depots back to their customers. For FMS customers, these requisitions are passed to DLA from the ILCOs. The DLA is also assigned a number of additional DoD-wide responsibilities: DoD-wide cataloging of items is performed by the Defense Logistics Information Service (DLIS), Battle Creek, Michigan, as the national codifi cation bureau for the U.S. DoD materiel utilization and surplus property disposal is performed by the Defense Reutilization and Marketing Service (DRMS), headquartered in Battle Creek, Michigan. The Defense Distribution Center, New Cumberland, Pennsylvania, operates the wholesale warehouse depots. The Defense Energy Support Center at Ft. Belvoir, Virginia, supplies bulk petroleum products, alternative fuels, performs direct delivery, and manages terminal facilities and distribution. The Defense Automatic Addressing System Center (DAASC) is the offi cial repository for selected DoD publications and databases. DAASC receives, edits, and routes logistics transactions or the military services and federal agencies, providing information about anything, anywhere, anytime, to anyone in the DoD 10-9 Logistics Support of International Military Sales and federal logistics community. All electronic FMS transactions are routed through DAASC. Although the DLA manages the vast majority of items, the DLA supply management mission does not have a central international logistics control organization for the management of security assistance programs. Rather, foreign requisitions fl ow to DLA through the military department ILCOs. It is interesting to note that a majority of military department-processed FMS requisitions are for DLA-managed consumable items supplied by the DLA supply centers. REQUISITION PROCESS OVERVIEW The typical FMS ordering process starts when the U.S. implementing agency receives obligation authority from the DFAS upon acceptance of a LOA by an FMS customer. The ILCO establishes a block of requisition numbers for use by the weapon system/program managers when ordering various services and support materiel requirements, and passes expenditure authority to the various logistics managers for ordering purposes. The logistics managers initiate requisitions for spare parts, support equipment and technical manuals, assigning a unique document number to each transaction. These document numbers are used to track materiel and services through the ordering and delivery process, and materiel is "pushed" to the FMS purchaser. The ILCO records all requisitions in a service-unique database, and forwards the requisitions to the appropriate item manager for issue from either DoD- owned stock or for procurement from a contractor. When the FMS case is a blanket order or CLSSA, the purchaser initiates the requisition, assigns a unique document number, and passes the requirement to the ILCO. Upon determining that the FMS case is valid and obligation authority exists, the ILCO records the requisition in its database and passes the requisition to the item manager, as illustrated in Figure 10-1. Regardless of the entry point, all logistics information passes through an information router, DAASC, where each transaction is recorded for future reference. Military Standard Requisitioning and Issue Procedures The MILSTRIP prescribes standard forms and codes adaptable to high-speed communications and automatic data processing. MILSTRIP is the backbone of all logistics and fi nancial procedures used in executing an FMS case. Chapter 6 of DoD 4000.25-1-M, Military Standard Requisitioning and Issue Procedures (MILSTRIP), covers MILSTRIP procedures for FMS purchasers. There are some service developed brochures describing MILSTRIP procedures for FMS purchasers. The structure of an FMS document number is very different from a domestic requisition document, resulting in several Purchaser DAASC ILCO ICP Contractor Depot Figure 10-1 Logistics Communications 10-10 Logistics Support of International Military Sales unique MILSTRIP codes and procedures for FMS use. Figure 10-2 illustrates the unique MILSTRIP entries for FMS. NORTH ATLANTIC TREATY ORGANIZATION CODIFICATION SYSTEM The NATO codifi cation system (NCS) has been in place since the mid-1950s. It provides standards for the use of a common stock identifi cation system throughout the NATO alliance. Subsequently its use has spread to other countries around the world. We tend to take this common language of logistics for granted in fi eld operations. The NCS is quickly appreciated, however, when the operational Figure 10-2 Foreign Military Sales Unique Record Positions Record Position Defi nition 30 Implementing agency (IA) code 31-32 Foreign purchaser's country code 33 Mark-for code 34 Delivery term code 35 Type assistance code 36 Last digit of the year of the requisition 37-39 Julian date 40-43 Requisition serial number 44 Recurring or non-recurring demand 45 Foreign purchaser's service or agency 46 Offer/Release code 47 Freight forwarder code 48-50 FMS case designator 1 2 3 4 5 6 7 8 9 10 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 DOCUMENTIDENTIFIERROUTINGIDENTIFIERNCBCODEUNIT OFISSUESTOCK NUMBER NIIN CLASS QUANTITY M&S30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 DOCUMENT NUMBER DATE SERIAL NUMBER SUPPL ADDRESS DAY YEARDEM/SUFSVCSIGNAL CODEFUNDING CODEDIST PROJ CODE 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 PRIORITYCODERAD/ RDD SUPPLY/SHIPMENT STATUS ADV CODE 10-11 Logistics Support of International Military Sales commander fi nds himself in a coalition environment with partner countries each using something different. The NATO codifi cation system is an integral part of supply operations throughout the world. It furnishes accurate information to all participating countries on the characteristics of millions of items. It simplifi es the solution of supply data management problems by providing quick responses from a single, up-to-date source. The NCS offers many signifi cant advantages to NATO and non- NATO countries, as well as to private sector participants outside the defense community. Item Identifi cation To achieve the three NCS objectives of: (1) increasing the effi ciency and effectiveness of logistics operations; (2) facilitating data handling; and (3) minimizing costs to user nations, it is essential that each item of supply be assigned a unique name, classifi cation, identifi cation and a NATO or national stock number (NSN). Countries that participate in the NCS follow common standards and techniques to assign NATO stock numbers to items of supply in their defense inventory. The national codifi cation bureau within each country centrally assigns their national NSNs. The National Codifi cation Bureau (NCB) for the U.S. is the Defense Logistics Information Service (DLIS) in Battle Creek, Michigan. The assignment of an NSN fi xes the identity of each distinctive item of supply. All NSNs are uniform in composition, length, and structure. Each is represented by a thirteen digit number, which can be divided into three unique parts: The fi rst four digits are the NSC code, which relates the item to the group and class of similar items The next two digits indicate the assigning NCB code (each country has its own two digit NCB code the U.S. uses "00" and "01" The fi nal seven digits are assigned sequentially and have no inherent signifi cance. However, when coupled with the NCB code this number relates to one and only one item of supply Within NATO, the NCS currently contains about sixteen million active NSNs (seven million for the U.S. and nine million assigned by other NATO countries). The items represented range from hand grenades to guided missiles, from propeller blades to space vehicles, and from soap dishes to washing machines. Around 43 percent of all of the seven million "active" U.S. national stock numbers have at least one allied user registered. There are currently fi fty separate foreign countries recorded as users on various NSNs in the U.S. catalog system. About 31 million part numbers are registered on these NSNs, as are about 1.5 million manufacturers. Federal Supply Catalogs The Defense Logistics Information Service (DLIS) is the DLA fi eld activity designated as the manager of the federal catalog system (FCS). The FCS is the offi cial U.S. government program under which equipment and supplies are uniformly named, described, classifi ed, and stock numbered. DLIS offers a range of products containing FCS information. Certain products, such as the FED LOG are available only to the NATO and NATO-sponsored countries because they contain proprietary data and characteristics data of countries other than the U.S. Sponsorship agreements contain language regarding the protection of restricted data. 10-12 Logistics Support of International Military Sales The FMS purchaser can obtain DLIS catalogs directly from DLIS or through cases with the MILDEP. Requests for information about DLIS information products or placing an order should be directed to Commander, Defense Logistics Information Service, Attn: DLIS-SD, 74 North Washington Street, Battle Creek, MI 49017-3084, DSN 932-4310/4328 Ext 5721, Commercial (616) 961-4310/4328 Ext 5721, Fax (616) 961-4760, or E-mail: mailto:fms@dlis.dla.mil. DLIS also offers a wide range of training classes related to cataloging and the federal catalog system and the use of DLIS's information products. Additional information is available from Commander, Defense Logistics Information Service, Attn: DLISVST, 74 North Washington Street, Battle Creek, MI 49017-3084. The telephone number is (616) 961-4478/4829, FAX: (616) 961-4307, e-mail: mail to:dlis.tng.@dlis.dla.mil. DLIS has a home page on the internet that has a large amount of information about its products, services, prices and contact points, as well as links to other U.S. government home pages. The web site is http://www.dlis. dla.mil. NORTH ATLANTIC TREATY ORGANIZATION CODIFICATION SYSTEM SPONSORSHIP More and more countries are seeking and receiving sponsorship within the NCS. Sponsored countries sign an agreement to exchange codifi cation data and to abide by the rules and procedures of the system. Among other things, the rules require countries to provide equivalent safeguards to protect sensitive and proprietary data. Information about NCS sponsorship is kept up-to-date at the following web site http://www.dlis.dla. mil/nato/default.asp#Sponsorship. In addition to the twenty-six members of NATO, nearly thirty other nations around the world have been accepted as sponsored members of the NCS. NATO Sponsored Countries Countries Belgium Albania Bulgaria Argentina Canada Austria Czech Republic Australia Denmark Brazil Estonia Chile France Croatia Germany Egypt Greece Finland Hungary Indonesia Iceland Israel Italy Korea Latvia Kuwait Lithuania Macedonia Luxembourg Malaysia Netherlands Morocco Norway New Zealand Poland Oman Portugal Papua New Guinea Romania Philippines Slovakia Russia Federation Slovenia Saudi Arabia Spain Singapore Turkey South Africa United Kingdom Sweden United States Thailand Tonga Ukraine United Nations Table 10-1 NCS Sponsorship 10-13 Logistics Support of International Military Sales UNIFORM MATERIEL MOVEMENT AND ISSUE PRIORITY SYSTEM The uniform materiel movement and issue priority system (UMMIPS) helps identify the relative importance of competing demands for logistics systems resources. It guides the ranking of materiel requirements and time standards for requisition processing and materiel movement through the use of a two-digit priority designator. The priority designator is based on two factors that relate to the mission of the requisitioning activity and the urgency of need. Force/activity designators (FADs) are represented by Roman numerals I through V. The U.S. Joint Chiefs of Staff have assigned FADs to selected foreign country forces in their directive CJCSI 4110.01, Force/Activity Designators for Foreign Country Forces, 10 October 95. The FAD is applicable to all requisitions for materiel destined for the country. The receiving activity's urgency of need for the materiel being requisitioned is indicated by an urgency of need designator (UND), either A, B, or C. The requisition originator determines the UND to be assigned, using the criteria set forth in the UMMIPS directives. In broad terms, UND "A" equates to an extremely urgent requirement, UND "B" to a less urgent requirement, and UND "C" to a routine requirement, e.g., stock replenishment. Table 10-2 is the UMMIPS matrix. The matrix is used to determine the priority number for a given requisition. For example, an FMS purchaser assigned a FAD "IV" with a UND "C" would assign a priority "14" to the requisition. LOGISTICS COMMUNICATIONS As with all military operations, the success of DoD logistics operations depends to a large extent on the availability of a fast, accurate, and reliable communications system such as the defense data network (DDN). However, since DDN is not available to the majority of FMS purchasers, other methods such as international mail, facsimile transmissions (FAX), e-mail, and the international logistics communications system (ILCS) serve many countries as the primary logistics communications methods for FMS. International mail is both slow and unreliable when compared to electronic means of transmitting MILSTRIP documents, cataloging data, and narrative traffi c. Although the FAX and e-mail may be faster than international mail, they are still subject to manual processing at the ILCO. This intervention slows down the request and subjects the document to potential transcription errors. FAD Urgency of Need A B C I 01 04 11 II 02 05 12 III 03 06 13 IV 07 09 14 V 08 10 15 Table 10-2 UMMIPS Matrix 10-14 Logistics Support of International Military Sales The ILCS was developed to improve logistics communications service to security assistance countries, freight forwarders, and contractors. Used since 1979, it has also been adopted for use by a large number of U.S. government and commercial organizations. The service provides a computer-to-computer telecommunications capability that allows a subscriber to exchange logistics related information with the DoD logistics community and with other ILCS subscribers. The ILCS operates at high speeds and is suited to purchasers with high volumes of traffi c. Furthermore, the ILCS can be directly integrated into a purchaser's logistics data system and used to transmit narrative messages to offi ces in DoD. The ILCS signifi cantly increases the amount and timeliness of management information available to purchaser logisticians and signifi cantly reduces pipeline time by as much as 80 percent resulting in signifi cant cost savings. This system, which has multi-service application, passes MILSTRIP requisitions to the Defense Automatic Addressing System Center (DAASC). DAASC automatically routes the documents to the appropriate ILCO for processing. After an ILCO verifi es the requisitions validity and funding, the requisitions are forwarded to the source of supply directly or via the DAASC. For most requisitions, use of these systems eliminates manual processing between the requester and the source of supply. Additionally, status transactions return to the requester through this same system. ILCS is normally installed based on an implemented FMS case after it has been determined that the existing methods of communication are not adequate to serve the subscriber's needs. The information processed in ILCS is contained in 80 record positions of data for each transaction. ILCS can be provided to the subscriber through: A DAASC developed turn-key system, consisting of hardware, software, supplies, installation, and training for the system at the subscriber's location. This service is provided based on an FMS case established by the appropriate ILCO. An existing in-country personal computer system with the capability, hardware, and software to interface with the DAASC network control system computer system. DAASC will provide the interface requirements and the DAASC automatic message exchange system (DAMES) software package to the subscriber. The cost of a DAMES system for a subscriber cannot be determined exactly until a site survey is performed or a working group meeting is convened; however, fi rst year costs can be as low as $10,000 depending on the confi guration and location. A further refi nement of the ILCS is an optional system known as supply tracking and repairable return (STARR/PC). This is a personal computer-based system available from the U.S. Air Force, U.S. Army and U.S. Navy. STARR/PC provides the foreign purchaser much more logistics and fi nancial information than ILCS alone. Typical costs include a system subscription fee based on a pro rata share of developing and operating the system, system hardware, software, and supplies; U.S. support for system installation; and telephone charges. Hardware and software costs are one-time in nature, while the annual fee, optional technical assistance, and telephone charges are recurring. Telephone costs associated with the connection to DAASC are on a time-used basis. The investment and recurring costs of ILCS are provided from funds in an FMS case managed by the appropriate service ILCO. FMS countries with an interest in ILCS should notify their country offi ce at the appropriate service ILCO they will interface with DAASC to secure the required ILCS services through an FMS case. Currently, there are 46 countries connected through the ILCS system. 