United States Code

USC most recently checked for updates: Jan 31, 2023

§ 2761.
Sales from stocks
(a)
Eligible countries or international organizations; basis of payment; valuation of certain defense articles
(1)
The President may sell defense articles and defense services from the stocks of the Department of Defense and the Coast Guard to any eligible country or international organization if such country or international organization agrees to pay in United States dollars—
(A)
in the case of a defense article not intended to be replaced at the time such agreement is entered into, not less than the actual value thereof;
(B)
in the case of a defense article intended to be replaced at the time such agreement is entered into, the estimated cost of replacement of such article, including the contract or production costs less any depreciation in the value of such article; or
(C)
in the case of the sale of a defense service, the full cost to the United States Government of furnishing such service, except that in the case of training sold to a purchaser who is concurrently receiving assistance under chapter 5 of part II of the Foreign Assistance Act of 1961 [22 U.S.C. 2347 et seq.] or to any high-income foreign country (as described in that chapter), only those additional costs that are incurred by the United States Government in furnishing such assistance.
(2)
For purposes of subparagraph (A) of paragraph (1), the actual value of a naval vessel of 3,000 tons or less and 20 years or more of age shall be considered to be not less than the greater of the scrap value or fair value (including conversion costs) of such vessel, as determined by the Secretary of Defense.
(b)
Time of payment

Except as provided by subsection (d) of this section, payment shall be made in advance or, if the President determines it to be in the national interest, upon delivery of the defense article or rendering of the defense service.

(c)
Personnel performing defense services sold as prohibited from performing combat activities
(1)
Personnel performing defense services sold under this chapter may not perform any duties of a combatant nature, including any duties related to training and advising that may engage United States personnel in combat activities, outside the United States in connection with the performance of those defense services.
(2)
Within forty-eight hours of the existence of, or a change in status of significant hostilities or terrorist acts or a series of such acts, which may endanger American lives or property, involving a country in which United States personnel are performing defense services pursuant to this chapter or the Foreign Assistance Act of 1961 [22 U.S.C. 2151 et seq.], the President shall submit to the Speaker of the House of Representatives and to the President pro tempore of the Senate a report, in writing, classified if necessary, setting forth—
(A)
the identity of such country;
(B)
a description of such hostilities or terrorist acts; and
(C)
the number of members of the United States Armed Forces and the number of United States civilian personnel that may be endangered by such hostilities or terrorist acts.
(d)
Billings; interest after due date, rates of interest and extension of due date

If the President determines it to be in the national interest pursuant to subsection (b) of this section, billings for sales made under letters of offer issued under this section after June 30, 1976, may be dated and issued upon delivery of the defense article or rendering of the defense service and shall be due and payable upon receipt thereof by the purchasing country or international organization. Interest shall be charged on any net amount due and payable which is not paid within sixty days after the date of such billing. The rate of interest charged shall 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 United States as of the last day of the month preceding the billing and shall be computed from the date of billing. The President may extend such sixty-day period to one hundred and twenty days if he determines that emergency requirements of the purchaser for acquisition of such defense articles or defense services exceed the ready availability to the purchaser of funds sufficient to pay the United States in full for them within such sixty-day period and submits that determination to the Congress together with a special emergency request for the authorization and appropriation of additional funds to finance such purchases under this chapter.

