What does a Foreign Military Sales purchaser agree to?

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.

In Section 1.5, the USG retains the right to cancel or suspend part or all of the case under unusual or compelling circumstances when in the U.S.’s national interest. Similarly, this section provides the international partner the right to change their mind. Simply because the international partner accepted the case at one point does not mean they are locked into that decision. The international partner is a voluntary participant and can cancel the entire LOA or delete specific items prior to delivery.

2.2 The purchaser notes its obligations under International Humanitarian Law and Human Rights Law. The Purchaser agrees, except as may otherwise be mutually agreed in writing by the Purchaser and the USG, to use the defense articles sold hereunder only:

2.2.1 for internal security;

2.2.2 for legitimate self-defense;

2.2.3 for preventing or hindering the proliferation of weapons of mass destruction and of the means of delivering such weapons;

2.2.4 to permit the Purchaser to participate in regional or collective arrangements or measures consistent with the Charter of the United Nations, or otherwise to permit the Purchaser to participate in collective measures requested by the United Nations for the purpose of maintaining or restoring international peace and security; or

2.2.5 for the purpose of enabling foreign military forces in less developed countries to construct public works and to engage in other activities helpful to social and economic development.

2.2.6 for purposes specified in any Mutual Defense Assistance Agreement between the USG and the Purchaser; or,

2.2.7 for purposes specified in any other bilateral or regional defense agreement to which the USG and the Purchaser are both parties.

This condition also stipulates that the international partner will only use the materiel or services purchased under the case for certain purposes, referred to as end use. The list of acceptable end uses is drawn from the AECA. At first, it may appear unfair that the USG attaches end-use limitations to the sale, but the USG is selling defense articles and services rather than consumer products. Additionally, this is often the same materiel used by U.S. military forces. As such, the USG has valid concerns over how these articles or services are used by the international partner.

2.3 The Purchaser agrees that the USG retains the right to verify reports that defense articles and services have been used for purposes not authorized or for uses not consented to by the USG.

Section 2.3 establishes the right of the USG to verify any reports that defense articles or services are being used for purposes other than as specified in Section 2.2. The incorporation of this language into the terms and conditions of the LOA establishes for the USG the right to investigate any reports of violation to the use provisions of the case. These conditions are also typically contained in international agreements with international partners pursuant to Section 505 of the FAA.

2.4 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, specifications, or information), or technology furnished under this LOA to anyone who is not an officer, employee, or agent of the Purchaser (excluding transportation agencies) or of the USG, and shall not use or permit their use for purposes other than those authorized, unless the written consent of the USG has first been obtained. The Purchaser will ensure, by all means available to it, respect for proprietary rights in any items and any plans, specifications, 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 notified of any substantial evidence that the defense articles sold in this LOA have been used in a manner that is inconsistent with this provision.

Section 2.4 restates the obligations imposed on the international partner under the AECA. Although the international partner actually becomes owner of the materiel, the USG requires, as a condition of the sale, that the international partner agrees to not resell or transfer possession of the purchased items without first obtaining written USG consent. This condition does not mean that the international partner can never sell the materiel or turn over possession for maintenance to a third country. It simply means that the USG is very concerned about who has access to and possession of this defense materiel. Before offering the LOA, the USG determined that it was in its best interest to permit the international partner to possess this materiel. The USG wants to ensure that possession of this defense materiel by a prospective third party is also in the USG’s best interest.

This condition also requires the international partner to respect the proprietary rights of U.S. contractors. U.S. industry has often made significant investments in defense technologies that enable the firm to compete both commercially and in the defense sector. This condition protects the intellectual property of U.S. contractors from misuse. This section also specifically identifies conditions related to Cyprus. It does appear unusual that provisions regarding Cyprus would be included in the standard terms and conditions used with all FMS cases. This is an example of the political influences that impact FMS. Congress was concerned about unauthorized transfers of defense articles to Cyprus. As a result, Congress specifically addressed this concern within the language of the FAA. Given these conditions relative to Cyprus are contained within the law, these same requirements are included in the standard terms and conditions used with all FMS cases.

