364 
(B) would provide a military or intelligence 
advantage to countries other than the United 
States or to non-state actors to the detriment 
of the national security of United States friends 
and allies, or to the achievement of the foreign 
policy and national security objectives of the 
United States. 
(c) PURPOSES FOR WHICH UNITED STATES MILI-
TARY SALES ARE AUTHORIZED.—Defense articles and de-
fense services shall be sold or leased by the United States 
Government under this title to countries solely to meet the 
goals of assistance under section 4003. 
(d) FACTORS.—Decisions on issuing export licenses 
under this section shall ensure that the export of a defense 
article or defense service— 
(1) is justified in terms of its military utility re-
lated to the actual security threat by the recipient 
country; and 
(2) will not— 
(A) contribute to an arms race or regional 
instability; 
(B) aid in the development of weapons of 
mass destruction; 
(C) support domestic or international ter-
rorism; 
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365 
(D) increase the possibility of outbreak or 
escalation of conflict, either within or across the 
borders of the recipient country; 
(E) prejudice the development of bilateral 
or multilateral arms control arrangements; 
(F) adversely affect the arms control or 
nonproliferation policy of the United States; 
(G) conflict with any international agree-
ments, treaties or arrangements to which the 
United States is a party or adherent; 
(H) support blackmarket or greymarket 
trade in arms, either those transferred or obso-
lete arms to be replaced by the arms sale; or 
(I) undermine the objectives and purposes 
to promote and protect human rights and de-
mocracy under title III. 
(e) SALE REQUIREMENT.—In exercising the authori-
ties conferred by this section, the President may require 
that any defense article or defense service be sold under 
this title as a condition of its eligibility for export, and 
may require that persons engaged in the negotiation for 
the export of defense articles and defense services keep 
the President fully and currently informed of the progress 
and future prospects of such negotiations. 
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366 
CHAPTER 1—FOREIGN MILITARY SALES 
AND COOPERATION 
SEC. 4311. GENERAL AUTHORITY. 
(a) SALES FROM DEFENSE ARTICLES AND DEFENSE 
SERVICES.—The President may sell defense articles and 
defense services from the stocks of the Department of De-
fense and the Coast Guard, or design and construction 
services, to a foreign country or international organization 
if the country or international organization agrees to pay 
in United States dollars— 
(1) 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; 
(2) 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 arti-
cle, including the contract or production costs less 
any depreciation in the value of such article; or 
(3) in the case of a defense service (other than 
training covered in subsection (b)), or design and 
construction services, the full cost to the United 
States Government of providing such service. 
(b) TRAINING.— 
(1) IN GENERAL.—In the case of training sold 
to a foreign country or international organization 
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367 
that is concurrently receiving international military 
education and training assistance under this title, 
the country or international organization agrees to 
pay in United States dollars only those additional 
costs that are incurred by the United States Govern-
ment in providing such assistance. 
(2) OTHER
COUNTRIES.—The President may 
provide training to a foreign country not receiving 
assistance under chapter 6 of subtitle B if the Presi-
dent determines and so notifies the appropriate con-
gressional committees in each fiscal year for which 
such training is to be provided that providing such 
training to the country is in the national interest of 
the United States and the reasons for such deter-
mination. 
SEC. 4312. PROCUREMENT FOR FOREIGN MILITARY CASH 
SALES. 
(a) IN GENERAL.— 
(1) CONTRACTS.—Except as otherwise provided 
in this section, the President may, without require-
ment for charge to any appropriation or contract au-
thorization otherwise provided, enter into contracts 
for the procurement of defense articles or defense 
services or design and construction services for sale 
for United States dollars to any foreign country or 
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368 
international organization if such country or inter-
national organization provides the United States 
Government with a dependable undertaking— 
(A) to pay the full amount of such contract 
which will assure the United States Government 
against any loss on the contract; and 
(B) to make funds available in such 
amounts and at such times as may be required 
to meet the payments required by the contract 
and any damages and costs that may accrue 
from the cancellation of such contract, in ad-
vance of the time such payments, damages, or 
costs are due. 