10-15 Logistics Support of International Military Sales The security cooperation information portal (SCIP) is another medium available to the international purchaser for submitting and tracking requisitions, and monitoring case status. The SCIP gives the user access to data from the ILCO logistics databases (MISIL, CISIL and SAMIS), to data from the defense integrated fi nancial system (DIFS), and case management information from the defense security assistance management system (DSAMS). The SCIP capabilities and features are discussed in Appendix 3, "Security Assistance Automation." LIFE CYCLE LOGISTICS SUPPORT PLANNING PROCESS The DoD logistics system is designed to provide support throughout the life cycle of a weapon system to ensure maximum mission capability. The goal is to provide the greatest support for the least cost. Decisions regarding which repair parts to stock to maintain the highest operational readiness possible start with the initial planning phases of a new weapon system and continue during its entire operational life. For the purposes of foreign military sales, the life cycle management of a weapon system can be divided into two phases: initial and follow-on support. When an international customer decides to acquire a sophisticated weapon system through the FMS program, logistics support planning begins when the international customer submits a comprehensive letter of request, which, in addition to identifying the desired weapon system confi guration, identifi es the country's operational requirements, and existing logistics support capabilities. The planning process typically continues with the implementing agency conducting a site survey in the FMS purchaser's country. Site Survey Site surveys are associated with weapon system sales. They are the foundation of logistics support provided to the FMS customer. Site surveys are typically held in the purchaser's country with representatives from the implementing agency, representatives of the manufacturer, and the FMS customer. The structure of the site survey team may be a few people for several days for small, relatively simple weapon systems, to a large contingent of technical experts and logistics managers meeting with the purchaser in-country for several weeks. The purpose of the site survey is to tailor the maintenance and supply support strategy for the weapon system to the unique requirements of the FMS customer. During the site survey, the purchaser should become acquainted with the implementing agency's acquisition and delivery process, the maintenance support plan, and the initial spare parts and support equipment allowances. The site survey team will confi rm the FMS customer's operational and support plan, verify the purchaser's in- country logistics resources and requirements, prepare a milestone chart for the delivery of materiel and services, and prepare a proposal for follow-on logistics support. Planning for Initial Support Initial support is the range and quantity of items such as tools, spares, and repair parts provided in a defi ned order case during an initial period of service. These items are provided to support and maintain the major item purchased in the defi ned order case. Initial support is provided to the purchaser before or at the same time the system or major item is delivered. This ensures the successful introduction and operation of the new system into the purchaser's inventory. Suffi cient quantities of repair parts must be on hand until follow-on support is available. The level of initial support can vary from weapon system to weapon system, but in general, initial support is provided for a 12 to 24 month period. In order to determine the level required for security 10-16 Logistics Support of International Military Sales assistance customers, information is needed by the U.S. implementing military department, such as the average operations per month, number of repair locations, maintenance concept, etc. A driving force in determining the amount of initial support to be provided for a particular weapon system is often the amount of money that the country is willing to invest. After returning from the site survey the logistics program manager reviews the repairable and maintenance allowance recommendations. Part numbers, stock numbers, quantities and supply sources are validated for subsequent ordering. The amount of support is normally based on a mutually agreed upon rate of operation for the system. Determining the type and duration of initial support is normally accomplished with a provisioning conference. Provisioning Provisioning is the process of determining the type of repair parts to stock (or "range") and quantity of each stocked item to have on hand (or "depth") to support and maintain a system through its initial period of service. [Joint Pub 1-02] We must not forget that a weapon system must be maintained in operating condition throughout its lifetime to be valuable. It is not enough to think only of the plane, ship, or tank, but all those things that will be necessary to use and maintain that weapon system. Provisioning is used to determine all the necessary repair parts, test equipment, and other accessories such as special tools and ground support equipment. It is an extensive and expensive process that the DoD does for each new weapon system it employs. The provisioning conference is a working group consisting of contractor, engineering, maintenance, supply, and user personnel. This conference is held early enough in a weapon system acquisition program to permit an orderly production of the required items. Through the use of the maintenance concept, technical drawings, parts lists, estimated prices, recommended quantities, and agreed upon replacement factors, a decision is made regarding which items will be stocked in the DoD supply system and which will be procured only on demand. It is also during the provisioning conference that the necessary information is collected to begin cataloging new items for the DoD logistics system. In provisioning, several decisions must be made to determine which items of support are required. Normally, these decisions are made not only for the system as a whole but also on a component-by- component basis. The following concepts must be considered when selecting the optimum equipment support. Reliability Clearly, for a weapon system to be valuable, it must be combat-ready as much of the time as possible. As a measure of reliability, the failure rate of each constituent part is examined. A measure commonly used is the mean time between failure (MTBF). In simple terms, the providing implementing agency is concerned about how often an item breaks down and requires replacement or repair. This information infl uences the type and quantity of items placed on the initial provisioning list. Maintainability When an item fails, a determination must be made whether it can be restored to an operable condition according to predetermined specifi cations in the time allocated for its repair. Maintainability measures the ease of completing maintenance tasks. It is measured as the mean time to repair or restore (MTTR). 10-17 Logistics Support of International Military Sales In practice, the longer a repairable item is out of circulation for maintenance, the greater the quantity needed on the supply shelf. This, in turn, impacts the inventory investment that the purchasing country must consider. The capability to perform maintenance on a component presumes that the foreign nation has adequate resources, i.e., facilities, test equipment, skilled personnel, manuals, repair parts, and tools to do the job. If any one of the resources is defi cient or missing, repairs to be done in country may prove impossible, thus rendering the weapon system incapable of performing its mission. On the other hand, the cost of the component, when compared to the maintenance labor costs to repair it and the cost to hold an inventory of parts, may dictate that if the component fails, it should be thrown away and replaced. Many small components such as valves, motors, and pumps are discarded rather than repaired since repair costs exceed item value. A key factor in the fi nal decision regarding how many parts to buy is the in-country repair capability. If such a capability exists, the quantity purchased will be lower; if not, and the items must be shipped to distant repair facilities, then a greater number of items will be required to compensate for the number of days the items are in the pipeline. This is a decisive point because it helps determine the amount of investment needed for spares and repair parts. The selection of parts must be aimed at reducing downtime to ensure the weapon system can perform its designated mission in the most cost- effective manner. Economy In making support decisions, economy can be an overriding factor. The providing implementing agency must consider not just the cost of the material, but also labor costs for making the repairs and the cost of not having the weapon system available while repairs are being made. The lowest cost of parts may not necessarily be the most economical cost. Standardization and interchangeability also enter into the economics equation. Selecting parts common to systems currently being used may avoid inventory costs and support diffi culties. Level of Repair Once it is determined that an item of equipment or component can be repaired, the recipient country must determine at which level in its overall maintenance organization the repair will be made. Three different levels of repair are usually considered: organizational repair that is done by the using organization, i.e., company, squadron, or shipboard levels; intermediate repair, usually at an echelon above and supporting the organizational level, but still operating in the fi eld, such as base, battalion, station or division levels; and depot level maintenance, usually performed in a military depot or a contractor's plant. The decision to repair at the organizational, intermediate, or depot level is made after considering the technical skills of the personnel at each level, the investment in special tools, test equipment, facilities or handling devices which may be required, and any problems in physical access to the equipment which may be encountered. Military Essentiality Since having unlimited funds to secure support items is not usually the case, it is necessary to allocate available resources on the basis of military essentiality. Military essentiality is the relative value of each part to the equipment and the equipment to the system as a whole. Parts become more essential when their individual performance directly affect the entire system. Obviously, the failure of some part or equipment will prevent a weapon system from performing its total mission. While failure in back-up or auxiliary equipment may not be so catastrophic, funds will usually be applied to those 10-18 Logistics Support of International Military Sales items whose failure will have the most signifi cant impact on the ability of the equipment to accomplish its designated mission. Defi nitization Defi nitization is the process by which the provisioning requirements for the U.S. are adjusted to accommodate those of the foreign purchaser. The defi nitization process is essentially the same for FMS as is the provisioning process for new systems procured for U.S. forces. However, since most systems sold through FMS have already been provisioned for U.S. use, the U.S. operation, maintenance, and consumption data are the foundation for making adjustments for the FMS customer's projected requirements. During the operation of a weapon system, the database created during provisioning is updated continuously to refl ect actual usage and to modify the theoretical decisions which were originally assumed. This updated database becomes the basis for determining what support will be sold to a foreign purchaser. During the defi nitization process spares and support equipment requirements not already confi rmed during the site survey are identifi ed. Concurrent spare parts (CSP) accompany each system sale to provide the basic in-country supply system. FMS customers CSP lists are tailored from DoD provisioning data. The data is modifi ed to refl ect actual consumption of parts during operation, and purchaser's input addressing at a minimum equipment operations, condition (i.e., hours, climate) and budget restraints. Alternatives for reducing the FMS customer's initial spares investment are discussed with the major system and subsystem vendors. Depending upon the weapon system being sold, the CSP list may be a simple extract from U.S. fi les, or it may represent a major modifi cation to U.S. requirements. The weapon system confi guration being sold may differ from the standard U.S. model. In some cases, there are components which cannot be sold to other nations for security reasons or to protect vital technologies. In such instances, these must be replaced, most likely with components not used by U.S. forces. In other cases, a country's special needs or operational considerations require that some modifi cation be made to the standard confi guration. In either instance, the confi guration changes must be identifi ed in the defi nitization process, and the logistics support must be modifi ed accordingly. The defi nitization process includes planning for follow-on support. FMS customers and program managers should discuss future options for: Spare parts support through CLSSA or blanket order cases Repair options Follow-on training and training devices Technical and engineering services Updates of technical manuals and publications Munitions and explosives Transportation options for the movement of materiel The support infrastructure of the purchaser often has a bearing on the support package. The number of operating bases and supply depots and their locations may require changes to U.S. recommendations. Especially important in this area are the location and use of repair facilities. Today, more sophisticated equipment is being provided under our security assistance programs. It is often the case with such equipment that many components are more economically repaired than purchased new. However, many purchasing countries do not have the capability to repair the items and must return them to the 10-19 Logistics Support of International Military Sales U.S. repair facilities. In such an instance, the in-country stocks of repairable items may have to be higher to accommodate this longer loop in the repair cycle while items are being returned to the U.S. The alternatives for reducing initial and life cycle support costs through increased self-suffi ciency and a shorter supply and maintenance pipeline should be presented as options to the FMS customer. The overall objective of defi nitization is to provide optimum logistics support, at a reasonable cost, using the best possible calculations of projected needs. For the FMS customer, it is often insuffi cient to apply the same decisions as we have made for ourselves. The additional step of defi nitization is necessary to ensure adequate support for the system which is being purchased. FOREIGN MILITARY SALES FOLLOW-ON SUPPORT CONCEPT Follow-on support is that provided on a day-to-day basis subsequent to the initial support period and prior to removal of the end item from inventory. Follow-on support negotiations are generally started during the weapon system acquisition phase to accommodate administrative and production lead times. The follow-on support phase begins with the international customer planning follow-on support and ends when the international customer phases the weapon system out of its inventory. A newly purchased weapon system without follow-on logistics support rapidly takes on all of the characteristics of a museum piece impressive, but inert and immobile. Obviously, this applies whether a U.S. military department or a foreign country becomes the owner of the system. There is a commercial corollary to the concept of follow-on support termed "after-market" support. The same principles apply; however, in the military, this support takes on vastly greater dimensions. Segments of such support span the entire spectrum from spares through training to technical manuals. Each of the separate segments must be considered because if one is missing or less than adequate, the system's mission capability is appreciably damaged or effectively neutered. Follow-on support, unlike initial support, involves the USG being in a reactive role rather than a proactive role. That is, the DoD responds to demands initiated by the international customer. Follow- on logistics support encompasses all the various services and material required to sustain a weapon system after its operations begin. Follow-on support includes replenishment of initial spares and repair parts, procurement of new support equipment not provided for in the initial allowance, procurement of repair and engineering services, replenishment of munitions, updates of technical publications, etc. Follow-on logistics support is designed to maintain defense systems/equipment in an operable condition or to modify an original sale confi guration after a weapon system or item of major equipment is sold. The timely rendering of follow-on logistics support is vital to the success of the foreign military sales program. Without it, the equipment, usually purchased at considerable cost, will become inoperable and of little value to the purchaser who might then very well question the value of major FMS purchases. Follow-on support should be considered at the same time as initial support. This is necessary because of the lead-time required to negotiate and implement the various types of follow-on support agreements, and in some instances, because of lengthy lead times to procure required items. Supply support is often considered to be synonymous with follow-on support; however, spares and repair parts are only one aspect, though a very important one, of an overall follow-on support program. Spares and repair parts will be of no value to the purchaser if they cannot be identifi ed or installed properly to maintain and operate applicable systems. The following is a sample of the areas that should be considered in addition to spares and repair parts. 10-20 Logistics Support of International Military Sales Publications Maintenance Training Support equipment Munitions Modifi cations Technical assistance Petroleum, oil, and lubricants (POL) Options for Follow-on Support Other Than Foreign Military Sales An FMS system sale, including all associated training, support equipment, and initial spares/ repair parts, is normally processed as a single case, or as a series of related cases, with a program manager/lead command being assigned to coordinate the overall effort. However, management of the follow-on support program for the system is fragmented, and visibility of the overall program is diffi cult to obtain. This diffi culty is compounded by the fact that there are usually several options, other than an FMS agreement with the U.S. government, from which a customer country can choose to support the system. These other options involve in-country resources, third country support, and private contractor support. In-Country Resources The capability of a country to provide follow-on support from its own in-country resources should not be overlooked. While the use of this method varies from country to country and from system to system, as a general rule, both the U.S. government and the recipient countries wish to maximize the use of this means of support. For various reasons, e.g., costs or self-suffi ciency, a country may decide Munitions System Technical Assistance Training Publications Spares Support Equipment Publications Maintenance Technical Assistance Training Support Equipment Modifications Spares/ Repair Parts Figure 10-3 Total Logistics Support 10-21 Logistics Support of International Military Sales to establish in-country capabilities for follow-on support, particularly in areas such as training and maintenance. Third Country Support Third country support may be available. The Arms Export Control Act (AECA) imposes defi nite restrictions on third country transfers; however, this method may be available as a result of previous licensing arrangements, or coproduction agreements. For example, there are many instances where third country personnel have conducted training on U.S. equipment in a purchaser country. Commercial Contractor Support The foreign purchaser may use commercial contractors for follow-on support in accordance with DoD 5105.38-M, section C4.5, Security Assistance Management Manual (SAMM). The contractor may have a continuing support plan available to offer the country. If such a plan is not readily available, in many cases, the contractor may be willing to develop one for a price, or negotiate an offset arrangement. Purchaser Preference for Foreign Military Sales Support While the above methods of support may be available and are often used in varying degrees, the overwhelming preference of the customer countries is for FMS follow-on support. Customer countries are aware that DoD normally makes FMS of materiel only when there are plans to assure logistics support for the expected life of the equipment. FMS managers have developed options to provide a reasonable level of