2.5 The Purchaser agrees not to divert articles and services received under this LOA for purposes or uses other than those for which it was furnished, including, but not limited to, any use that could contribute to the acquisition, design, development or production of a “missile,” as defined in section 74 of the Arms Export Control Act (AECA) (22 U.S.C. 2797c). The items will be used only for the purposes stated and such use will not be modified nor the items modified 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 has 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 Missile Technology Control Regime (MTCR) equipment or technology that contributes to the acquisition, design, development or production of missiles in a country that is not an MTCR adherent.

Section 2.5 alerts the SC partner not to divert articles and services provided under the case for purposes other than for which they were furnished. This specifically excludes any use that would support the acquisition, design, development or production of a missile as defined in the AECA. This section also alerts the international partner that the USG may act to control export or transfer under the Missile Technology Control Regime.

2.6 The Purchaser will maintain the security of such article or service and will provide substantially the same degree of security protection afforded to such article or service by the United States Government. To the extent that items, including plans, designs, specifications, technical data, or information, furnished in connection with this LOA may be classified by the USG for security purposes, the Purchaser certifies that it will maintain a similar classification 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 certifies that classified items will be provided only to those individuals having an adequate security clearance and a specific 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. classified material or information furnished pursuant to this LOA. The Purchaser further certifies that if a U.S. classified item is to be furnished to its contractor pursuant to this LOA: (a) the item will be exchanged through official Government channels, (b) the specified contractor will have been granted a facility security clearance by the Purchaser at a level at least equal to the classification level of the U.S. information involved, (c) all contractor personnel requiring access to such items will have been cleared to the appropriate level by the Purchaser, and (d) the Purchaser is also responsible for administering security measures while the item is in the contractor’s possession. If a commercial transportation agent is to be used for shipment, the Purchaser certifies that such agent has been cleared at the appropriate level for handling classified items. These measures will be maintained throughout the period during which the USG may maintain such classification. The USG will use its best efforts to notify the Purchaser if the classification is changed.

The USG is very concerned about preserving the security of classified materiel transferred under FMS. This condition requires the international partner to maintain security measures equivalent to those used by the USG. This does not mean the international partner must use the same USG security procedures. It means that the end result of the international partner’s security process will achieve a level of security that is equivalent to the security level provided by the USG. Additionally, the international partner is responsible for security not only when the item is in government possession, but also when it is provided to the international partner’s domestic contractors or when it is in the transportation pipeline.

2.7 Pursuant to section 505 of the Foreign Assistance Act of 1961, as amended (FAA) (22 U.S.C. 2314), and section 40A of the AECA (22 U.S.C. 2785), the USG will be permitted, upon request, to conduct end use monitoring (EUM) verification 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 verification 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 verification.

Section 2.7 states the USG retains the right to conduct end-use monitoring (EUM) verification of articles and services transferred under the case. The international partner agrees to permit scheduled inspections or physical inventories upon request and make accountability records available to USG EUM personnel. This implements an AECA requirement.

2.8 Any offset arrangement is strictly between the Purchaser and the U.S. defense contractor. The U.S. Government is not a party to any offset agreement that may be required by the Purchaser in relation to the sales made in this LOA. The USG assumes no obligation to administer or satisfy any offset requirements or bear any of the associated costs. Although offsets, as defined in the Defense Federal Acquisition Regulation Supplement, are not within the scope of the DoD contracts entered into to fulfill the requirements of this LOA, offset costs may be recovered through such contracts. Indirect offset costs may be deemed reasonable without further analysis in accordance with the Defense Federal Acquisition Regulation Supplement. If the Purchaser wishes to obtain information regarding offset costs, the Purchaser should request information directly from the U.S. defense contractor.

Section 2.8 notifies the international partner that the USG is not a party to any offset arrangements and assumes no obligation to administer or satisfy any offset requirements. Although offsets are not within the scope of DoW contracts used to execute the case, offset costs may be recovered through such contracts. Section 2.8 notes that indirect offset costs may be deemed reasonable without further analysis under the Defense Federal Acquisition Regulation Supplement.