(e)
Charges; reduction or waiver
(1)
After September 30, 1976, letters of offer for the sale of defense articles or for the sale of defense services that are issued pursuant to this section or pursuant to section 2762 of this title shall include appropriate charges for—
(A)
administrative services, calculated on an average percentage basis to recover the full estimated costs (excluding a pro rata share of fixed base operation costs) of administration of sales made under this chapter to all purchasers of such articles and services as specified in section 2792(b) of this title and section 2792(c) of this title;
(B)
(C)
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 of such articles.
(2)
(A)
The President may reduce or waive the charge or charges which would otherwise be considered appropriate under paragraph (1)(B) for particular sales that would, if made, significantly advance United States Government interests in North Atlantic Treaty Organization standardization, standardization with the Armed Forces of Japan, Australia, the Republic of Korea, Israel, or New Zealand in furtherance of the mutual defense treaties between the United States and those countries, or foreign procurement in the United States under coproduction arrangements.
(B)
The President may waive the charge or charges which would otherwise be considered appropriate under paragraph (1)(B) for a particular sale if the President determines that—
(i)
imposition of the charge or charges likely would result in the loss of the sale; or
(ii)
in the case of a sale of major defense equipment that is also being procured for the use of the Armed Forces, the waiver of the charge or charges would (through a resulting increase in the total quantity of the equipment purchased from the source of the equipment that causes a reduction in the unit cost of the equipment) result in a savings to the United States on the cost of the equipment procured for the use of the Armed Forces that substantially offsets the revenue foregone by reason of the waiver of the charge or charges.
(C)
The President may waive, for particular sales of major defense equipment, any increase in a charge or charges previously considered appropriate under paragraph (1)(B) if the increase results from a correction of an estimate (reasonable when made) of the production quantity base that was used for calculating the charge or charges for purposes of such paragraph.
(3)
(A)
The President may waive the charges for administrative services that would otherwise be required by paragraph (1)(A) in connection with any sale to the North Atlantic Treaty Organization (NATO) Support and Procurement Organization and its executive agencies in support of—
(i)
a support or procurement partnership agreement; or
(ii)
a NATO/SHAPE project.
(B)
The Secretary of Defense may reimburse the fund established to carry out section 2792(b) of this title in the amount of the charges waived under subparagraph (A) of this paragraph. Any such reimbursement may be made from any funds available to the Department of Defense.
(C)
As used in this paragraph—
(i)
the term “support or procurement partnership agreement” means an agreement between two or more member countries of the North Atlantic Treaty Organization (NATO) Support and Procurement Organization and its executive agencies that—
(I)
is entered into pursuant to the terms of the charter of that organization; and
(II)
is for the common logistic support of activities common to the participating countries; and
(ii)
the term “NATO/SHAPE project” means a common-funded project supported by allocated credits from North Atlantic Treaty Organization bodies or by host nations with NATO Infrastructure funds.
(f)
Public inspection of contracts

Any contracts entered into between the United States and a foreign country under the authority of this section or section 2762 of this title shall be prepared in a manner which will permit them to be made available for public inspection to the fullest extent possible consistent with the national security of the United States.

(g)
North Atlantic Treaty Organization standardization agreements, similar agreements; reimbursement for costs; transmittal to Congress

The President may enter into North Atlantic Treaty Organization standardization agreements in carrying out section 814 of the Act of October 7, 1975 (Public Law 94–106), and may enter into similar agreements with countries which are major non-NATO allies, for the cooperative furnishing of training on bilateral or multilateral basis, if the financial principles of such agreements are 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 (except to the extent that members of the United States Armed Forces occupying comparable accommodations are charged for such accommodations by the United States). Each such agreement shall be transmitted promptly to the Speaker of the House of Representatives, the Committee on Foreign Affairs of the House of Representatives, and the Committees on Appropriations, Armed Services, and Foreign Relations of the Senate.