(2) INTEREST.—Interest shall be charged on 
any net amount by which any such country or inter-
national organization is in arrears under all of its 
outstanding unliquidated dependable undertakings, 
considered collectively. The rate of interest charged 
shall be a rate not less than a rate determined by 
the Secretary of the Treasury taking into consider-
ation the current average market yield on out-
standing short-term obligations of the United States 
as of the last day of the month preceding the net ar-
rearage and shall be computed from the date of net 
arrearage. 
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369 
(b) LETTERS OF OFFER.— 
(1) IN GENERAL.—The President may, if the 
President determines it to be in the national interest 
of the United States, issue letters of offer under this 
section that provide for billing upon delivery of the 
defense article or rendering of the defense service 
and for payment within 120 days after the date of 
billing. 
(2) REQUIREMENT.—The authority of para-
graph (1) may be exercised only if the President de-
termines that the emergency requirements of the 
purchaser for acquisition of such defense articles 
and defense services exceed the ready availability to 
the purchaser of funds sufficient to make payments 
on a dependable undertaking basis and submits both 
determinations to Congress together with a special 
emergency request for authorization and appropria-
tion of additional funds to finance such purchases 
under this Act. 
(3) APPROPRIATIONS.—Appropriations available 
to the Department of Defense may be used to meet 
the payments required by the contracts for the pro-
curement of defense articles and defense services 
and shall be reimbursed by the amounts subse-
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370 
quently received from the country or international 
organization to whom articles or services are sold. 
(c) RENEGOTIATION ACT OF 1951.—The provisions 
of the Renegotiation Act of 1951 do not apply to procure-
ment contracts entered into under this section or prede-
cessor provisions of law before, on, or after the date of 
the enactment of this Act. 
(d) COMPETITIVE PRICING.— 
(1) PROCUREMENT CONTRACTS.—Procurement 
contracts made in implementation of sales under this 
section for defense articles and defense services 
wholly paid for from funds made available on a non-
repayable basis shall be priced on the same costing 
basis with regard to profit, overhead, independent 
research and development, bid and proposal, and 
other costing elements, as is applicable to procure-
ments of like items purchased by the Department of 
Defense for its own use. 
(2) DIRECT
COSTS.—Direct costs associated 
with meeting additional or unique requirements of 
the purchaser shall be allowable under contracts de-
scribed in paragraph (1). Loadings applicable to 
such direct costs shall be permitted at the same 
rates applicable to procurement of like items pur-
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371 
chased by the Department of Defense for its own 
use. 
SEC. 4313. PAYMENTS. 
(a) IN GENERAL.—Except as provided in subsection 
(b), payment for defense articles or defense services under 
this chapter shall be made in advance or, if the President 
determines it to be in the national interest of the United 
States, upon delivery of the defense article or rendering 
of the defense service. 
(b) EXCEPTION.—If the President determines it to 
be in the national interest of the United States pursuant 
to subsection (a), billings for sales made under letters of 
offer issued under this section after the date of the enact-
ment of this subsection may be dated and issued upon de-
livery 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. 
(c) INTEREST.— 
(1) IN GENERAL.—Interest shall be charged on 
any net amount due and payable which is not paid 
within 60 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 
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372 
United States as of the last day of the month pre-
ceding the billing and shall be computed from the 
date of billing. 
(2) EXTENSION.—The President may extend 
such 60-day period to 120 days if the President de-
termines that emergency requirements of the pur-
chaser for acquisition of such defense articles or de-
fense services exceed the ready availability to the 
purchaser of funds sufficient to pay the United 
States in full for such articles or services within 
such 60-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 Act. 
SEC. 4314. CHARGES. 