follow-on support through a combination of government and commercial resources. Many aspects of the DoD logistics system serve the FMS customers well. These include: Quality products delivered through a robust defense acquisition system Government shelf stock that can reduce pipeline costs Access to ongoing product updates on common items Ongoing supply chain management initiatives Program managers and item managers dedicated to reducing costs for their FMS customers and effective problem solving A surge capability in the event of a national emergency The purchaser country has several options from which to choose in terms of the types of FMS cases available for follow-on support. Defi ned order cases, blanket order cases, and CLSSAs are all used in providing follow-on support. Each has distinct advantages and disadvantages as well as certain restrictions on the types of support that can be provided. For further discussion, especially of FMS defi ned order and blanket order cases, see Chapter 6, "Foreign Military Sales Cases," of this text book. COOPERATIVE LOGISTICS SUPPLY SUPPORT ARRANGEMENT The DoD offers the CLSSA as an effective means of replenishing the in-country stocks of spares and repair parts which were initially furnished with end items of equipment. The CLSSA is an FMS agreement for the furnishing of secondary items from the U.S. logistics system to a country in support of specifi c major end items/systems. The arrangement requires the country to make a fi nancial investment in the DoD logistics system to fund its anticipated support requirements. The country, with the recommendation of the system program managers, identifi es by stock number and quantity, those 10-22 Logistics Support of International Military Sales secondary and support items which the country anticipates it will require annually. This list is known as the equity list, because of the purchaser investment in the U.S. supply system. The investment permits the MILDEP to augment its stocks in anticipation of the country's actual demands. The CLSSA is used for replenishment of consumables or for replacement of repairable components. It may not be used to acquire munitions, major end items, classifi ed items, commercial off-the-shelf material, or anything that the DoD doesn't centrally stock or centrally manage. The CLSSA is not intended for initial support, but rather as a mechanism to resupply the initial support package. The materiel purchased with the country's cash investment is commingled with DoD stocks and is not physically separated or otherwise identifi ed in the service's inventory records. In return for this investment, the country is entitled to support from DoD stocks equal to that provided U.S. forces assigned the same force activity designator. Once an investment has been used to augment DoD stocks and a country desires to withdraw materiel for use, the country's payment for those items provide funds for restoring U.S. government stock levels. This allows for further support to that particular country in the future under the arrangement. Due to the two-step nature of this arrangement, stock augmentation and subsequent materiel withdrawals, two FMS cases are required for a CLSSA: A foreign military sales order (FMSO) I A FMSO II Foreign Military Sales Order I The FMSO I (or stock level case) initiates the arrangement by establishing the country's investment for augmenting DoD stock. The FMSO I consists of an equity list of spares projected to be required over the next 12 months. No materiel is transferred to the purchaser as a direct result of the FMSO I. The FMSO I case remains in existence for the duration of the CLSSA. It will be renegotiated or adjusted as necessary whenever a change is required in the investment level necessary to support the country's actual withdrawal or usage rate. The FMSO I case is subdivided into two parts: Part A, an on-hand portion representing the value of material that must be in U.S. stock to fi ll CLSSA requisitions; and Part B, which represents a dependable undertaking of the on-order portion, or the value of items and quantities needed to maintain the on-hand material, based on the representative lead-time for the commodity to be supported. The FMSO I case provides obligation authority to increase stocks to meet the anticipated demands from the country. The standard FMSO I investment is 30 percent of the equity list value for Part A and 70 percent for Part B. The country's total obligation includes the value of both Part A and Part B. However, upon acceptance, the country is only required to pay for Part A (the on-hand portion) plus a 5 percent administrative charge based on the value of Part A. This special administrative charge pays for the extraordinary costs incurred by DoD to set up the arrangement. CLSSA procedures are outlined in DoD Instruction 2000.ii, dated 29 August 2005, and DSCA Policy 05-23. 10-23 Logistics Support of International Military Sales Foreign Military Sales Order II The FMSO II (or requisition case) permits the country to requisition spares and repair parts to replenish in-country stocks as they are consumed. The puchaser's payments under the FMSO II case serve to replenish materiel withdrawn from DoD stocks and to maintain the country's level of equity investment in the U.S. DoD inventory. The FMSO II case is quite similar in function to a blanket order case. It has a dollar ceiling with undefi ned requirements and is valid as long as funds exist in the case. The country prepares its own requisitions and submits them to the appropriate ILCO. Customer billings are for the value of actual materiel delivered plus the appropriate accessorial and administrative charges. Cooperative Logistics Supply Support Arrangement Effectiveness The CLSSA is a viable option for many FMS customers who own U.S.-origin weapon systems currently in use by U.S. operating forces. By participating in the CLSSA, the FMS customer has greater access to the DoD's inventory of spares, on the same level as does the American military customer. The result is faster FMS stock replenishment which keeps the FMS customer's equipment operating at full capacity. In today's war fi ghting environment the capabilities and interoperability of America's coalition partners cannot be overlooked. The effectiveness of a CLSSA can be infl uenced by a variety of factors. First and foremost, CLSSA is predicated on adequate inventories of stocked materiel in the purchasing country. In most instances this requirement is accomplished through the initial support package/concurrent spares package provided with the purchase of the weapon system. CLSSA effectiveness depends on the orderly and timely replenishment of this in-country stock. The participating country should submit replenishment requisitions in a routine manner, as needed, and should avoid ordering large quantities infrequently. In addition, CLSSAs are not intended as the vehicle for large quantity augmentation of in-country stocks. Such augmentation may be required because of an increase in stock levels due to changes in mission, operational levels, maintenance philosophy, or the introduction of additional end items. These requirements should be satisfi ed through a defi ned order or blanket order case. The investment levels of the CLSSA should then be adjusted accordingly to support the replenishment of these increased levels of in-country stock. Factors that normally preclude the use of a CLSSA for follow-on support or drastically reduce its utility are the purchaser's requirements for sole-source procurement, the purchaser's desire for single vendor integrity, or the need for non-standard items. Sole Source Procurement A sole source procurement is defi ned as one where supplies or services can be obtained from only one person or fi rm. The CLSSA program relies on availability of depot stock, and there often are multiple suppliers of a single stocked item. Since DoD procedures do not provide for segregation or identifi cation of stocked material by manufacturer, FMS customers insisting upon a sole source may not requisition the item against a CLSSA. Single Vendor Integrity A country's use of single vendor integrity (SVI) can also affect the follow-on support provided by DoD. The SVI also precludes the use of a CLSSA since normal DoD procedures do not provide for segregation or identifi cation of stocked material by manufacturer or by funding source. For the purpose of this discussion, SVI is defi ned as the purchaser's specifi cation that all of the spares needed 10-24 Logistics Support of International Military Sales to support a particular weapon system be furnished by the original manufacturer. Spares are typically bought by agencies other than the agency that buys the weapon system itself. For example, DLA typically procures and stocks aviation spares that are used on aircraft managed by Army, Air Force, Navy and Marine Corps. Thus, to ensure that the installed equipment and the spares come from the same manufacturer, an FMS customer invokes SVI in the LOA. The purpose of SVI is to ensure that the spares match the installed equipment and will function within the weapon system when installed as replacement equipment, and that confi guration adaptation of intermediate and/or depot level support equipment and piece parts will not be required. The SVI concept is more restrictive than sole source in that it stipulates that the same subcontractor and suppliers for the initial purchase must also be used for subsequent procurements. Single vendor integrity has many appealing features for the foreign purchaser: it simplifi es their in-country repair and rebuild program in that less inventory is required, training and publications are easier to maintain, and the requirements for test equipment are reduced. Single vendor integrity also requires extra effort for the U.S. implementing agency to manage follow-on support and, in turn, may prove more costly to the purchaser. Other disadvantages include certain inherent risks that are also associated with sole source procurement, i.e., the source may go out of business, it may be non-responsive to requests for changes, and prices may be higher. COMMERCIAL BUYING SERVICES The use of aging weapon systems beyond their original life expectancies has placed unexpected demands on supply systems initially provisioned to support shorter life cycles. A combination of diminishing manufacturing support, failure of electronic components, and age, fatigue and corrosion of non-electronic parts has created unanticipated demands for spares supporting older weapons systems. To exacerbate the problem, the original equipment manufacturer may no longer exist or be capable of supplying spares, repair parts and sustaining engineering support for aging weapon systems. Commercial buying services involve the purchase of defense articles and services that cannot be effectively acquired through other means. This may include non-standard items, commercial-off-the- shelf items, standard articles that the FMS implementing agency determines to be unobtainable within a reasonable time, and certain repair or other services. The purchase of nonstandard items can have an impact on the follow-on support provided by DoD. Nonstandard items, as they relate to FMS, may be defi ned as any items or equipment not included in the DoD inventory or not purchased for regular use by DoD. DoD also considers as nonstandard those country-peculiar system confi gurations resulting from the installation of a non-standard item on equipment or system that make it dissimilar to like systems in the DoD inventory. Nonstandard items are normally in FMS channels for the following reasons: The purchaser may change an item's design to improve the desired mission performance The U.S. may change the design for security reasons An item may become obsolete as a result of technological advancements and improvements Follow-on support problems are encountered because there usually is no inventory control point or item manager assigned responsibility for managing nonstandard items. Therefore, instead of using 10-25 Logistics Support of International Military Sales a relatively standard requisition and distribution system, manual procedures must be used to satisfy purchaser demands. This not only proves more costly to the U.S., but also increases the replacement time and costs for the purchaser. The following special programs provide contractor support for nonstandard items: The simplifi ed nonstandard acquisition process (SNAP) is managed by the U.S. Army. The program purchases nonstandard item components, repair parts and supplies of primarily land systems and communications equipment. The parts and repair ordering system (PROS) is a contractor-operated program that purchases nonstandard item components, repair parts and supplies, and arranges for maintenance of nonstandard items on a repair-and-return basis. Although the program is managed by the U.S. Air Force, the Army and Navy also use the PROS program for nonstandard spares and task orders. Finding sources of supply of non-standard items, particularly spare parts for end items no longer in DoD inventory, has been an ongoing challenge. System support buyouts and efforts to withhold items with FMS requirements from disposal are providing only a partial answer to this problem. Commercial buying services (CBS) contracts, such as PROS, are fi lling an important need in this area. In addition to nonstandard item support, CBS processes are increasingly the source of last resort for defense articles and services that cannot be effectively supplied by the standard DoD logistics system. As DoD emphasizes businesslike practices, including less stock and more direct vendor delivery, CBS efforts are becoming even more important. REPAIR OF REPAIRABLES Joint Pub 1-02 defi nes a repairable as an item which can be reconditioned or economically repaired for reuse when it becomes unserviceable. Often it is less expensive to repair items than it is to discard them and order new items. The U.S. military services make extensive use of returns from repairs and, in some cases, returns from repairs are the sole source of supply. The FMS repairable program provides a country the means of obtaining repair services without the necessity of establishing an in-country capability, which can be a long term and normally uneconomical investment because of a relatively small number of weapon systems in use. When an in-country capability does exist, the FMS repairable program can supplement this capability when necessary. Often purchasers will opt to return repair items to U.S. facilities for repair or modifi cation. The scope of work performed under the FMS repairable program is usually referred to as "depot level repairs." That is, the repair, overhaul, or rebuild of unserviceable assets, which require maintenance beyond the capability (equipment and/or skills) available in fi eld or organization level activities. The repairs are accomplished by the service depots or by commercial fi rms under contract to the depots. The choice of this option is often based largely on economics. Rather than investing heavily in facilities, skills, tools, test equipment, etc., the purchaser may fi nd that U.S., or other external depot repair service, is more advantageous. When a purchaser follows this course of action and uses FMS cases for the repair of items, close coordination with and among the servicing depot facilities is a must. The maintenance facility can determine when the item should be returned and estimate the cost of repairs. The ILCO is responsible for ensuring that the unserviceable assets are transported from the purchaser to the appropriate depot repair facility. The ICP is responsible for procuring the needed repair parts, and for getting them to the depot assigned the overhaul/rebuilding task. 10-26 Logistics Support of International Military Sales Purchaser Country Responsibilities The country has certain basic responsibilities under the FMS repairable program. The country must establish an FMS case in order to get the items repaired. Procedures for establishing FMS cases and processing material returns to the U.S., including the documentation required to accompany the items, are contained in the appropriate service regulations referenced at the end of this chapter. The country should only return economically repairable items to the U.S. If the repair facility determines that an item is not economically repairable, it will not be repaired without specifi c authorization from the country. The country is responsible for transportation to and from the designated repair facility, port handling fees, broker fees, and customs clearance. International customers must understand that materiel being returned to the U.S. for repair, regardless of the type of repair program, must clear U.S. Customs. Customers or their designated freight forwarders must cite International Traffi c in Arms Regulations (ITAR) exemption 123.4 (unclassifi ed) or fi le a DSP-85 (classifi ed) import document with U.S. Customs at the primary U.S. port of entry, along with a copy of the letter of offer and acceptance which authorizes the materiel's repair. For more information on import/export requirements, see Chapter 11, "Foreign Military Sales Transportation Policy," of this text book, or the SAMM, Chapter 7. Concepts of Repair Two concepts are used in obtaining repairs under the FMS repairable program. Repair and Return To participate in the repair and return program, the FMS customer must establish an FMS case for repair services with the MILDEP. This may be a blanket order or a defi ned order case. Under the repair and return concept, the country returns its unserviceable item, which is entered into the repair cycle, and upon completion of repairs, the same item is returned to the country. The U.S. Air Force and U.S. Army call this program repair and return. The U.S. Navy calls this program return, repair and reshipment (RRR). The repair program is normally limited to items for which the MILDEP has established a depot level repair program. The FMS customer must request approval for repair through the ILCO from the IM before shipping material to the U.S. for repair. After receiving approval and shipping instructions from the IM the purchaser ships the materiel to the designated repair facility where it is entered into the repair queue. After repairs are completed, the item is reshipped back to the FMS customer. In the repair and return or RRR program, the cost to the country is the actual cost of the repair in accordance with DoD 7000.14-R, Financial Management Regulation (FMR), Volume 15. Repair and Replace Under the repair and replace program, also known as direct exchange (DX), the unserviceable item is returned to the repair activity and, if it can be economically repaired or overhauled, a replacement item is issued from the U.S. military service's stocks. The country's unserviceable item is repaired or overhauled and returned to the U.S. military service's stocks. Under this program, countries are charged the estimated average cost of repairs (also referred to as net cost or exchange price). With the exception of the administrative and special requirements, i.e., packing, crating and handling, the same costs will be assessed to allies as are charged to U.S. forces. The DX program is usually available through either a blanket order case or as a CLSSA. 