(h)
Reciprocal quality assurance, inspection, contract administrative services, and contract audit defense services; catalog data and services
(1)
The President is authorized to provide (without charge) quality assurance, inspection, contract administration services, and contract audit defense services under this section—
(A)
in connection with the placement or administration of any contract or subcontract for defense articles, defense services, or design and construction services entered into after October 29, 1979, by, or under this chapter on behalf of, a foreign government which is a member of the North Atlantic Treaty Organization or the Governments of Australia, New Zealand, Japan, the Republic of Korea, or Israel, if such government provides such services in accordance with an agreement on a reciprocal basis, without charge, to the United States Government; or
(B)
in connection with the placement or administration of any contract or subcontract for defense articles, defense services, or design and construction services pursuant to the North Atlantic Treaty Organization Security Investment program in accordance with an agreement under which the foreign governments participating in such program provide such services, without charge, in connection with similar contracts or subcontracts.
(2)
In carrying out the objectives of this section, the President is authorized to provide cataloging data and cataloging services, without charge, to the North Atlantic Treaty Organization, to any member government of that Organization, or to the Governments of the Republic of Korea, Australia, New Zealand, Japan, or Israel if that Organization, member government, or the Governments of the Republic of Korea, Australia, New Zealand, Japan, or Israel provides such data and services in accordance with an agreement on a reciprocal basis, without charge, to the United States Government.
(i)
Sales affecting combat readiness of Armed Forces; statement to Congress; limitation on delivery
(1)
Sales of defense articles and defense services which could have significant adverse effect on the combat readiness of the Armed Forces of the United States shall be kept to an absolute minimum. The President shall transmit to the Speaker of the House of Representatives, the Committees on Foreign Affairs and Armed Services of the House of Representatives, and the Committees on Armed Services and Foreign Relations of the Senate on the same day a written statement giving a complete explanation with respect to any proposal to sell, under this section or under authority of subchapter II–B, any defense articles or defense services if such sale could have a significant adverse effect on the combat readiness of the Armed Forces of the United States. Each such statement shall be unclassified except to the extent that public disclosure of any item of information contained therein would be clearly detrimental to the security of the United States. Any necessarily classified information shall be confined to a supplemental report. Each such statement shall include an explanation relating to only one such proposal to sell and shall set forth—
(A)
the country or international organization to which the sale is proposed to be made;
(B)
the amount of the proposed sale;
(C)
a description of the defense article or service proposed to be sold;
(D)
a full description of the impact which the proposed sale will have on the Armed Forces of the United States; and
(E)
a justification for such proposed sale, including a certification that such sale is important to the security of the United States.
A certification described in subparagraph (E) shall take effect on the date on which such certification is transmitted and shall remain in effect for not to exceed one year.
(2)
No delivery may be made under any sale which is required to be reported under paragraph (1) of this subsection unless the certification required to be transmitted by paragraph 1
1
 So in original. Probably should be “subparagraph”.
(E) of paragraph (1) is in effect.
(j)
Repealed. Pub. L. 104–106, div. A, title I, § 112, Feb. 10, 1996, 110 Stat. 206
(k)
Effect of sales of excess defense articles on national technology and industrial base

Before entering into the sale under this chapter of defense articles that are excess to the stocks of the Department of Defense, the President shall determine that the sale of such articles will not have an adverse impact on the national technology and industrial base and, particularly, will not reduce the opportunities of entities in the national technology and industrial base to sell new or used equipment to the countries to which such articles are transferred.

(l)
Repair of defense articles
(1)
In general
The President may acquire a repairable defense article from a foreign country or international organization if such defense article—
(A)
previously was transferred to such country or organization under this chapter;
(B)
is not an end item; and
(C)
will be exchanged for a defense article of the same type that is in the stocks of the Department of Defense.
(2)
Limitation
The President may exercise the authority provided in paragraph (1) only to the extent that the Department of Defense—
(A)
(i)
has a requirement for the defense article being returned; and
(ii)
has available sufficient funds authorized and appropriated for such purpose; or
(B)
(i)
is accepting the return of the defense article for subsequent transfer to another foreign government or international organization pursuant to a letter of offer and acceptance implemented in accordance with this chapter; and
(ii)
has available sufficient funds provided by or on behalf of such other foreign government or international organization pursuant to a letter of offer and acceptance implemented in accordance with this chapter.
(3)
Requirement
(A)
The foreign government or international organization receiving a new or repaired defense article in exchange for a repairable defense article pursuant to paragraph (1) shall, upon the acceptance by the United States Government of the repairable defense article being returned, be charged the total cost associated with the repair and replacement transaction.
(B)
The total cost charged pursuant to subparagraph (A) shall be the same as that charged the United States Armed Forces for a similar repair and replacement transaction, plus an administrative surcharge in accordance with subsection (e)(1)(A) of this section.
(4)
Relationship to certain other provisions of law

The authority of the President to accept the return of a repairable defense article as provided in subsection (a) shall not be subject to chapter 137 legacy provisions (as such term is defined in section 3016 of title 10) of title 10 or any other provision of law relating to the conclusion of contracts.