(a) IN GENERAL.—Letters of offer for the sale of de-
fense articles or defense services that are issued pursuant 
to section 4311 or 4312 shall include appropriate charges 
for— 
(1) administrative services, calculated on an av-
erage percentage basis to recover the full estimated 
costs (excluding a pro rata share of fixed base oper-
ations costs) of administration of sales made under 
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373 
this Act to all purchasers of such articles and serv-
ices as specified in section 4402(b) and (c); 
(2) a proportionate amount of any nonrecurring 
costs of research, development, and production of 
major defense equipment (except for equipment 
wholly paid for either from funds transferred under 
section 4211(b)(3) or from funds made available on 
a nonrepayable basis under section 4251; and 
(3) the recovery of ordinary inventory losses as-
sociated with the sale from stock of defense articles 
that are being stored at the expense of the purchaser 
of such articles. 
(b) WAIVER.— 
(1) ADMINISTRATIVE CHARGES.—The President 
may waive the charges for administrative services 
that would otherwise be required by— 
(A) subsection (a)(1) in connection with 
any sale to a foreign country, if the President 
determines that a waiver— 
(i) is in the national security interests 
of the United States; and 
(ii) will facilitate the ability of that 
country to detect, deter, prevent, defeat, or 
counter terrorist activities, or participate 
in, or support, military operations, coali-
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374 
tion operations, or stability operations of 
the United States; or 
(B) subsection (a)(2) in connection with 
any sale to the Maintenance and Supply Agency 
of the North Atlantic Treaty Organization in 
support of— 
(i) a weapon system partnership 
agreement; or 
(ii) a NATO/SHAPE project. 
(2) MAJOR DEFENSE EQUIPMENT.—The Presi-
dent may reduce or waive the charge or charges that 
would otherwise be considered appropriate under 
subsection (a)(2) for a particular sale or for sales if 
the President determines that— 
(A) the reduction or waiver would signifi-
cantly advance United States Government inter-
ests in standardization with the armed forces of 
a foreign country that is a strategic United 
States ally, or would promote foreign procure-
ment in the United States under coproduction 
arrangements; 
(B) imposition of the charge or charges 
likely would result in the loss of the sale; or 
(C) in the case of a sale of major defense 
equipment that is also being procured for the 
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375 
use of the United States 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 pro-
cured for the use of the United States Armed 
Forces that substantially offsets the revenue 
foregone by reason of the waiver of the charge 
or charges. 
(3) INCREASE
IN
CHARGES.—The President 
may waive, for particular sales of major defense 
equipment, any increase in a charge or charges pre-
viously considered appropriate under paragraph (2) 
of subsection (a) if the increase results from a cor-
rection of an estimate (reasonable when made) of 
the production quantity base that was used for cal-
culating the charge or charges for purposes of such 
paragraph. 
SEC. 4315. NON-COMBAT DUTIES OF UNITED STATES PER-
SONNEL SUPPORTING FOREIGN MILITARY 
SALES. 
(a) IN GENERAL.—United States personnel per-
forming defense services sold under this title may not per-
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376 
form any duties of a combatant nature, including any du-
ties 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. 
(b) REPORT.—Within 48 hours of the existence of, 
or a change in status of significant hostilities or terrorist 
acts or a series of such acts, that may endanger lives or 
property of United States personnel, involving a country 
in which United States personnel are performing defense 
services pursuant to this title, the President shall submit 
to the Speaker of the House of Representatives and to 
the President pro tempore of the Senate a report, in writ-
ing, classified if necessary, setting forth— 
(1) the identity of such country; 
(2) a description of such hostilities or terrorist 
acts; and 
(3) 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. 
SEC. 4316. PUBLIC INFORMATION. 
Any contract entered into between the United States 
and a foreign country under the authority of section 4311 
or section 4312 shall be prepared in a manner that will 
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377 
permit the contract to be made available for public inspec-
tion to the fullest extent possible consistent with the na-
tional security of the United States. Such information 
shall be posted on the Internet website of the Department 
of State in a timely fashion. 