10-27 Logistics Support of International Military Sales For FMS, the Army, Air Force and the Navy currently offer purchasers the option of using both the repair and return and the direct exchange program. The Marine Corps offers only the repair and return program. U.S. Navy. The U.S. Navy's repair and replace program is called the repairable item replacement option (RIRO). Under this program, FMS customers can draw directly from the U.S. Navy stock system (through a CLSSA) for specifi cally identifi ed weapons replaceable assemblies, system replaceable assemblies, and other designated repairable spares that are managed and have been approved by NAVICP in conjunction with the U.S. Navy's hardware systems commands. If the requested material is available in the U.S. Navy's stock system, it is shipped immediately upon request. Then, the purchaser sends the failed item to a U.S. Navy designated receiving point for further transfer to a depot for repair. Upon completion of repairs to the returned item, it is returned to U.S. Navy stock. Purchasers are charged the difference between a condition "A" item and the value of the failed item carcass (also known as the net cost). If the carcass is determined to be non-repairable, then the purchaser is charged the full price for a condition "A" item minus the net cost, which is charged when the requisition is initially submitted. U.S. Air Force. Under the U.S. Air Force's repair and replace program, FMS customers can draw directly from USAF sources of supply (through a CLSSA or blanket order case) for items listed on a preauthorized material repair requirements list (MRRL). Purchasers send their failed items to a designated USAF receiving depot. Upon receipt at the depot, a replacement requisition is generated and the purchaser is charged the average repair cost for that particular item (also known as the "exchange price"). If the carcass is determined to be non-repairable, then the purchaser is charged the full price for a condition "A" item. U.S. Army. The U.S. Army calls its repair and replace program direct exchange (DX). Under this program, FMS customers can draw directly from the U.S. Army supply system (through a CLSSA or blanket order case) for specifi cally approved items. If the requested material is available in the U.S. Army's stock system, it is shipped immediately upon request and the purchaser is charged the standard price for the item. Upon the Army's receipt of the failed item (or carcass), the purchaser is credited for the value of the failed item. EXCESS PROPERTY General Excess property procedures afford still another method for limited materiel support. Property that is excess to U.S. MILDEP requirements and cannot be used by other DoD components may be provided to eligible foreign governments through the FMS program. Providing excess materiel is accomplished either through the excess defense articles (EDA) program or the DRMS. EDA include lethal and non- lethal defense equipment owned by the MILDEPs, excluding construction equipment, which may be provided to selected countries on a grant or FMS sale basis. The DRMS program, on the other hand, is the sale of excess government property, which may include major end items, support equipment and consumables that are no longer needed by the MILDEPs, and are sold by DLA at a reduced cost based on the condition of the items. All sales of excess signifi cant military equipment or materials valued at $7M or higher in original acquisition value, require a 30-day advance congressional notifi cation prior to transfer. Purchases of DoD excess equipment and supplies can provide a valuable source of supply and, through reduced prices, enable foreign governments to obtain a greater return for their procurement dollar. 10-28 Logistics Support of International Military Sales Excess Defense Articles Not all countries are eligible for all types of EDA transfers. For information on eligibility and program restrictions, see Chapter 2, "Security Assistance Legislation and Policy," of this text book. Under the EDA process, each MILDEP determines what items are excess. Additionally, the MILDEPs must ensure that the items must also be excess to other military departments, defense agencies, reserve components, and the National Guard before being offered to a foreign government. There are three general ways in which countries can request EDA. Countries may respond to MILDEP surveys of interest for EDA by the requested deadline. Countries may submit short lists of requirements to the MILDEP. Upon receipt, the MILDEP will determine whether the item is available as EDA. If not, the MILDEP will keep the request on fi le. The important factor in the acquisition of EDA from any source is the availability of both initial and follow-on support. Care should be taken to ensure a prospective customer has either an existing infrastructure or that one can be developed as part of the TPA in order to support the introduction of EDA into the purchaser's inventory. Foreign governments interested in acquiring EDA should contact the U.S. security assistance offi ce in their country. Not all countries are eligible for all types of EDA sales or transfers. Since EDA is provided on an "as is, where is" basis, the associated costs for any refurbishment and subsequent packaging, crating, handling, and transportation of the defense article are generally the determining factor as to whether or not a country accepts the EDA, even if it is offered on a grant basis. These associated costs prove to be prohibitive to many countries wanting EDA equipment, resulting in approximately 55% of EDA offers being declined. Most EDA articles are unserviceable and require major repair. Additionally, spare parts, tools and manuals, if available, must be purchased separately. In some cases, no follow-on support is available since the MILDEPs no longer fi eld the items. These associated costs often outweigh the benefi t of the material being offered for transfer. Defense Reutilization and Marketing Service There has been an increase of interest in the DRMS and how countries can fi nd and acquire DoD excess property. The objective of this DLA FMS program is to maximize the reuse of excess property when such sales favorably contribute to both the U.S. and host country's national security objectives. DRMS provides an alternative low-cost method of acquiring property through foreign military sales. Recent changes have streamlined the ability to fi nd property when and where the purchaser wants it. With a web page and on-line searchable inventory, the property is virtually brought to the purchaser's desktop. DRMS has performed disposal services for the DoD for thirty years as a primary fi eld level activity of the DLA. The mission of DRMS is to maximize the return to the U.S. taxpayer by fi nding new homes for the property in other government agencies, non-profi t organizations, the armed services, and foreign governments. Property remaining after this effort is cataloged and sold to the public. FMS is one of the many programs qualifi ed to receive DRMS property. To assist in this effort, DRMS writes and negotiates all of its own cases. When property is no longer needed or DoD has too many items in stock, the property is deemed excess and scheduled for turn-in at one of the DRMO. Once property enters the inventory, it begins a 42-day screening cycle. After the screening cycle is complete, items that have a military offensive or defensive capability are demilitarized (quite possibly destroyed) and sold as scrap. Therefore, it is important for the purchaser to locate needed property as soon as possible. DRMS has several methods 10-29 Logistics Support of International Military Sales to assist the purchaser in fi nding the property. Because the DoD considers the property excess, the property is in a wide range of conditions. The owner turning in the item determines the condition of the property. The condition of the property ranges from new and in original packaging to items whose only value is as scrap. Realizing the inherent problem of identifying the usability of the property, DRMS has taken extra measures to assist the purchaser in determining condition. The DRMOs take a photo of the actual item, that are then uploaded to the web and are viewable by purchasers. Additionally, DRMO personnel can check basic functioning of the item. However, since all excess defense articles are "as is, where is," purchasers are encouraged to visually inspect all major items to ensure the item is in an acceptable condition. The pricing of property in the DRMS inventory for FMS customers is based on the condition code of the item. The price ranges from fi ve to fi fty percent of original acquisition value with additional charges of packaging, crating, handling, and transportation and administrative charges. Grant eligible countries also must pay for packaging, crating, handling, and transportation (PCH&T). See Chapter 12, "Foreign Military Sales Financial Management," of this text for more information on depreciation values. The DRMS web site at http://www.drms.dla.mil/ is the customer's toolbox for searching and locating DRMS property. The purchaser can search the inventory by NSN, item name or federal supply class, location or condition code. Once the search is performed, a listing of all the available assets meeting the search criteria is visible. The list also may include photos of the items. The preferred method for an FMS customer to order from DRMS is by using a blanket order case. When such a case is approved, the eligible country is issued a password and user ID that allows the purchaser to enter into the FMS web and process its order on-line. Each order is processed overnight and received at the DRMS sites worldwide the next business day. The item is then prepared for shipping. Countries are responsible for the cost of transporting the property to the fi nal destination. OTHER SUPPORT PROGRAMS U.S. Air Force Technical Coordination Groups For more than twenty-fi ve years, the U.S. Air Force has been supporting the FMS and security assistance countries with what has become known as technical coordination groups (TCG). The TCGs, international engine management groups (IEMGs) and electronic combat international security assistance program (ECISAP) provide dedicated follow-on technical and engineering support to the FMS customers. Purchasers sign an FMS case to become members of the TCG. The TCGs provide a single point of contact for countries on all their technical concerns regarding their respective systems once the system is procured. This means the country has direct contact with any of the TCG team employees. The TCGs provide technical assistance for weapon systems including: F-4, F-5, A/T-37, F-16, F-15, E-3, C-130, and KC-135 aircraft, plus AIM-9, AIM-7 and AGM-65 missiles. The IEMGs provide technical support for all aircraft engines to include F100, F108, F110, J69, J79, J85, T56 and T30. ECISAP provides engineering software support and system hardware support. The TCGs, IEMPs and ECISAP work exclusively for their international customers, and they are not responsible to provide any service to USAF units. The member countries fund the TCGs, IEMPs and ECISAP, and 100 percent of the TCG's time is dedicated to FMS support. The FMS customers pay on a prorated basis to receive these services. The program has been delegated to the AFSAC for day-to-day oversight. There are currently twelve TCGs, two IEMGs and the one ECISAP supporting a wide range of aircraft, missiles, engines and other systems. 10-30 Logistics Support of International Military Sales U.S. Navy F/A-18 In-Service Support The U.S. Navy has established the F/A-18 in-service support (ISS) program to ensure that post- production logistics and engineering support will be available for FMS customers that own out-of- production F/A-18s. The ISS program enables FMS customers to address their problems with the U.S. Navy and the prime contractor, Boeing, on a day-to-day basis. The ISS program assists FMS countries in the continuing operation and maintenance of their weapon systems by sharing U.S. Navy and FMS logistics and engineering data at minimum cost to all concerned. Without a common ISS program, it would be necessary for each FMS customer to establish individual contracts to obtain those sustaining services. The ISS program joins all F/A-18 users into a single cohesive team. It contains common requirements, those that are applicable to both USN and FMS customers' unique requirements, that specifi cally apply to one or more FMS customers. The program supports the U.S., Canada, Australia, Spain, Kuwait, Switzerland, Malaysia and Finland. System Support Buyout When a U.S. military department is terminating support for a particular system, or in some instances components of a system, it is normal practice to offer those countries having the system an opportunity to participate in what is referred to as a life-of-type buy or system support buyout. If this is offered, the purchasing country must inform the MILDEP of the total remaining expected service life of the equipment and other supporting information. The MILDEP then identifi es those spares and repair parts that are adequate to support the system for its intended life. A list of these items is forwarded to the country for review and adjustment prior to the eventual request for an FMS case for the agreed upon items. The purchaser should have a minimum of two years to place a fi nal order for secondary items to support the system for its remaining useful life. After the system support buyout is completed, no further CLSSA is maintained, nor are standard item FMS follow-on support cases rendered for that system/component. Foreign Military Sales Reserve Program Many international customers that do not have the funding to buy new production weapon systems purchase instead used older or excess weapon systems from the U.S. Before doing so, however, they want assurances from the supplier that the older weapon system confi guration will be supportable throughout its life cycle. Protecting critical government-owned assets from disposal is a critical aspect of future supportability. The FMS reserve program was established by the Offi ce of the Secretary of Defense, and provides for the temporary retention in inventory, and subsequent sale of defense articles which have been phased out of use by the DoD and which are needed to provide support for foreign owned weapon systems. The FMS reserve includes selected secondary items (e.g. stock numbered items that are centrally managed/stocked), and service unique items managed by the system or product commands (e.g. test equipment, training devices, etc.). FMS reserve items are available to fi ll both initial and follow-on support requisitions. Items in the FMS reserve are not excess to DoD, therefore they are issued at full standard or market price with possible adjustments for age, model or condition. Both the U.S. Navy and the DLA participate in the FMS reserve program. Items are retained in reserve for at least four years. Items with demand during that four year period may be retained and managed in support of security assistance requirements (SAMM, section C6.4.7.) under the FMS reserve program. Items with no demand in those four years, including the system support buyout period, may be processed for disposal. 10-31 Logistics Support of International Military Sales Worldwide Warehouse Redistribution Services Worldwide warehouse redistribution services (WWRS) is a program designed to redistribute excess spare parts and support equipment acquired by FMS customers. Items available through WWRS must be U.S.-origin items in operating condition. WWRS is designed to be self-funding through the collection of a redistribution service fee assessed on the sales price of the materiel sold. WWRS can be considered a virtual warehouse of assets used to fi ll FMS requisitions. WWRS may not include signifi cant military equipment (SME). An approved LOA is the authority to purchase the WWRS listed materiel. FMS customers submit their list of excess items for sale through the WWRS program offi ce at the AFSAC. The AFSAC posts the items to the WWRS web site. Prices are determined by the seller. Buyers purchase items listed on the WWRS by submitting a supply requisition against a blanket order case to the AFSAC. Neither the buyer nor the seller is identifi ed in the web site. Once a buyer requisitions the item, the seller is instructed by the AFSAC to ship the material to a contractor near Dayton, Ohio. Title to the material transfers to the USG upon passing inspection by the contractor. After inspection and sanitization, the item is shipped, and title transfers, to the buyer. Using this process ensures no third-country transfer violations. The WWRS listing of materiel, customer handbook, and program changes and enhancements can be found on the WWRS home page at https://afsac4.wpafb.af.mil/wwrs. Aerospace Maintenance and Regeneration Center The Aerospace Maintenance and Regeneration Center (AMARC) is a joint service storage, regeneration, reclamation and disposal facility located at Davis-Monthan Air Force Base that maintains approximately 4,500 aircraft from all branches of service. The operation is unique in that authorized customers from all over the world may withdraw parts and aircraft. The AMARC maintains aircraft in long term and short term storage. Long term storage aircraft may be contingency weapon systems, weapon systems designated for potential FMS sales, and weapon systems designated for reclamation. The inventory consists of wide range of reciprocating, turboprop, and jet engine powered fi xed and rotary wing aircraft. International customers may withdraw entire aircraft from storage, or simply hard to obtain spare parts. Historically, approximately 25 percent of the aircraft at AMARC have gone back into fl ying status. PUBLICATIONS SUPPORT The term publication can be defi ned as a wide range of printed material, or other media (such as microfi che, diskette, etc.) including technical orders/manuals, indexes, software, supply catalogs, training publications, administrative publications, engineering drawings and associated documents, equipment component lists, decals, forms, and audiovisual products. In most cases, as with other aspects of the FMS program, no special system has been developed to requisition publications to support the FMS customer. The systems already used by each of the MILDEPs and other DoD organizations to meet internal requirements have all been adapted for the FMS customer. Numerous web sites provide access to MILDEP and DLA publications, but most can only be accessed through a .mil or .gov address. An up-to-date list of publications web sites can be accessed through the external links identifi ed on the Defense Institute of Security Assistance Management (DISAM) home page at http://www.disam.dsca.mil/. 