(m)
Return of defense articles
(1)
In general
The President may accept the return of a defense article from a foreign country or international organization if such defense article—
(A)
previously was transferred to such country or organization under this chapter;
(B)
is not significant military equipment (as defined in section 2794(9) of this title); and
(C)
is in fully functioning condition without need of repair or rehabilitation.
(2)
Limitation
The President may exercise the authority provided in paragraph (1) only to the extent that the Department of Defense—
(A)
(i)
has a requirement for the defense article being returned; and
(ii)
has available sufficient funds authorized and appropriated for such purpose; or
(B)
(i)
is accepting the return of the defense article for subsequent transfer to another foreign government or international organization pursuant to a letter of offer and acceptance implemented in accordance with this chapter; and
(ii)
has available sufficient funds provided by or on behalf of such other foreign government or international organization pursuant to a letter of offer and acceptance implemented in accordance with this chapter.
(3)
Credit for transaction

Upon acquisition and acceptance by the United States Government of a defense article under paragraph (1), the appropriate Foreign Military Sales account of the provider shall be credited to reflect the transaction.

(4)
Relationship to certain other provisions of law

The authority of the President to accept the return of a defense article as provided in paragraph (1) shall not be subject to chapter 137 legacy provisions (as such term is defined in section 3016 of title 10) of title 10 or any other provision of law relating to the conclusion of contracts.

(Pub. L. 90–629, ch. 2, § 21, Oct. 22, 1968, 82 Stat. 1323; Pub. L. 94–329, title II, §§ 205, 206, June 30, 1976, 90 Stat. 736, 738; Pub. L. 95–384, § 16, Sept. 26, 1978, 92 Stat. 740; Pub. L. 96–92, § 12, Oct. 29, 1979, 93 Stat. 705; Pub. L. 96–533, title I, §§ 102, 103, 105(b)(1), 115(b)(2), Dec. 16, 1980, 94 Stat. 3132, 3134, 3140; Pub. L. 97–113, title I, §§ 103, 104, Dec. 29, 1981, 95 Stat. 1521; Pub. L. 97–392, § 3, Dec. 29, 1982, 96 Stat. 1963; Pub. L. 98–473, title I, § 101(1) [title III, § 301], Oct. 12, 1984, 98 Stat. 1884, 1895; Pub. L. 99–83, title I, §§ 107(a), 108–111, Aug. 8, 1985, 99 Stat. 196, 197; Pub. L. 100–202, § 101(e) [title V, § 580], Dec. 22, 1987, 101 Stat. 1329–131, 1329–181; Pub. L. 100–456, div. A, title X, § 1002, Sept. 29, 1988, 102 Stat. 2037; Pub. L. 101–165, title IX, § 9104(c), Nov. 21, 1989, 103 Stat. 1152; Pub. L. 102–25, title VII, § 705(d)(1), Apr. 6, 1991, 105 Stat. 120; Pub. L. 102–484, div. A, title I, § 114, Oct. 23, 1992, 106 Stat. 2333; Pub. L. 103–236, title VII, § 731(d), Apr. 30, 1994, 108 Stat. 503; Pub. L. 104–106, div. A, title I, § 112, div. D, title XLIII, § 4303(a), Feb. 10, 1996, 110 Stat. 206, 658; Pub. L. 104–164, title I, §§ 104(b)(1), 112(c)(2), 147(a)(3)(A), (b), 152(a), (b), July 21, 1996, 110 Stat. 1426, 1428, 1435, 1438, 1439; Pub. L. 104–201, div. B, title XXVIII, § 2802(d)(2), Sept. 23, 1996, 110 Stat. 2787; Pub. L. 106–113, div. B, § 1000(a)(7) [div. B, title XII, § 1222], Nov. 29, 1999, 113 Stat. 1536, 1501A–498; Pub. L. 109–102, title V, § 534(l)(1), (2), Nov. 14, 2005, 119 Stat. 2211; Pub. L. 110–429, title II, § 203(b)(1), (3), (4), Oct. 15, 2008, 122 Stat. 4845; Pub. L. 111–266, title III, § 301(1), Oct. 8, 2010, 124 Stat. 2804; Pub. L. 113–66, div. A, title XII, § 1250(b), Dec. 26, 2013, 127 Stat. 926; Pub. L. 113–276, title II, § 208(a)(1), (2), Dec. 18, 2014, 128 Stat. 2992, 2993; Pub. L. 115–232, div. A, title XII, § 1279(b), Aug. 13, 2018, 132 Stat. 2072; Pub. L. 117–81, div. A, title XVII, § 1702(l)(3), Dec. 27, 2021, 135 Stat. 2160.)
cite as: 22 USC 2761