SEC. 4317. STANDARDIZATION AGREEMENTS. 
(a) IN GENERAL.—The President may enter into 
North Atlantic Treaty Organization standardization 
agreements in carrying out section 814 of the Department 
of Defense Appropriation Authorization Act, 1976 (Public 
Law 94–106), and may enter into similar agreements with 
a country that is a strategic United States ally, for the 
cooperative furnishing of training on a bilateral or multi-
lateral basis, if the financial principles of such agreements 
are based on reciprocity. 
(b) REIMBURSEMENT.—Each agreement shall in-
clude reimbursement for all direct costs but may exclude 
reimbursement for indirect costs, administrative sur-
charges, 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). 
(c) CONGRESSIONAL NOTIFICATION.—Each agree-
ment shall be transmitted promptly to— 
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378 
(1) the appropriate congressional committees; 
and 
(2) the Committees on Appropriations and the 
Committees on Armed Services of the House of Rep-
resentatives and the Senate. 
SEC. 4318. QUALITY ASSURANCE AND RELATED SERVICES. 
(a) IN GENERAL.—The President is authorized to 
provide, without charge, quality assurance, inspection, 
contract administration services, and contract audit de-
fense services under this chapter— 
(1) in connection with the placement or admin-
istration of any contract or subcontract for defense 
articles, defense services, or design and construction 
services entered into under this Act on behalf of, a 
government that is a strategic United States ally, if 
such government provides such services in accord-
ance with an agreement on a reciprocal basis, with-
out charge, to the United States Government; or 
(2) in connection with the placement or admin-
istration of any contract or subcontract for defense 
articles, defense services, or design and construction 
services pursuant to the North Atlantic Treaty Or-
ganization’s Security Investment program in accord-
ance with an agreement under which the foreign 
governments participating in such program provide 
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379 
such services, without charge, in connection with 
similar contracts or subcontracts. 
(b) CATALOGING DATA
AND CATALOGING SERV-
ICES.—In carrying out the objectives of this section, the 
President is authorized to provide, without charge, cata-
loging data and cataloging services to the North Atlantic 
Treaty Organization or to any strategic United States ally 
if that Organization or ally provides such data and serv-
ices in accordance with an agreement on a reciprocal basis, 
without charge, to the United States Government. 
SEC. 4319. RESTRICTION ON SALE OF DEFENSE ARTICLES 
AND DEFENSE SERVICES THAT WOULD AD-
VERSELY AFFECT UNITED STATES COMBAT 
READINESS. 
(a) RESTRICTION.—The President may not sell de-
fense articles and defense services if the sale of such arti-
cles or services would have significant adverse effect on 
the combat readiness of the United States Armed Forces. 
(b) WAIVER AND CONGRESSIONAL NOTIFICATION.— 
(1) IN
GENERAL.—The President may waive 
the restriction in subsection (a) if the President de-
termines that the possible significant adverse effect 
on the combat readiness of the United States Armed 
Forces is outweighed by the benefits to United 
States national security and transmits such deter-
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406 
military exercises, or communications or electronics 
interface projects. 
(2) WAIVERS.—The President may waive the 
requirement of subsection (a)(4)— 
(A) for reimbursement of depreciation for 
any defense article which has passed three- 
quarters of its normal service life if the Presi-
dent determines that to do so is important to 
the national security interest of the United 
States; 
(B) with respect to a lease which is made 
in exchange with the lessee for a lease on sub-
stantially reciprocal terms of defense articles 
for the Department of Defense, except that this 
waiver authority— 
(i) may be exercised only if the Presi-
dent submits to the appropriate congres-
sional committees, and in addition the 
Committees on Appropriations of the 
House of Representatives and the Senate, 
a detailed notification for each lease with 
respect to which the authority is exercised; 
and 
(ii) may be exercised only— 
(I) on a fiscal year basis; and 
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