10-32 Logistics Support of International Military Sales Initial versus Follow-On Publications Support Under the total logistics support concept (Figure 10-3), publications are an integral part of the support package for major weapons systems. Each major system sale includes those publications required to maintain the system. Technical publications are crucial items in the FMS program since they often provide the only operating and maintenance instructions for the equipment purchased by FMS customers. Without the proper publications, equipment may be misused or improperly maintained. Nevertheless, it is up to the purchaser to ensure that such publications are kept current. Lack of up-to-date publications can keep a weapon system inoperative. Publications are just as important as training, spares, and support equipment to ensure that the system will perform as required. Follow-on cases for publications are a must. To aid in this effort, each of the MILDEPs has developed procedures for automatic distribution on which the purchaser can rely. This is the easiest method to ensure that publications are kept up-to-date. The indexes of MILDEP publications are available on CD-ROM and at the respective MILDEP publishing agency web sites. Types of Cases/Categories of Publications The purchaser has a choice of two types of FMS cases for ordering publications, either a blanket order or a defi ned order case. The blanket order is the preferred type of case to use. It makes administration of the case much simpler and permits the more rapid fi lling of purchaser requests. If the purchaser desires to participate in the automatic distribution program, a blanket order case is mandatory. Certain categories of publications can only be ordered using a defi ned order case, including classifi ed publications, Defense Language Institute (DLI) publications, and professional military education (PME) correspondence courses. Additionally, each MILDEP has placed restrictions on other publications. More specifi c guidance on the ordering of publications can be obtained from the respective ILCO. Navy Publications Each Navy publication or form, including changes, has been assigned a Navy item control number (NICN) allowing the use of the MILSTRIP format to order publications. The purchaser may submit a requisition via normal means however, the document identifi er "A04" must be used in record positions 1-3. All requisitions for publications are forwarded electronically from the NAVICP-OF to the Navy Logistics Library (NLL) for minimal validation. The NLL forwards the requisition to the publication sponsor for release determination. If the sponsor disapproves the release of the publication, the requisition will be rejected with a cancellation status sent to the customer via the supply system. If the sponsor approved release of the publication to the FMS customer, the NLL refers the requisition to the supply point for fulfi llment. Requests for classifi ed publications must be approved by Navy International Programs Offi ce prior to the submission of a requisition to NAVICP-OF. Army Publications Publications requisitioning from the Army is accomplished under a combination of MILSTRIP and non-MILSTRIP requisition processes because the U.S. Army Publishing Directorate does not have an automated internal supply system capable of accepting MILSTRIP requisition actions. However, the U.S. Army Security Assistance Command records all publication orders electronically so that the purchaser always has visibility of the requests. To understand the system, the purchaser needs to comprehend two terms used to describe the methods of distribution: resupply and initial distribution. The resupply method includes both defi ned 10-33 Logistics Support of International Military Sales and blanket order cases, and the publications are requisitioned using the DA Form 4569-1-R, Security Assistance Publication Requisition Code Sheet. The instructions and a copy of this form are contained in DA Pamphlet 25-33, and the form can be locally reproduced. On the other hand, the purchaser uses the DA Form 12-99-R, Initial Distribution Requirements for Publications, to obtain publications using the initial distribution method (sometimes called pinpoint distribution). This reproducible form with instructions is also in DA Pamphlet 25-33. If the country participates in the international logistics communication system (ILCS), it can use the ILCS to transmit publication requests in lieu of mailing in the hard copy DA Form 4569-1- R. MILSTRIP document identifi er code "BMB" has been established to allow purchasers to transmit publication resupply requisitions to USASAC. FMS customers requiring advice and assistance on publications problems should contact their case manager at USASAC-NC. Air Force Publications The Air Force has two distinct sources and methods of obtaining publications. Technical orders (TOs) are requested through Tinker Air Force Base, Oklahoma and shipped from the managing Air Logistics Center. All other publications are obtained through the Air Force Security Assistance Center at Wright-Patterson Air Force Base, Ohio. Distribution of publications continues to be via paper copies. Requests for standard publications, forms, engineering drawings, CD-ROM, and decals are sent to the AFSAC using DD Form 1149. Since each publication does not have a stock number assigned, the purchaser must use the current publication short title. The form must be mailed to AFSAC. Classifi ed publications, other than TOs, are released only after approval by a delegated release authority. Technical orders are requisitioned from the security assistance technical order program (SATODS) offi ce located at the Oklahoma City Air Logistics Center on AFTO Form 187 or AFTO Form 276. Automatic distribution of changes can be requested by indicating initial distribution quantity on the AFTO Form 187. Publications from DoD and Other Sources Publications are normally ordered through FMS cases with the three MILDEPS; however, some publications can be ordered directly from the agency that acts as the single manger for a particular series. Requisitioning from these sources directly can speed up the delivery. In some cases, the agency is the only source of the publications. There are many DoD directives, instructions, and publications that may be of interest to FMS customers. Most can be viewed and downloaded from the proponent MILDEP publishing agency web site. Further guidance for FMS customers on obtaining publications is available online in "The New Guide to Security Assistance Publications," by Forrest E. Smith, The DISAM Journal, Spring 2005, http://www.disam.dsca.mil/pubs/Journal%20Index/Journals/Journal_Index/Vol%2027_3/Smith.pdf. EQUIPMENT DISPOSAL The disposal phase begins when an FMS customer has a need to dispose of all or part of a weapon system. SAMM, chapter 8, states that the proper use of U.S. origin items is a joint responsibility of the recipient and U.S. personnel. Often an item must be demilitarized to eliminate its military capability. Classifi ed features and those that pose physical or environmental hazards should be neutralized prior to or during the disposal process. Demilitarization procedures are outlined in DoD 4160.21-M-1. International customers are encouraged to use the DoD procedures for demilitarization if they have 10-34 Logistics Support of International Military Sales no equivalent demilitarization procedures of their own. Demilitarization guidance is available from weapon system managers or through the DRMS. The SAMM, section C8.6, provides further guidance on equipment demilitarization and disposal. International customers also may consider transferring their unwanted materiel to another country as a means of disposal. This is typically done with items which still have military capability. It is the responsibility of the transferring country to locate a buyer that meets the approval of the U.S. All third-country transfers must be approved by the Department of State (DoS). Both the DoS and DoD have set up end use monitoring (EUM) programs to assure that defense articles are used according to agreements with the U.S. from receipt to fi nal disposal. See Chapter 18, " End-Use Monitoring and Third-Party Transfer," of this text book . TEAMS USED TO SUPPORT COUNTRY REQUIREMENTS Often when the U.S. government provides new equipment to a country there is a need for technical assistance and training. Whenever there is a new presidential determination that a country is eligible for U.S. security assistance, the country will often require help to interface with the U.S. logistics system. Various teams sent to the country from the U.S. often provide this technical assistance and training. To insure that all aspects of the security assistance mission are integrated into an overall effective program, all such teams are under the supervision of the overseas security assistance offi ce while they are in the foreign country. The use of these teams is an integral part of the TPA, providing both initial and follow-on support for the country. The following is a brief discussion of the general types of teams that may be provided. Quality Assurance Teams Quality assurance teams (QATs) are often provided whenever a new item of military equipment is provided to a foreign purchaser. The mission of the QAT is to receive, inspect, and prepare the U.S. equipment for initial operation. They are NOT a training team. The QAT is assigned to make sure that the equipment has not been damaged during transit, and if it has, to repair the equipment and insure that it is operational when provided to the purchasing country. QATs are usually very small teams temporarily assigned in country; they perform their mission and leave the country quickly, thereby minimizing the cost to the purchaser. Technical Assistance Teams Technical assistance teams (TATs) are U.S. DoD personnel temporarily assigned in country to maintain or repair equipment provided under an FMS program. These teams can also be used to set up and place into operation such things as repair parts warehouses, personnel records systems, and technical libraries. TATs are often used when a country fi nds itself having problems in maintaining U.S. equipment or interfacing with U.S. management techniques. The primary purpose of a TAT does not normally include training, although some degree of training will be provided by virtue of the team performing their mission. Mobile Training Teams and Mobile Education Teams Mobile training teams (MTTs) and mobile education teams (METs) consist of U.S. military and civilian personnel temporarily in country to train/educate foreign military personnel. MTTs/METs are authorized to conduct in-country training when the requirement is beyond the capability of the 10-35 Logistics Support of International Military Sales security assistance offi ce and it is more effective to bring the training to the country. MTTs/METs are not authorized to provide technical assistance. Extended Training Service Specialists Extended training service specialists (ETSS) are DoD personnel (military or civilian) who are technically qualifi ed to provide advice, instruction, and training in the installation, operation, and maintenance of weapons, equipment, and systems. Unless specifi cally approved by DSCA, an ETSS will be provided for no longer than one year. These are the long-term training teams utilized for in- country training of foreign military personnel. English language instructors are an example of ETSS. Contract Field Services Contract fi eld services (CFS) are furnished by DoD contract with U.S. industry to provide advice, instruction, and training in the installation, operation, and maintenance of weapons, equipment, and systems. CFS will be used only when DoD personnel with the required skills are not available, or it is not practical to use them. CFS can be programmed on a one-year basis, although the term may extend past the end of a fi scal year. The conditions of CFS must be approved by DSCA and may be funded under IMET. Both CFS and ETSS are considered to be a fi eld training service. Technical Assistance Field Teams Technical assistance fi eld teams (TAFTs) are U.S. DoD personnel permanently assigned in country who are used to provide in-country technical support to foreign personnel on specifi c equipment, technology, weapons, and supporting systems when MTTs and ETSS are not appropriate. TAFTs are often the bridge between purely technical assistance and pure training. TAFT members are technical experts in their fi elds and often provide formal and informal training to their counterparts as part of their primary mission of insuring the continued operation of the equipment or support system. TAFTs are often used to set up operational maintenance and supply systems that will interface effectively with continental U.S. (CONUS) activities. In this sense, TAFT members are both doers and trainers. TAFTs set up and operate the systems, but they also train their counterparts to assume full operational control as quickly as possible. As part of the TPA for support, it is essential that consideration be given to using the various teams available to assist in both initial and follow-on support. For additional information, see the SAMM, section C10.5, and Chapter 14, "International Training," of this text book. DISCREPANCY REPORTING In a system as large and diverse as the DoD logistics system, errors are bound to happen. The DoD, recognizing this fact, has set up a system to quickly validate the problem and respond to the purchaser, while documenting trends to preclude recurrence of the discrepancy. A discrepancy is a difference or variance from a standard. If something does not meet the standard in either quantity or quality, a discrepancy exists. The U.S. government's intention is to resolve the discrepancy and ensure that every effort is made to provide the correct defense article or service in the quantity and quality agreed to in the FMS LOA. A deviation from a standard can be caused in any number of ways: shipment damage, wrong items, shortages, and many others. Considering the large number of shipments processed through the security assistance program, some discrepancies can be expected. When we seek the cause, we fi nd it usually involves some human error or oversight. Anyone in the long line of people processing the transaction, its transfer, shipment, or receipt may have inadvertently contributed to the discrepancy. 10-36 Logistics Support of International Military Sales It is the goal of the U.S. government to effi ciently resolve reported discrepancies as soon as possible. Where it is determined that the U.S. government is responsible, the implementing agency will make a fi nancial adjustment for the recipient country. Furthermore, it is policy that the U.S. government is not responsible for discrepancies occurring after title transfer to the FMS customer. An exception to this is a discrepancy in billing, which normally occurs after title has passed to the purchaser. There are four distinct categories of discrepancies. Each has unique reporting requirements for FMS. Transportation discrepancies, caused by the carrier or transportation system Product quality defi ciencies, caused by the manufacture Financial discrepancies, caused by erroneous computation of administrative or accessorial charges Supply discrepancies, which capture of a wide range of issues Transportation Discrepancies Transportation discrepancies occur when there is loss or damage to an item that can be attributed to the carrier, e.g., loss of a crate or package, or a hole put through a container by a forklift during loading. These types of discrepancies are usually easy to detect by a visual inspection of the containers or by insuring the number of items received matches the carrier's bill of lading for the number of items shipped. If a container was damaged when the carrier picked it up from the shipping activity, the damage should also be refl ected on the bill of lading. Transportation discrepancies are normally handled by fi ling a claim with the shipper against the carrier on a Transportation Discrepancy Report (TDR), Department of Defense (DD) form 361. The TDR procedures apply to any security assistance shipment made within the defense transportation system (DTS). Transportation discrepancies are discussed in detail in Chapter 11, "Foreign Military Sales Transportation Policy," of this text. Product Quality Defi ciency Reports The product quality defi ciency report (PQDR) program provides users with a method of reporting defi ciencies in new or newly reworked materiel to the item manager for preventing recurrence. Item managers use PQDRs to justify freezing assets, purging system assets, or returning materiel to the contractor for repair or replacement. Foreign military sales customers are encouraged to submit a PQDR, Standard Form 368, via the ILCO to the item manager or to a technical coordination group (TCG) of which the FMS customer is a member. However, submission of a PQDR will not automatically give the purchaser any fi nancial credit or provide a replacement item. When the defi cient item is still within the SDR submission timeframe, the customer may submit the SDR in lieu of the PQDR to the ILCO in order to be considered for compensation for discrepant materiel. The ILCO will provide information about the product defi ciency to the item manager. However, when the SDR submission timeframe has expired, the purchasers should use the PQDR to advise the U.S. item managers of product issues. Defense Logistics Agency Regulation 4155.24 provides further information on the submission criteria and use of the PQDR. Financial Discrepancies Financial discrepancies are very rare, but may occur when the incorrect accessorial charges are recorded by DFAS on the quarterly bill. An example of a fi nancial discrepancy is an incorrect 10-37 Logistics Support of International Military Sales transportation charge due to a change in delivery terms. Such discrepancies should be identifi ed by the purchaser and submitted directly to DFAS (except for U.S. Air Force FMS cases) in a letter format requesting correction. The SDR form, SF 364 is not used for reporting fi nancial discrepancies. The U.S. Air Force requires the fi nancial discrepancy to be submitted to the AFSAC. The following address should be used when submitting the fi nancial discrepancy: DFAS-IN/JAXBC 8899 E. 56th Street Indianapolis, IN 46249 Supply Discrepancies Supply discrepancies are those caused by the ILCO, item manager, shipping activity, or by the manufacturer. They are reported by the country or freight forwarder to the appropriate ILCO on an SF 364. Shipment Discrepancies Shipment discrepancies may include shortages, overages, damage, insuffi cient remaining shelf- life, incorrect items, and misdirected shipments. Occasionally, unnecessary SDRs are submitted in these areas because the country does not completely understand the U.S. supply system or fails to coordinate with its freight forwarder prior to submission of the SDR. Shipment Shortages. Purchasers often believe there is a shortage or total non-receipt of an item when the reconciliation documents sent to the purchaser show that an item is shipped, but the freight forwarder has not yet sent the item to the country. When shipments are made through a freight forwarder, the purchaser submitting SDRs for non-receipt is required to provide documentation from the freight forwarder indicating that no materiel has been received on the applicable requisition and transportation control number. The ILCO will deny any non-receipt SDR that does not include this documentation. Many times, SDRs are submitted for shortages because there was a partial shipment of the quantity requested. Such shortages are often identifi ed by researching the supply status received prior to the