Do NATO members and close allies pay less for Foreign Military Sales?

The President may reduce or waive nonrecurring cost (NRC) charges required by Section 21(e)(1)(B), AECA, (e.g., a proportionate amount of any NRC of research, development, and production of MDE) for particular sales that, if made, would significantly advance USG interests in NATO standardization; standardization with the Armed Forces of Japan, Australia, the Republic of Korea, Israel, or New Zealand; or foreign procurement in the U.S. under coproduction arrangements [Section 21(e)(2)(A), AECA].

NRC for research and development (R&D) may also be waived for an FMS sale to any eligible country if the following applies:

• 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 [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 Support and Procurement Organization and its executive agencies in support of a weapon system partnership agreement or NATO/SHAPE project [Section 21(e)(3), AECA].

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].

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, FAA, prohibits the high-income countries of Austria, Finland, Republic of Korea, Singapore, and Spain from receiving IMET assistance, they remain eligible for FMS-incremental tuition prices [Section 21(a)(1)(C), AECA]. Israel, though not an IMET recipient, is authorized the IMET tuition price for training when using FMFP [Section 541(b), FAA].

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 [22 U.S.C. 2761(h)(1)(A)]. Effective 14 November 2005, these authorities were extended to Australia, Japan, Republic of Korea, New Zealand, and Israel [Section 534(l)(1), P.L. 109-102].