22 U.S.C. § 2762 : Foreign Relations And Intercourse — Arms Export Control — Foreign Military Sales Authorizations — Procurement For Cash Sales


(a) Authority of President; dependable undertaking by foreign country or international organization; interest rates

Except as otherwise provided in this section, the President may, without requirement for charge to any appropriation or contract authorization otherwise provided, enter into contracts for the procurement of defense articles or defense services for sale for United States dollars to any foreign country or international organization if such country or international organization provides the United States Government with a dependable undertaking (1) to pay the full amount of such contract which will assure the United States Government against any loss on the contract, and (2) 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 advance of the time such payments, damages, or costs are due. Interest shall be charged on any net amount by which any such country or international 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 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 net arrearage and shall be computed from the date of net arrearage.


(b) Issuance of letters of offer under emergency determination; availability of appropriations for payment

The President may, if he determines it to be in the national interest, issue letters of offer under this section which provide for billing upon delivery of the defense article or rendering of the defense service and for payment within one hundred and twenty days after the date of billing. This authority may be exercised, however, only if the President also determines that the emergency requirements of the purchaser for acquisition of such defense articles and services exceed the ready availability to the purchaser of funds sufficient to make payments on a dependable undertaking basis and submits both determinations to the Congress together with a special emergency request for authorization and appropriation of additional funds to finance such purchases under this chapter. Appropriations available to the Department of Defense may be used to meet the payments required by the contracts for the procurement of defense articles and defense services and shall be reimbursed by the amounts subsequently received from the country or international organization to whom articles or services are sold.


(c) Applicability of Renegotiation Act of 1951

The provisions of the Renegotiation Act of 1951 do not apply to procurement contracts heretofore or hereafter entered into under this section, section 2769 of this title, or predecessor provisions of law.


(d) Competitive pricing

(1) 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 nonrepayable 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 procurements of like items purchased by the Department of Defense for its own use.

(2) Direct costs associated with meeting additional or unique requirements of the purchaser shall be allowable under contracts described in paragraph (1). Loadings applicable to such direct costs shall be permitted at the same rates applicable to procurement of like items purchased by the Department of Defense for its own use.

(Pub. L. 90–629, ch. 2, § 22, Oct. 22, 1968, 82 Stat. 1323; Pub. L. 93–189, § 25(3), Dec. 17, 1973, 87 Stat. 730; Pub. L. 94–329, title II, § 207, June 30, 1976, 90 Stat. 738; Pub. L. 95–384, § 17, Sept. 26, 1978, 92 Stat. 740; Pub. L. 96–533, title I, § 105(b)(2), Dec. 16, 1980, 94 Stat. 3134; Pub. L. 104–107, title V, § 531A(a), Feb. 12, 1996, 110 Stat. 731; Pub. L. 106–113, div. B, § 1000(a)(7) [div. B, title XII, § 1223], Nov. 29, 1999, 113 Stat. 1536, 1501A–498.)


References in Text

This chapter, referred to in subsec. (b), was in the original “this Act”, meaning Pub. L. 90–629, Oct. 22, 1968, 82 Stat. 1321, which is classified principally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 2751 of this title and Tables.

The Renegotiation Act of 1951, referred to in subsec. (c), is act Mar. 23, 1951, ch. 15, 65 Stat. 7, as amended, which was classified principally to section 1211 et seq. of the former Appendix to Title 50, War and National Defense, prior to its omission from the Code.


Amendments

1999—Subsec. (d). Pub. L. 106–113 designated existing provisions as par. (1) and added par. (2).

1996—Subsec. (d). Pub. L. 104–107 added subsec. (d).

1980—Subsec. (c). Pub. L. 96–533 substituted “procurement contracts” for “contracts for the procurement of defense articles and defense services” and inserted reference to contracts entered into under section 2769 of this title.

1978—Subsec. (c). Pub. L. 95–384 added subsec. (c).

1976—Subsec. (a). Pub. L. 94–329, § 207(a), inserted provisions requiring interest to be charged on any net amount a country or international organization is in arrears and the rate of interest to be determined by the Secretary of Treasury considering current average market yield of short-term obligations of United States on a particular day.