shipment or by inspecting the shipping document to see if the items received are partial shipments. If a purchaser receives a partial shipment, further research is required to see if the remaining items were previously received or if they are still due-in to the country. Another problem is caused by the use of multi-pack shipments. This is a packaging method whereby many different items are, for economic reasons, packed and shipped in a single container. Often the documentation on the outside of the crate or box identifi es only the document used to track the container. Inside, there may be 20 to 30 small items consolidated in the shipment which may be individually accounted for by the foreign customer. Discrepancies Caused by the Manufacturer. Product quality defi ciencies are defects or nonconforming conditions, which limit or prohibit the item from fulfi lling its intended purpose. These include defi ciencies in materiel, manufacturing, and workmanship, e.g., failure to put a gasket in a carburetor. A latent defect is defi ned as a defi ciency in an article which affects the operability and is not normally detected by examination or routine test, but which was present at time of manufacture. Substitute Items. SDRs are often submitted for incorrect items because the shipping activity did not have a specifi c item in stock and, instead, shipped an authorized substitute. Although the item will often perform as well as the requested item, the purchaser submits an SDR because it is not the same 10-38 Logistics Support of International Military Sales stock number as the item ordered. Again, further research of previously received status documentation is needed. If the purchaser does not desire a substitute, the appropriate advice code should be placed on the original requisition. There are times, however, when human error is involved and an incorrect item is shipped. If an item has not been identifi ed as a suitable substitute for, or interchangeable with, the original item ordered, then an SDR is appropriate. Shelf Life Items. A shelf life item is an item of supply possessing deteriorative or unstable characteristics to the degree that a storage time period must be assigned to ensure that it will perform satisfactorily in service. All shelf life items are classifi ed as one of the following two types: TYPE I items are determined through an evaluation of technical test data and/or actual experience to have a non-extendible shelf-life. These items include fresh foods, vaccines and drugs. TYPE II items have an assigned shelf life that may be extended after completion of visual inspection/certifi ed laboratory test, and/or restorative action. These products include petroleum, oil and lubricants, canned or packaged foods, and certain rubber- based products. DoD shelf life policy requires that materiel will be issued/shipped on a fi rst in, fi rst out (FIFO) basis and shall be the oldest within the condition code specifi ed. However, DoD recognizes that some FMS shipments may require a longer transportation time and has provided the following exceptions for FMS customers. FMS requisitions will be issued in accordance with last in, fi rst out (LIFO) issue policy. LIFO issue of non-extendable Type I shelf life items will be accomplished by issuing materiel with the latest date of expiration; extendable Type II items will be issued by the latest date of manufacture, date of cure, date of assembly, or date of pack (subsistence only) regardless of the number of extensions. Items with a shelf life code (SLC) of 24 months or greater, issued to satisfy FMS shall be in condition code A, with a minimum of 12 months shelf life remaining. Requesters have the option to waive the 12-month minimum by submitting exception requisitions (A05). Items with a SLC of less than 24 months are not subject to the 12-month minimum. However, they must be issued from condition code A assets, unless the purchaser specifi es that other than condition code A materiel is acceptable. Shelf life extensions for items/materiel in the custody of the FMS customer can be found by contacting the USG security assistance or international program offi ces having responsibility over the FMS case. The offi ce can access the DoD shelf life extension system for applicable data and extension test results. Improper Packaging. SDRs may be submitted for materiel received in damaged condition if the damage is the result of improper preservation, packing, marking, loading, handling, or storage provided prior to title transfer. SDRs will not be accepted for damage caused by the carrier. Billing Discrepancies A billing discrepancy involves materiel which is received as ordered, and with proper accompanying documentation, but the charge is incorrectly refl ected on the quarterly billing statement provided by DFAS. These are usually duplicate charges or omissions from the bill. The purchaser will usually identify these problems by using the FMS delivery listing provided as part of the quarterly billing statement. 10-39 Logistics Support of International Military Sales Submission of Supply Discrepancy Reports To determine if a suspected discrepancy should be reported, a step-by-step process is recommended, which involves the elements of time, value, and determination of the cause of the discrepancy. The Element of Time Supply discrepancy reports must be submitted within one year of the date of the title transfer/date of shipment. Therefore, it is imperative that the purchaser inspect each delivery upon receipt to ensure that the correct item is received in the correct amount and in good condition. If there is a discrepancy with the shipment, the purchaser must submit the SDR within one year from the time the item left the depot/manufacturing facility. In the event that a purchaser fails to receive an entire shipment, but is billed for the original amount ordered, the purchaser has one year from the date on the DFAS quarterly billing statement (DD Form 645) on which it was billed for the shipment. The constraint of time is not applicable in the case of a latent defect, which is defi ned as a defect which exists at the time of acceptance, but which cannot be identifi ed by a reasonable inspection. The element of time, twelve months from the date of initial shipment, is provided in the terms and conditions of the LOA, section 5.4, to allow the purchaser suffi cient time to receive, inspect and, if necessary, test the material. It does not constitute a warranty, but rather allows the FMS customer to assemble the necessary documentation to support a claim for a discrepancy. The Element of Value Next, the purchaser should determine if the suspected discrepancy is, in fact, valid. The monetary minimum is $200 for any LOA implemented on or after 1 June 1992. Supply discrepancy reports will only be processed by the MILDEP when the estimated value is $200 or greater. This minimum value includes the value of the item plus any transportation and handling costs. Purchasers are encouraged to submit SDRs regardless of the dollar value so that problems can be documented, but only those over the minimum dollar value will be reviewed for possible compensation. Cause of Discrepancy It must be decided whether the resolution of a reported discrepancy is the responsibility of the shipper (U.S. government) or the carrier. If a carrier discrepancy is suspected, claims should immediately be fi led directly with the carrier, as a carrier's liability is terminated after nine months from the date of shipment. If the discrepancy is a shipper or billing responsibility, an SDR should be prepared and forwarded to the appropriate ILCO for initial processing. Table 10-3 provides a decision table to assist the purchaser in determining the appropriate action to be taken with respect to the gamut of discrepancies that might be encountered. Further SDR decision criteria can be found in the SAMM, Table C6.T5. 10-40 Logistics Support of International Military Sales Table 10-3 Decision Table for Supply Discrepancy Report Submissions THE DISCREPANCY REPORT After completing the step-by-step review and process just outlined, the next action involves preparation of the supply discrepancy report. Refer to Figure 10-4 for this process. The SF 364, Supply Discrepancy Report, is the document used in reporting selected discrepancies. See Appendix Discrepancy Action Transportation: Packages are Inspect the shipping manifest missing or damaged when received. to insure that cargo is missing and/or was not damaged when picked up by carrier. If DTS is the carrier, contact U.S. military representative and have the SAO submit an DD 361 (TDR). If not a DTS shipment, imme- diately submit a claim with the carrier. Financial: Accessorial or Army/Navy: Submit a letter administrative charges are directly to DFAS-IN explaining computed incorrectly. the defi ciency and requesting correction. Air Force: Submit a letter to AFSAC explaining the defi ciency and requesting correction. Quality: Item does not perform Submit an SF 364 (SDR) and all properly due to workmanship, supporting documentation to materiel, etc., and the item was appropriate ILCO. purchased using FMS. Billing: Item is billed erroneously Submit an SF 364 (SDR) and all on the quarterly statement supporting documentation to (duplication, etc.) appropriate ILCO. Shipping: When there is an Research status previously incorrect item, a shipment received to insure there has misdirected to you but intended not been a partial cancellation, for someone else, or an item is substitution, or split shipment. damaged but the container is If appropriate, submit an SF not and then item was shipped 364 (SDR) and all supporting U.S. Postal Service or damage documentation to appropriate was caused by the way the item ILCO. was packaged (improper bracing, marking, etc.) Take photographs if possible, make drawings etc., and submit an SF 364 (SDR) and all supporting documentation to appropriate ILCO. 10-41 Logistics Support of International Military Sales 1 for a sample SF 364. The requirement for the FMS customer to submit reports of discrepancy on a SF 364 is included in the conditions of each LOA negotiated with the country. The original and six copies of the SF 364 along with a copy of all applicable documentation should be forwarded to the ILCO of the military service managing the FMS case. Electronic submission of the SDR via STARR-PC, Navy e-Business Suite, AFSAC on-line, the SCIP or some other electronic medium will speed up the investigation process, but the FMS customer must still follow- up the electronic submission with suffi cient hard copy documentation to facilitate rapid and accurate resolution. Photographs of materiel, as received, which involve damaged or mislabeled materiel, should be attached as evidence to substantiate the claim. If available, other documents that should accompany the SF 364 include copies of the DD Form 1348-1A, Issue Release/Receipt Document; DD Form 250, Material Inspection and Receiving Report; any previously received status reports, bills of lading, drawings, and any other related documents that support the SDR. Supply discrepancy reports for other than transportation or fi nancial discrepancies should be submitted to one of the following: Navy Commanding Offi cer Navy Inventory Control Point ATTN: Code P753112 700 Robbins Avenue Philadelphia, Pennsylvania 19111-5098 ! ! "! # $ $ ! $! ! " %& ! # # # # ' ' ' % ( ' )*+ Figure 10-4 Discrepancy Process 10-42 Logistics Support of International Military Sales Army U.S. Army Security Assistance Command 54 M Avenue, Suite 1 New Cumberland, Pennsylvania 17070-5096 Air Force AFSAC/COSD 5490 Pearson Road Wright-Patterson Air Force Base, Ohio 45433-5332 Initial Edit When a SF 364 is received from an FMS customer, the ILCO acknowledges receipt to the customer. The receiving activity then makes an initial edit of the SDR for proper format, and a second edit against the FMS management information system, SAMIS, MISIL or CISIL. The ILCO has fi fteen days to accomplish this initial processing. If correct, the SDR is recorded, entered into the processing system, and forwarded to the appropriate inventory control point or shipping activity for further processing. The ICP/shipping activity has sixty days to research the SDR and provide evidence of shipment or delivery. If the initial edit by the ILCO reveals that the SDR was submitted in error, e.g., not in accordance with the conditions on the LOA or was submitted with insuffi cient information for processing, the SDR is rejected with the reason(s) indicated. Resolution Resolution of an accepted SF 364 normally requires a minimum of 120 days after receipt. Thus, the FMS customer will normally not receive any report of the fi nal action taken until about four months after receipt of the SF 364 by the appropriate ILCO. If a purchaser's request for consideration under this procedure is denied by the MILDEP concerned, i.e., an unfavorable fi nding, the purchaser may request reconsideration by resubmitting the SDR within ninety calendar days of the denial. A copy of the original SF 364, annotated to indicate that it is a resubmission along with all supporting documentation, is resubmitted to the ILCO. The FMS customer should include a cover letter explaining why the original fi nding is thought to be incorrect. If the customer remains dissatisfi ed with the second response, the SDR may be resubmitted a third time within ninety days of the date of the second response. A third submission is normally accomplished only if there is additional documentation to support the claim. Final Action The appropriate MILDEP item manager or shipping activity of the source of supply is responsible for providing an SDR reply either by completing the reverse side of the SF 364 or providing comparable documentation and returning it to the ILCO. When directed by the ILCO, DFAS takes appropriate fi nancial action on the purchaser account. Credit to the purchaser's FMS case is the normal resolution of a valid SDR. The billing statement furnished to the purchaser on a quarterly basis ( DD Form 645) will refl ect such fi nancial adjustments. Mandatory Defense Security Cooperation Agency Approval Defense Security Cooperation Agency approval of an SDR is required when the implementing agency determines the U.S. government is liable for correction of the discrepancy under the terms and conditions of the LOA and recommends the use of FMS funds, and the value of the SDR is in excess of 10-43 Logistics Support of International Military Sales $50,000. DSCA approval is also required when the SDR involves a resolution which is not consistent with guidance provided in the SAMM or other appropriate directives. Material Returns Whenever material is returned to U.S. custody, the purchasing country will be directed to reship the material using the same document number under which the material was originally shipped. The country will be advised to return the material to U.S. government custody within 180 days from date of approval at U.S. government expense using either DTS or a commercial carrier under contract to the DoD. Upon evidence of material being returned, a credit adjustment will be processed for the return of the discrepant material if previously authorized. This evidence releases the FMS customer of liability for the material. Warranties and Supply Discrepancy Reports The SDR process is not a warranty. FMS customers may submit SDRs for discrepant material whether or not a warranty exists. Per the SAMM, section C6.3, if the purchaser desires a special performance warranty, the U.S. will purchase one and exercise these rights at an additional cost. If the FMS purchaser did not request and pay for a special performance warranty, then they have no warranty (except for clear title). If the U.S. happens to purchase a routine warranty, no special warranty actions are required by the purchaser. The purchaser may receive the benefi t of any routine warranties through the SDR process. The presence of a warranty or lack thereof infl uences the potential range of remedies the DoD can pursue. The implementing agency may accept the SDR for evaluation, however doing so does not automatically create an obligation to compensate the FMS customer. If a written warranty exists and is documented in the LOA, an SDR submitted for warranty repairs or service is valid as long as the warranty is effective. FOREIGN MILITARY SALES TRANSPORTATION REIMBURSEMENT POLICY DSCA policy allows for reimbursement of transportation for discrepant materiel approved under an SDR. The policy covers SDR transportation reimbursement for the following: FMS items furnished by defense working capital fund (DWCF) activities FMS items furnished by non-DWCF activities Packing, crating and handling relating to FMS materiel Local disposal relating to FMS materiel Transporting items repaired under a warranty to the FMS customer It does not apply to items requested by the international customer via direct commercial sales, or for materiel at the FMS customer freight forwarder for disposition to a U.S. depot or contractor facility. The SDR agency approving the transportation reimbursement must follow a checklist to ensure all reimbursement prerequisites are met. The policy allows for a reimbursement of between 3 and 5 percent of the billed amount. More information is available in DSCA policy letter dated October 6, 2003, subject; FMS Supply Discrepancy Report (SDR) Transportation Reimbursement Policy (DSCA 03-15). 10-44 Logistics Support of International Military Sales SUMMARY Traditionally, logistics employs four processes to complete four tasks. The tasks are procurement, transportation, supply, and maintenance. Since there is no separate, dedicated logistics system for FMS, the processes and tasks required for its support are furnished through the existing DoD logistics infrastructure. The same wholesale (ICP or depot level) acquisition, supply, transportation and maintenance systems used for the support of U.S. forces are also used for the support of FMS. By taking advantage of DoD resources through the FMS program, the foreign country avoids establishing its own separate offi ces to perform the same functions. The primary interface between the foreign country and the U.S. logistics system are the ILCOs, i.e., USASAC, NAVICP-OF, and AFSAC. These organizations have employees who resolve foreign military sales purchaser's logistics problems. It is DoD policy to support FMS systems and equipment. In this regard, both initial support and follow-on support have to be considered as part of the total TPA. TPA ensures that FMS customers plan for and obtain all necessary support items, training, and services required to introduce and operate major systems and equipment. In addition, both initial and follow on support must be considered at the time a major system is sold. The purchaser's unique requirements are often determined through a site survey. Instrumental to determining the range and depth of required spares is the concept of provisioning. Provisioning entails numerous considerations such as reliability, maintainability, economy, level of repair, and military essentiality. The benefi ts of provisioning are passed on to the FMS customer through defi nitization of the purchaser's total package. Follow-on support is available through several avenues. At times the purchasing country itself may have some compatible resources that can be applied to the new system. Other sources are from third countries, where permitted, or through private U.S. contractor support, or, through the U.S. government. There are several methods for acquiring such support, including CLSSA. Several follow-on support programs are in place for acquiring hard to obtain assets. The PROS and SNAP commercial buying services focus primarily on obtaining non-standard spares for the FMS customer. The FMS reserve maintains in inventory many spares that are needed by FMS customers but no longer used by the DoD. Follow-on support can also be acquired through a variety of programs whereby materiel excess to the needs of the USG can be made available to purchasing countries under FMS. Because of the sheer number of FMS transactions and the worldwide distribution of the materiel involved, the opportunity for errors, differences, and discrepancies is ever present. In order to manage the discrepancy situation, a formal reporting system has been established using the Supply Discrepancy Report (SF 364). REFERENCES Air Force Manual 16-101, International Affairs and Security Assistance. Army Regulation 12-1, Security Assistance, International Logistics, Training, and Technical Assistance Support Policy and Responsibilities. Navy Supply Publication-526, FMS Customer Guide. Navy Supply Publication-541, Security Assistance Manual. 