How is a Supply Discrepancy Report submitted and resolved?

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.

It is imperative that the international partner inspect each delivery upon receipt to ensure that the correct item is received in the correct amount and in good condition.

The element of time is provided in the terms and conditions of the LOA, Section 5.4, to allow the international partner sufficient time to receive, inspect, and, if necessary, test the materiel. It does not constitute a warranty, but rather allows the international partner to assemble the necessary documentation to support a claim for a discrepancy. The constraint of time is not applicable in the case of a latent defect, which is defined as a defect, which exists at the time of acceptance, but which cannot be identified by a reasonable inspection.

It must be decided whether the resolution of a reported discrepancy is the responsibility of the shipper (U.S. Government) or the carrier.

If the discrepancy is a shipper or billing responsibility, an SDR should be prepared and forwarded to the appropriate ILCO for initial processing.

The SF 364, Supply Discrepancy Report, or an electronic equivalent, is the document used in reporting selected discrepancies to the ILCO. Instructions for SF 364 completion, DoW processing time frames, and responsibilities are located in DLM 4000.25, Defense Logistics Management Standards (DLMS), Volume 2, Chapter 17. The SDR process is not applicable to BPC cases. The requirement for the international partner to submit reports of discrepancy on an SF 364 is included in the conditions of each LOA negotiated with the country. International partners may use SCIP or AFSAC Online to submit SDRs electronically instead of using the SF 364.

The U.S. Security Cooperation Organization (SCO) may assist the international partners in articulating the discrepancy so that it is understandable by the ILCO. However, the SCO has no role in accepting or adjudicating the SDR on behalf of the international partner or ILCO.

The SF 364 SDR 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 SCIP, or some other electronic medium, will speed up the investigation process. Photographs of materiel as received, which involve damaged or mislabeled materiel, should be attached to the SF 364 or uploaded along with the electronic SDR 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 or WAWF electronic equivalent, Material Inspection and Receiving Report; and any previously received status reports, bills of lading, drawings, and any other related documents that support the SDR.

When an SDR is received from an international partner, the ILCO acknowledges receipt to the international partner. 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. 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. 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 insufficient information for processing, the SDR is rejected with the reason(s) indicated.

The appropriate MILDEP item manager or shipping activity of the source of supply is responsible for providing an SDR reply to the ILCO.

Compensation for an approved SDR may be in the form of a financial credit, a repair service, or a replacement item. If the discrepancy was for a lost, damaged, or incorrect item, the international partner may request a replacement item. In that case, the ILCO will coordinate with the item manager to ship a replacement asset without having the international partner reorder the item. If the discrepancy is financial, the ILCO will coordinate with DFAS to take appropriate financial action on the international partner account. The billing statement furnished to the international partner on a quarterly basis (DD Form 645) will reflect such financial adjustments. If the discrepancy involves a quality or performance defect, the MILDEP may determine that repair services are the most appropriate method to resolve the discrepancy.

Whenever discrepant materiel is to be returned to U.S. custody, the purchasing country will be directed to reship the materiel using the same document number under which the materiel was originally shipped.

Upon evidence of materiel being returned, a credit adjustment will be processed for the return of the discrepant materiel if previously authorized. This evidence releases the international partner of liability for the materiel.