Procurement, surveys and administrative expenses

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1. The general provisions of the Act

Chapter 4 of the Arms Export Control Act holds general rules that apply across its sales authorities. Section 42 deals with where procurement happens, how sales are weighed, who in the government is responsible and how contracts can be stopped (22 U.S.C. 2791). Section 43 deals with administrative expenses (22 U.S.C. 2792). A related section in chapter 2, section 26, governs the surveys the United States carries out to assess a country’s security assistance needs (22 U.S.C. 2766). This piece takes each in turn.

2. Buying in the United States

The Act sets a default. "In carrying out this chapter, special emphasis shall be placed on procurement in the United States" (22 U.S.C. 2791(a)). Consideration is also given to coproduction or licensed production abroad of American-origin articles, where that best serves the foreign policy, national security and economy of the United States.

Evaluating a proposed sale brings in three considerations (22 U.S.C. 2791(a)). The first is how far the sale damages or infringes licensing arrangements under which American entities have licensed foreign manufacture of the articles the buyer chose, where those licenses bring financial returns to the United States. The second is the share of such articles that is of American origin. The third is whether the sale might contribute to an arms race, weapons of mass destruction, international terrorism or the escalation of conflict. The Act also names prejudice to arms control or nonproliferation arrangements.

Two further limits apply. No credit sale or loan guaranty may be made for coproduction or licensed production abroad unless the Secretary of State first gives Congress full information (22 U.S.C. 2791(b)). That information includes a description of the articles, the estimated value, and the probable effect on American employment and production. Funds under the chapter may be used for procurement outside the United States only after a presidential determination. It must find that adverse effects on the American economy or industrial mobilization base do not outweigh the advantages of cheaper foreign procurement (22 U.S.C. 2791(c)).

3. Who is responsible, and civilian contractors

The Secretary of Defense, acting under the President’s direction, carries primary responsibility for sales and guaranties under the main sales sections (22 U.S.C. 2791(d)(1)). The Act lists five areas: military end-item requirements, procurement that fits with service programs, supervision of training of foreign military personnel, movement and delivery of end items, and any other functions within the Department. The Secretary also sets priorities in the procurement, delivery and allocation of military equipment (22 U.S.C. 2791(d)(2)).

The Act prefers contractors for work abroad. The President shall, to the maximum extent possible and consistent with the chapter, use civilian contract personnel in any foreign country to perform defense services sold under it (22 U.S.C. 2791(f)). How companies take part in sales is covered in how a US company supplies a Foreign Military Sale.

Export licenses carry their own reservation. Each license issued under the Act’s export control section must provide that the Secretary of State may revoke, suspend or amend it without prior notice whenever the Secretary deems it advisable (22 U.S.C. 2791(e)(2)).

4. Paying for administration

Agencies carrying out the Act may use the operating funds they receive under other laws for their administrative expenses under the Act (22 U.S.C. 2792(a)). The administrative charges on sales must also recover certain costs incurred by any agency, mission or group in carrying out the Act (22 U.S.C. 2792(b)). They cover administrative expenses and official reception and representation expenses, subject to three conditions. The functions must be primarily for a foreign country’s benefit. The expenses must not already be charged to and reimbursed from sales of defense services. And they may not be salaries of the armed forces or unfunded civilian retirement and benefit costs.

The Security Assistance Management Manual applies section 43(a) to early case work (SAMM C9.3.4.6). Where an implementing agency has pre-request or case development work that its administrative budget does not fund, it may use its operating funds on an exceptional basis. Those funds may not be used to give the foreign customer a subsidy in breach of the Act’s full-cost rules. Each Defense Department component applies the necessary expense doctrine to decide whether the spending is necessary and incidental to the purpose of its appropriation. Administrative or case funds that become available later may be used to reimburse the agency.

There is a firm cap on hospitality. Not more than $86,500 of the funds from administrative charges may be used each fiscal year for official reception and representation expenses (22 U.S.C. 2792(c)). How the administrative surcharge account is run is covered in managing the administrative surcharge account.

5. Security assistance surveys

Section 26 begins with a finding by Congress. Surveys prepared by the United States for foreign countries have had a significant impact on those countries’ later procurement decisions (22 U.S.C. 2766(a)). The stated policy follows: survey results "clearly do not represent a commitment by the United States to provide any military equipment to any foreign country" (22 U.S.C. 2766(a)). Recommendations should be consistent with the Act’s arms export control policy.

The Act defines a security assistance survey as any survey or study carried out in a foreign country by government personnel to assess that country’s security assistance needs (22 U.S.C. 2766(d)). The term includes defense requirement surveys, site surveys, general surveys and engineering assessment surveys. Each quarterly report to Congress lists the surveys authorized in the preceding quarter, with the country, the purpose and the number of government personnel involved (22 U.S.C. 2766(b)). On request, the chairman of the House Foreign Affairs Committee or the Senate Foreign Relations Committee receives copies of the surveys (22 U.S.C. 2766(c)).

Key terms

Coproduction	Production abroad of American-origin defense articles, weighed against procurement in the United States.
Licensed production	Foreign manufacture under a license from an American entity.
Official reception and representation expenses	Hospitality costs, capped at $86,500 a year from administrative charges.
Security assistance survey	A study in a foreign country by government personnel to assess its security assistance needs.
Civilian contract personnel	Contractors the Act prefers for performing defense services abroad.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

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