10-45 Logistics Support of International Military Sales JP 4-0, Doctrine for Logistics Support of Joint Operations, 6 April 2000. Department of Defense. DoD 5105.38-M, Security Assistance Management Manual (SAMM), Chapter 6. Department of Defense, Joint Regulation DLA 4140.55, AR 735-11-2, SECNAVINST 4355.18A, AFJMAN 23-215, Reporting of Supply Discrepancies. Department of Defense. DoD 4140.27-M, Shelf Life Management Manual. 10-46 Logistics Support of International Military Sales 11-1 Foreign Military Sales Transportation Policy INTRODUCTION The movement of and the accounting for foreign military sales materiel involves a number of transportation complexities as the materiel fl ows from the military department depots and contractor points of origin to the ultimate customer. This chapter examines those complexities, to include the Department of Defense (DoD) policy governing the process, organization, and responsibilities of those activities engaged in the movement and accounting of the materiel. Each topical area affords the reader an appreciation of the policy and the individual roles and responsibilities of the country representatives, freight forwarders, and DoD. Policy for the movement of foreign military sales ( FMS) materiel is the responsibility of the assistant deputy under secretary of defense for transportation policy within the under secretary of defense for acquisition, logistics, and technology organization. BASIC TRANSPORTATION POLICY Historically, FMS transportation policy has been a policy of purchaser self-suffi ciency whereby each purchaser is normally responsible for the transportation and delivery of its own materiel. In the application of this policy, and within the framework of U.S. laws, regulations, and policies, the purchaser usually employs an agent, such as a freight forwarder, to manage transportation and delivery from the freight forwarder's facility in the United States (U.S.) to the purchaser's desired destination. Title Transfer Title to equipment and materiel will pass at the initial point of shipment (point of origin) unless otherwise specifi ed in the letter of offer and acceptance (LOA). Title to DoD articles sold from stock will normally transfer at the U.S. depot. Items procured from contractors will normally pass title at the contractor's loading facility. Title to excess materiel will normally pass at the location at which the materiel is being offered for sale. Title to defense articles transported via parcel post passes to the purchaser on the date of parcel post shipment. Point of Delivery The point of delivery is that point in the transportation cycle where responsibility for physical movement of a FMS shipment passes from DoD to the purchaser. The point of delivery is identifi ed on the letter of offer and acceptance (LOA) by the delivery term code (DTC). The continental U.S. (CONUS) point of shipment/origin is normally also the point of delivery, especially for shipments to freight forwarders. However, there are numerous situations when the point of delivery may be a CONUS port of exit (POE), a ship, or a purchaser's port or in-country destination. The Defense Transportation System The DoD prefers FMS customers to be self-suffi cient in the shipment of their FMS materiel; that is, all transportation arrangements from the point of origin should be made by the FMS customer. However, the DoD recognizes that neither do all FMS customers have the resources to perform their own transportation or hire their own freight forwarder, nor are all categories of materiel eligible to be FOREIGN MILITARY SALES TRANSPORTATION POLICY Chapter 11 11-2 Foreign Military Sales Transportation Policy transported through commercial channels. For these reasons, the DoD arranges transportation for the FMS customer using the defense transportation system (DTS). The prime movers within the DTS are the U.S. Air Force Air Mobility Command (AMC), the U.S. Navy Military Sealift Command (MSC), and the U.S. Army Surface Deployment and Distribution Command (SDDC). All three commands are under the central authority of the U.S. Transportation Command (USTRANSCOM). The AMC manages DoD air terminals and the onward movement of passengers booked on military airlift, and cargo. The MSC provides worldwide ocean transportation for the DoD. The SDDC is the single DoD manager for military traffi c, land transportation, and common-user ocean terminals. The SDDC provides transportation planning and support for the surface movement of passengers and cargo within the DTS, including within CONUS. When FMS materiel is shipped through the DTS the customer is charged for the cost of transportation either in the price of the materiel or by having a transportation line on the LOA. Working capital funded materiel, which includes most Defense Logistics Agency (DLA) managed secondary and consumable items, includes the cost of transportation to the purchaser's freight forwarder or to the CONUS POE. The transportation document is a commercial or government bill of lading (CBL/GBL). Collect commercial bills of lading (CCBLs) are occasionally used for non-working capital funded items shipped to the freight forwarder. The DoD 7000.14-R, Financial Management Regulation (FMR), Volume 15, Chapter 7, states that when transportation of FMS materiel is accomplished through the use of CBLs/GBLs, normal commercial rates, not USG rates, shall be used. The purchaser remains responsible for onward transportation. Normally, fi rearms, explosives, lethal chemicals, other hazardous materiel, and occasionally, classifi ed materiel are moved within the DTS or other USG-arranged transportation on a CBL/GBL to the CONUS POE. The onward movement of these items will be by purchaser-owned or controlled aircraft or purchaser-owned, operated, or controlled surface vessels. FMS materiel which requires exceptional movement procedures, such as sensitive and certain hazardous materiel as defi ned in DoD 4500.9-R, Defense Transportation Regulation Volume II (DTR), Part II, "Cargo Movement," will be shipped through CONUS water or aerial port facilities controlled by DoD. Air cargo that exceeds commercial capability can also be delivered through DTS. Figure 11-1 illustrates the defense transportation system. Figure 11-1 Foreign Military Sales Transportation Process !"#$!" !" %&' (& ) *& ) + ( , - . 11-3 Foreign Military Sales Transportation Policy Note that when using the DTS, the USG normally maintains control and custody of the materiel (but not the title) until delivery to the purchaser. Since use of an FMS-funded bill of lading for an FMS shipment is considered a DTS shipment, the DoD is performing a reimbursable service for the FMS customer and custody must not be construed to mean retention of title or acceptance by DoD of any risk of loss or damage. If the DTS ships an item to an FMS recipient, including a recipient freight forwarder, and loss or damage occurs, the recipient must fi le a claim with the carrier. If resolution with the shipper is unsuccessful, the recipient may submit supply discrepancy reports (SDRs) to request additional shipment or billing information or to obtain implementing agency (IA) assistance in resolving the discrepancy. The USG has responsibility for fi ling and processing claims with carriers when shipment is made on a prepaid basis to locations where DoD personnel or other USG representatives have primary responsibility for receipt inspection and acceptance. When the USG fi les the claim, the benefi ts will be reimbursed to the purchaser. Insurance If the FMS purchaser does not want to self-insure a shipment, the purchaser should obtain commercial insurance for the FMS shipments. The FMS customer's freight forwarder may be able to arrange for commercial insurance as part of the freight forwarder's contract with the FMS customer. Only in exceptional situations will a military department obtain insurance for the purchaser. When this happens, the insurance will be billed as a separate line item on the LOA. Preservation, Packing and Marking The LOA, standard terms and conditions, Section 5.1, state that defense articles will be packed and crated prior to the time that title passes. This packaging is done in accordance with MIL-STD 2073-1D, Department of Defense Standard Practice for Military Packaging. This reference, and the Security Assistance Management Manual (SAMM) section C7.10, require packing for protection of materiel under anticipated favorable environmental conditions of worldwide shipment, handling and storage. This level of packaging is designed to protect materiel against physical damage and deterioration during favorable conditions of shipment, handling and storage in warehouse conditions for a minimum of 18 months. Additional special packing is available as an additional FMS service for an additional fee. Address markings shall be in accordance with MIL-STD-129P, Department of Defense Standard Practice for Military Marking and DTR Chapter 208. DoD shippers and commercial contractors and vendors making shipments to overseas locations must use the DD Form 1387 shipping label with bar coded data. In addition to DoD prescribed markings, FMS shipments must be marked with freight forwarder and in-country clear-text addresses when applicable. Additionally, each package should indicate shipment priority in such a manner that the freight forwarder will know the onward shipment requirements. The case identifi er, national stock number and the item dollar value are also required for freight forwarder and customs export requirements. Small Parcel Shipments The U.S. Postal Service (USPS) defi nes a small parcel as an item that is 70 pounds or less in weight, and is 108 inches or less in combined length and girth. Transportation offi cers are authorized to use either the USPS parcel post facilities or commercial package carrier equivalents, such as United Parcel Service (UPS) or Federal Express Corporation (FedEx) for small parcel shipments. Overseas movement via the military postal service (APO or FPO) is used only if the APO/FPO is specifi cally identifi ed in the LOA and the APO/FPO has given written approval that they accept responsibility 11-4 Foreign Military Sales Transportation Policy for receiving security assistance shipments. The DoS's diplomatic pouch services cannot be used for materiel shipments. As a rule, the APO/FPO and diplomatic pouch modes are not to be used for FMS shipments; however, exceptions to this policy are authorized for classifi ed shipments when the purchaser does not have approved facilities to receive classifi ed items in the U.S., or where the LOA specifi es delivery in-country through the security assistance offi ce (SAO) or mission. The SAMM, section C7.6.4, states that such exceptions will be kept to a minimum and the cost of such shipments will be assessed to the purchaser. When shipment is to be via domestic parcel post or commercial carrier equivalents, the transportation service selected must provide a proof of entry into the transportation network and a proof of delivery to the consignee. Consolidation FMS issues from a stock point will be consolidated by addressee for shipment purposes to the greatest extent possible consistent with customer requirements. Consolidation of line items into containers or shipment units will be limited to the same U.S. sponsoring service, the same FMS case designator, the same "Mark-for" and "Ship-to/Freight Forwarder" locations, and the same priority designator (designators 01-08 may be mixed but not with lower priorities). When items are consolidated, the container should be marked to indicate a consolidated shipment. Dangerous Goods Shipments FMS customers frequently purchase materiel through the DoD which are deemed hazardous by United States Code of Federal Regulations (CFR). The U.S. Department of Transportation (USDOT) publishes U.S. hazardous materiel (HAZMAT) regulations under Title 49, Sections 100-199 of the Code of Federal Regulations (49 CFR 100-199). The USDOT strictly regulates the movement of such materiel. The USDOT defi nes dangerous goods (hazardous materiel) as those materials which are capable of posing an unreasonable risk to health, safety and property when transported in commerce. Such materiel include petroleum products, aerosols, compressed gases, paints, and cleaning compounds. These materiel are identifi ed alphabetically, by proper shipping name, in the hazardous materials table, 49 CFR 172.101. This table covers the transportation of HAZMAT in all modes - highway, rail, water and air. It makes no difference whether the shipment comes from a DoD or a commercial shipper, or whether the carrier is a contracted commercial surface or air carrier or a military carrier. It also makes no difference if the movement of the HAZMAT is strictly domestic or international. All movement of dangerous goods in commerce must comply with 49 CFR, and all commercial and DoD shippers must be certifi ed in accordance with 49 CFR before they can approve the movement of dangerous goods. Often the DoD or contract shipper will not know the ultimate mode of transportation for export shipments, especially if onward transportation is arranged by a freight forwarder. When this possibility exists, the original shipper should attempt to contact down-line shippers and forwarders to determine what packaging and certifi cation is required because this can generally be accomplished in a more cost effective manner if performed by the original shipper rather than by down-line shippers. It is the originating shipper's responsibility to prepare the shipment for transportation to the ultimate destination. Failure to adequately package and label dangerous goods, and/or failure to properly provide accurate shipping documents results in frustrated cargo that cannot clear customs and leave the U.S.. If a freight forwarder receives such a shipment, the DoD is still responsible for resolving the discrepancy, which often can be a time-consuming and costly process to both the DoD and the freight 11-5 Foreign Military Sales Transportation Policy forwarder. The DoD is not exempt from paying costly fi nes imposed under 49 CFR for failing to comply with HAZMAT transportation regulations. In addition to having to conform to the requirements of 49 CFR, hazardous materiel shipments must be certifi ed to the International Maritime Dangerous Goods Code (IMDGC) if the materiel is being transported by ship, to the International Air Transport Association (IATA) Dangerous Goods Regulation or International Civil Aviation Organization (ICAO) if being transported by either commercial cargo aircraft or passenger aircraft, or to the U.S. Air Force Joint Manual 24-204, Preparing Hazardous Materiel for Military Air Shipments, if being transported by military aircraft. Classifi ed Shipments Classifi ed shipments of FMS materiel are often made via the DTS which provides the required security and enables DoD to maintain control and custody of the materiel until delivery to the purchaser. Classifi ed materiel or data must be moved under security safeguards appropriate to the transportation mode employed, as established by DoD 5200.1-R, Information Security Program Regulation. Classifi ed and sensitive materiel is identifi able through the controlled inventory item code listed in the catalog data for that item. Classifi ed items should also be identifi ed on the letter of offer and acceptance. Commercial transportation may be used for the movement of classifi ed or protected materiel provided the carrier has fulfi lled the required criteria and has the proper authorization as delineated in DoD 4500.9-R, Defense Transportation Regulation, Part II, "Cargo Movement," and DoD 5220.22-R, Industrial Security Regulation. The DoD 5200.1-R, chapter 8, specifi cally advises that classifi ed materiel shall be transmitted only to an embassy or other offi cial agency of the recipient government, or for loading on board a ship, aircraft, or other fl ag carrier designated by the recipient government at the point of departure from the U.S. classifi ed materiel shall be transferred on a government-to-government basis by duly authorized representatives of each government. Some freight forwarders have been cleared to receive classifi ed shipments. A foreign government, embassy, or country representative may request a freight forwarder security clearance by contacting the Defense Industrial Security Clearance Offi ce (DISCO), Attn: Facility Clearance Division, 2780 Airport Drive, Suite 400, Columbus, Ohio 43219-2268. The DISCO web site contains directions and forms that needed to be completed prior to submitting with the letter requesting a facility clearance. A copy of the facility clearance letter must be sent to the Defense Logistics Management Standards Offi ce (DLMSO), Suite 1834, 8725 John J. Kingman Road, Ft. Belvoir, VA 22060-6217. The DLMSO will update the Military Assistance Program Address Directory ( MAPAD) to identify that the freight forwarder is cleared to handle classifi ed frieght. The release of a shipment to a freight forwarder does not constitute transfer of custody and security responsibility to the recipient foreign government; this occurs only when the receiving government's designated government representative (DGR) assumes custody of the consignment. The freight forwarder acts only as a transfer agent. the DGR must be a citizen of the receiving country, and must be appointed in writing by the international customer's government. For more information on the transfer of classifi ed material, see Chapter 7, "Technology Transfer, Export Controls and International Programs Security" of this text. Before classifi ed FMS materiel can be shipped, the procedures for safeguarding it must be spelled out in a detailed transportation plan that must be prepared by the IA that prepares the LOA, in cooperation with the FMS customer. The transportation plan must identify the individual responsible 11-6 Foreign Military Sales Transportation Policy for safeguarding the classifi ed materiel, the methods of