Subsec. (b). Pub. L. 94–329, § 207(b), substituted provisions authorizing President to issue letters of offer with provisions for billing on delivery of article or rendering of service and payment within 120 days after billing date where President determines that emergency conditions exist, for provisions authorizing President to accept a dependable undertaking of a foreign country or international organization with respect to sales of defense articles and services and to make payment within 120 days of delivery of article or rendering of service.

1973—Pub. L. 93–189 designated text preceding first proviso as subsec. (a) and inserted “Except as otherwise provided in this section,” before “the President”, designated first proviso as subsec. (b) and inserted reference to acceptance of a dependable undertaking of a foreign country or international organization, and struck out further provisions setting forth Presidential powers with respect to sales agreements with and payments by purchasing countries or international organizations.


Effective Date of 1996 Amendment; Implementing Regulations

Pub. L. 104–107, title V, § 531A(b), Feb. 12, 1996, 110 Stat. 731, provided that:

“Section 22(d) of the Arms Export Control Act [subsec. (d) of this section], as added by subsection (a)—

“(1) shall take effect on the 60th day following the date of the enactment of this Act [Feb. 12, 1996];

“(2) shall be applicable only to contracts made in implementation of sales made after such effective date; and

“(3) shall be implemented by revised procurement regulations, which shall be issued prior to such effective date.”


Delegation of Functions

For delegation of functions of the President under subsec. (a) of this section, see section 1(d) of Ex. Ord. No. 13637, Mar. 8, 2013, 78 F.R. 16129, set out as a note under section 2751 of this title. Functions were previously delegated by Ex. Ord. No. 11958, which was formerly set out as a note under section 2751 of this title and was revoked, subject to a savings provision, by section 4 of Ex. Ord. No. 13637.


Requirement to use Firm Fixed-Price Contracts for Foreign Military Sales

Pub. L. 114–328, div. A, title VIII, § 830, Dec. 23, 2016, 130 Stat. 2282, provided that:


“(a) Requirement.— Not later than 180 days after the date of the enactment of this Act [Dec. 23, 2016], the Secretary of Defense shall prescribe regulations to require the use of firm fixed-price contracts for foreign military sales.

“(b) Exceptions.—
The regulations prescribed pursuant to subsection (a) shall include exceptions that may be exercised if the foreign country that is the counterparty to a foreign military sale—

“(1) has established in writing a preference for a different contract type; or

“(2) requests in writing that a different contract type be used for a specific foreign military sale.


“(c) Waiver Authority.— The regulations prescribed pursuant to subsection (a) shall include a waiver that may be exercised by the Secretary of Defense or his designee if the Secretary or his designee determines on a case-by-case basis that a different contract type is in the best interest of the United States and American taxpayers.

“(d) Pilot Program for Acceleration of Foreign Military Sales.—


“(1) In general.—

The Secretary of Defense shall establish a pilot program to reform and accelerate the contracting and pricing processes associated with full rate production of major weapon systems for no more than 10 foreign military sales contracts by—
“(A) basing price reasonableness determinations on actual cost and pricing data for purchases of the same product for the Department of Defense; and
“(B) reducing the cost and pricing data to be submitted in accordance with section 2306a of title 10, United States Code.


“(2) Expiration of authority.— Authority for the pilot program under this subsection expires on January 1, 2020.”


Prior Provisions

Provisions similar to those comprising subsec. (d)(2) of this section were contained in the following appropriation acts:

Pub. L. 106–113, div. B, § 1000(a)(2) [title V, § 556], Nov. 29, 1999, 113 Stat. 1535, 1501A–100.

Pub. L. 105–277, div. A, § 101(d) [title V, § 536], Oct. 21, 1998, 112 Stat. 2681–150, 2681–181.

Pub. L. 105–118, title V, § 535, Nov. 26, 1997, 111 Stat. 2416.

Pub. L. 104–208, div. A, title I, § 101(c) [title V, § 533A], Sept. 30, 1996, 110 Stat. 3009–121, 3009–153.

Pub. L. 104–107, title V, § 531A(c), Feb. 12, 1996, 110 Stat. 731.