transport, the locations of transfer and delivery, the location of storage or processing facilities, and the security clearances of all personnel and facilities involved in the transfer. The IA must ensure that its own security offi cials review and approve the transportation plan. The transportation plan is an integral part of all offi cial copies of the LOA, and it must be maintained in the case fi le. It must be made available to U.S. Customs and Border Protection and other security offi cials when classifi ed materiel is exported. Transportation plan specifi cs are detailed in the SAMM section C3.F5. Classifi ed FMS shipments require a U.S. DoS export authorization DSP-94, Authority to Export Defense Articles Sold Under the Foreign Military Sales Program, to be permanently exported. A DSP-85, Application/License for Permanent/Temporary Export or Import of Classifi ed Defense Articles and Related Classifi ed Technical Data, may be required for classifi ed materiel to be temporarily or permanently re-imported by a commercial or foreign government representative. This includes classifi ed materiel coming back into the U.S. for repair, overhaul, testing, calibration, training or disposal. Sensitive Shipments Sensitive arms, ammunition and explosives (AA&E) is a special term that describes conventional weapons, ammunition and explosives that need special protection and security to keep them out of the hands of criminals and terrorists. Conventional AA&E are munitions that are not nuclear, biological or chemical (NBC) munitions. NBC items are covered by their own regulations. Criminals and terrorists fi nd conventional sensitive AA&E desirable because they are deadly, portable and easy to steal if unprotected. The DoD applies special security controls to sensitive AA&E. Sensitive materiel will always be moved via the DTS under delivery term codes (DTCs) 7, 8 or 9. Sensitive AA&E fall into four hazardous materiel categories, which are discussed in detail in the SAMM section C7.17. Category I materiel must be transported to at least a customer country's port of debarkation (POD) under DoD control, unless waived by the Defense Security Cooperation Agency (DSCA). The applicable DTC on the LOA will be 9 or 7. Categories II through IV items must be shipped at least to a DoD ocean or aerial port where DoD personnel load it into a customer country's ship or aircraft. The LOAs for these items must be written with a DTC with no less than 8. There are non-sensitive AA&E items and they do not need to be given special AA&E security. Non-sensitive AA&E, if it contains explosives, is regulated by HAZMAT regulations. Just because an item is hazardous does not make it sensitive AA&E, or vice-versa. Hazardous and non-sensitive items may be shipped through commercial channels under DTC 4 or 5. Notice of Availability Classifi ed, sensitive and hazardous shipments require the use of notices of availability (NOAs), DD Form 1348-5. These notices may be mailed or sent electronically by the shipper. The NOA alerts the freight forwarder/country representative that a shipment is ready for movement and that appropriate actions are to be taken to ensure the protection of the materiel and, for classifi ed items, proper government-to-government transfer. NOAs for unclassifi ed, sensitive, oversized and hazardous materiel are sent to the type address code (TAC) 3 address identifi ed in the MAPAD. NOAs for classifi ed materiel, however, must be sent to the country representative identifi ed in the country's special instructions in the MAPAD, not the TAC 3 address. This is normally the country's embassy in Washington, D.C. The MAPAD will be discussed in detail later in this chapter. Notices of availability 11-7 Foreign Military Sales Transportation Policy are only applicable when the delivery term code is 4, 5, 8, B, C, E or H, and for all classifi ed items regardless of DTC. An example of a notice of availability is at Figure 11-2. United States Flag Shipping In accordance with the Merchant Marine Act of 1936, as amended, defense articles purchased through the foreign military fi nance program (FMFP) and which will be shipped by ocean vessel, are to be transported in vessels of U.S. registry. However, under certain circumstances, the law permits the granting of waivers, allowing not more than 50 percent of the cargo to be shipped in vessels fl ying fl ags of the country to which the credit/loan agreement applies. DSCA and the U.S. Maritime Administration of the Department of Transportation closely monitor credit/loan shipments. Waiving and monitoring procedures are a part of the sales agreements. DSCA has the responsibility for acting on waiver requests from the foreign countries, while the Maritime Administration monitors actual shipments. Additional information concerning credit agreements and waivers may be found in this text in Chapter 12, "Foreign Military Sales Financial Management," and the SAMM, sections C7.12 and C9.7. Accessorial Services and Charges The SAMM and DoD 7000.14-R, Financial Management Regulation (FMR), Vol. 15, Chapter 7, defi ne accessorial charges as certain expenses incident to issues, sales, and transfers of materiel which are not included in the standard price or contract cost of materiel, such as packing, crating and handling, transportation, pre-positioning, staging of materiel in CONUS, and port loading and unloading. Figure 11-2 Notice of Availability (DD 1348-5) 11-8 Foreign Military Sales Transportation Policy Transportation costs for other than collect commercial bill of lading shipments are considered accessorial costs. Transportation rates are assessed when the DTS provides transportation for FMS materiel, when items are shipped on a government or commercial bill of lading, and when packages are shipped prepaid through the U.S. Postal Service, FEDEX, UPS, or through any commercial carrier. Consult the FMR, Chapter 7, for transportation rates, their application, and computation. TRANSPORTATION RESPONSIBILITIES There are normally three parties involved in the movement of FMS materiel: the USG, the purchaser, and the freight forwarder. Each has specifi c responsibilities that must be met in order to assure the effi cient movement of materiel. The SAMM, section C7.4 provides additional information concerning the various responsibilities. United States Government The USG initiates shipments to freight forwarders and provides transportation services for specifi c items identifi ed in the LOA. As the shipment initiator, the USG can cause problems in the movement of FMS articles to the purchasing country. Any failure in the packing and shipping process can result in problems for the carrier, the freight forwarder, and the customer, and prevent prompt processing of claims, or prevent U.S. customs clearance. Packing and shipping facilities must ensure that packing documentation, hazardous certifi cation, and FMS case identifi cation are properly affi xed to the container. Shippers must pack and mark FMS material, and certify hazardous material, to the fi nal destination. Additionally, it is essential that the on-line MAPAD system is used in creating the clear-text address on the shipping label. Failure to use the electronic MAPAD can result in items being shipped to the incorrect ship-to or mark-for addressee. It is the responsibility of the shipping activity to ensure that the information contained on the shipping label (or included on the accompanying documentation, i.e., a DD 1348-1, DoD Single Line Item Release/Receipt Document, a DD 250, Material Inspection and Receiving Report, or a DD 1149, Requisition and Invoice/Shipping Document) include as a minimum the price or value of the shipment, the transportation priority, a description of the item, the FMS case identifi er and the military standard requisition and issue procedures (MILSTRIP) document number and supplementary address. When any of this information is omitted, the freight forwarder is unable to obtain customs clearance or is unable to identify the fi nal destination for onward shipment. The item then becomes frustrated cargo and remains undeliverable until the applicable International Logistics Control Organization (ILCO) and shipping activity correct the errors. The same problems arise with items being shipped directly from procurement as those being shipped from stock. Shipping activities are also responsible for providing the freight forwarder with advance documentation of the impending shipment, by sending out a DD 1348-5, Notice of Availability, and Maintaining Evidence of Shipment. The DTR, Part II, Appendix E requires all FMS shipping documents, including GBLs, CBLs, NOAs, transportation control and movement documents (TCMDs), issue release/receipt documents (DD Forms 1348-1, 1149, 250), inspection and receiving reports, air bills, supply transactions, transfer to carrier documents, acceptance data, and any similarly related materiel used to transfer FMS shipments to carriers to be retained for a mandatory 30 years in hardcopy format. This normally means keeping the documentation for two years at the shipper locations and 28 years in a national records archive. The SAMM, section C6.2.1 requires general FMS case fi les to be retained for 10 years after fi nal case closure. This documentation should be retained in hard copy, but cases with large volumes of transactions may be stored electronically. USG agencies are required to provide necessary shipping information to enable the purchaser and/or freight forwarder to process claim actions against either the carrier or the USG. When applicable, the USG assists the purchaser in processing any claim that may arise for lost or damaged shipments in the same manner it processes 11-9 Foreign Military Sales Transportation Policy claims for USG-owned materiel. In addition, the DoD components can provide technical assistance and guidance to purchaser representatives/freight forwarders, if requested. When the DoD ships security assistance materiel through the DTS, the shipment usually moves through a DoD port and there is no commercial freight forwarder involved. However, in recent years the DTS system has been expanded to include commercial airlift or surface shipments acquired directly by DoD shippers to move FMS purchases directly to overseas destinations. These shipments are usually made through commercial ports. Perhaps as a result of heightened security and an increased concern over technology transfer and export controls, the U.S. Customs and Border Protection (CBP) inspectors now require DoD certifi cation of FMS export documents. The DoD is required to prepare the DSP-94 export authority for shipments made entirely through the defense transportation system using either DoD or commercial ports. The freight forwarder or FMS customer prepares the DSP-94 for LOAs that include shipments made via a freight forwarder. In either situation, the IA's ILCO certifi es the value of the materiel exports and lodges the DSP-94, along with a complete copy of the LOA, amendments and modifi cations, with the principal CONUS port of exit (POE). The DSP-94 is valid for two years, as long as the value of materiel to be exported does not change. Additionally, a shipper's export declaration is fi led electronically at the U.S. port using the automated export system (AES), a Census Bureau tracking system for exports licensed by either the DoS or the DoC. An AES transaction is processed each time a shipment occurs, and the value of the shipment is decremented by CBP from the materiel export value on the DSP-94. The DoD shipper is responsible for reporting shipments via AES for service-owned materiel shipped entirely through DTS. For depot stock materiel, the shipper is the DLA. For FMS materiel coming from procurement and shipped entirely through DTS, the Defense Contract Management Agency (DCMA) is responsible for reporting via AES. When the shipment is made via a freight forwarder and not through DTS, the freight forwarder reports the shipment via AES. Whenever the value of materiel to be exported increases through a LOA amendment or modifi cation, the DSP-94 must be amended and re-lodged with all supporting documentation at the POE. Specifi c export document preparation and fi ling instructions are provided in the SAMM, sections C7.T8 -T10. The MILDEP's FMS transportation coordinators at each ILCO are the points of contact for country representatives and may assist the country representative and freight forwarder in the determination of proper addresses and codes for entry in the MAPAD and subsequent use in requisitions. Additionally, the FMS transportation coordinators may assist freight forwarders in processing claims against DTS carriers for lost or damaged freight received at the freight forwarder's facility. Security Assistance Offi ce Responsibilities Most SAOs will not be routinely involved in transportation issues. Many FMS customers are self-suffi cient in arranging for materiel movement and receiving materiel both at CONUS ports and in overseas ports of debarkation. However, when the DTS is used to deliver materiel in country, with LOA delivery term codes 9 or 7, the in-country U.S. military representative, such as the SAO, may get involved. The SAO is responsible for supervision of the discharge at destination of classifi ed FMS materiel and equipment moving through the DTS. The SAO may be required to serve as the U.S. Designated Government Representative (DGR), and ensure proper transfer of the classifi ed materiel to the FMS customer's DGR. If the SAO is to serve as the U.S. DGR, the responsible individual must be identifi ed in the transportation plan for the movement of classifi ed materiel. The IA is responsible for preparing 11-10 Foreign Military Sales Transportation Policy the transportation plan. The case manager should provide a copy of the transportation plan to the SAO, or other U.S. military representative acting as the U.S. DGR. The extent of the SAOs responsibility in the discharge of unclassifi ed materiel shipped through the DTS will depend upon the capabilities of the foreign purchaser. This responsibility may include making arrangements for receipt of the cargo, assuring establishment by the purchaser of adequate procedures for checking the equipment and materiel against manifests and shipping documents, providing technical advice regarding proper discharge of cargo, and responding to transportation correspondence and initiating various transportation receipt documents and discrepancy reports as outlined in the Defense Transportation Regulation, chapter 210, and the Defense Logistics Agency Instruction 4140.55, Reporting of Supply Discrepancies. This latter instruction provides information on reporting shipping or packaging discrepancies attributable to the responsibility of the shipper (i.e., overages, damages, or non-receipt) to be reported via a SDR by the receiving activity. The following guidance is provided for shipments made through the DTS on delivery term codes 9 or 7. If shipment is via SDDC-arranged surface transportation, the U.S. military representative in the purchaser country should receive certain documentation from either SDDC or the ocean carrier at the direction of SDDC. First is a cargo traffi c message. This is a non-detailed summation of cargo picked up at a CONUS port of embarkation. It is normally addressed to any destination that is to receive any of the cargo that is picked up. If the load includes any FMS cargo, these addressees will include the U.S. military representatives in the purchasing country. Although it does not include a lot of detail, the cargo traffi c message advises if the load includes hazardous materiel or if the ocean container with FMS shipment units destined for the purchaser's water port of debarkation will be transferred to another ship while enroute. For FMS shipments, a U.S. military representative in a purchaser country should also receive an SDDC cargo manifest. This manifest lists shipments (technically, shipment units; i.e., box, pallet etc.) by transportation control number (TCN), not by individual requisition. A shipment unit may contain more than one requisition which means that one TCN may cover a multiple of MILSTRIP document numbers. Shipment status, which is provided to in-country U.S. military representatives (TAC 4 MAPAD address), shows the TCN/document number connections. To ensure cross-referencing of supply/release documents versus shipment unit TCNs, each shipment unit has a military shipping label attached which includes the TCN, shipper's Department of Defense activity address code (DODAAC) and in-the-clear address, water port of discharge (WPOD), Military assistance program address code (MAPAC) and clear text address for the FMS ultimate consignee, the FMS case designator and other important data that clearly identifi es the shipment as DoD-sourced and as an FMS shipment. Finally, the SAO should receive an original ocean bill of lading for a voyage containing cargo for the FMS purchaser. This document is usually furnished by the carrier at the direction of SDDC, not by SDDC itself. This is almost always the most important document for the purchasing country for getting its FMS deliveries through customs, both its own and third party countries, if the WPOD is not located in the purchasing country itself. Customs clearance is the purchaser's responsibility. At no time should the SAO or U.S. military representative get involved in clearing customs for the FMS purchaser. For any of this documentation to function as intended, it has to be received by the U.S. military representative in country. Unless the SAO actively establishes communications with SDDC's documentation division, SDDC will use the MAPAD TAC 4, 5 or 6 address by default. An APO or 11-11 Foreign Military Sales Transportation Policy State Department pouch service address may not move documentation quickly enough to be available for ship arrivals. Therefore, SAOs should directly contact the SDDC documentation division at Fort Eustis, Virginia and furnish them with a good message (or e-mail) addresses for cargo traffi c messages and other addresses that will insure rapid delivery of ocean documentation. These contact numbers are (757) 878-8621, (757) 878-8623, (757) 878-8624 or (757) 878-8058. The SAO or U.S. military representative may also be required to initiate Transportation Discrepancy Reports (TDRs), DD 361, when DTS shipments arriving in country are damaged or lost. The TDR process is discussed later in this chapter. Purchaser Normally, the FMS purchaser is responsible for the transportation beyond the U.S. port of exit of its own materiel furnished under an LOA. The FMS purchaser may choose to hire a commercial freight forwarder to arrange for the receipt, processing, export, and import of security assistance materiel. The purchaser must clearly defi ne his requirements in a contract with the freight forwarder. The military departments (MILDEPs) do not participate in negotiations of contractual arrangements between a country and a freight forwarder. The FMFP funds cannot be used to pay for freight forwarder services. These services must be procured with the purchaser's own national funds. The prohibition on the use of FMFP to fi nance a freight forwarder is inferred from the language of the Arms Export Control Act (AECA), Section 23. The law citation is paraphrased in the SAMM, section C9.7.2. The USG (DoD) procures
