C11.4.1. Definition and Purpose. Whenever the President determines it to be consistent with, and in furtherance of, the purposes of Part I of the FAA and within the limitations of the Foreign Assistance Act of 1961, section 607 of the FAA authorizes any agency of the USG to furnish services and commodities on an advance-of-funds or reimbursement basis to friendly countries, international organizations, the American National Red Cross, and voluntary nonprofit relief agencies/private voluntary organizations (PVOs) registered with and approved by the U.S. Agency for International Development (USAID). For the purposes of the FAA, "services" include any service, repair, training of personnel, or technical or other assistance or information used for the purposes of furnishing nonmilitary assistance. "Commodities" includes any material, article, supply, goods, or equipment used for the purposes of furnishing nonmilitary assistance. The President's authority to make determinations under section 607 was delegated to the Secretary of State and to the Administrator of USAID for matters within their respective areas of responsibility in a memorandum dated February 16, 1995. A list of registered PVOs can be found at the following USAID website: http://pvo.usaid.gov/usaid/.

C11.4.2. Requests for Sales. A Letter of Request (LOR) that details the services and/or commodities needed is submitted by a foreign government or international organization, as referenced in C11.4.1, to the USG through the U.S. Embassy Security Cooperation Organization (SCO). The LOR should indicate the proposed method of financing and whether Price and Availability (P&A) data, a Letter of Offer and Acceptance (LOA), an LOA Amendment or LOA Modification is desired. Once endorsed by the Embassy SCO, a copy of the LOR should be forwarded to the appropriate Implementing Agency (IA) and DSCA alerting each organization of the request. The LOR is subsequently forwarded by the IA to USAID with a request for a determination from USAID, which is coordinated with the Department of State (DoS), on whether it approves or disapproves of the request. Once USAID has approved or disapproved the request, the determination is sent back to the IA for onward coordination and processing with DSCA. Prior to the development of an LOA, the IA furnishes P&A data to DSCA (Operations Directorate) for appropriate coordination with the Office of the Secretary of Defense (OSD).

C11.4.3. Letter of Offer and Acceptance (LOA). The USG uses an LOA to track the sale of services and/or commodities (to include training, and design and construction services) under the authority of FAA, section 607. The LOA itemizes the services and/or commodities included in the LOR. Like other FMS LOAs, section 607 LOAs authority are signed by the country and/or organization receiving the services and/or commodities.

C11.4.3.1. LOA Preparation Timeframe. Section 607 LOAs are categorized as "Group D" and will be processed according to the guidelines provided in Chapter 5, paragraph C5.3.2.

C11.4.3.2. LOA Preparation. The IA develops a section 607 LOA in the Defense Security Assistance Management System (DSAMS) to allow execution of these programs through existing Security Assistance automation systems. Section 607 LOAs follow the same LOA preparation guidelines as FMS LOAs. See Section C5.4.5.

C11.4.3.3. LOA Format. LOA format guidance provided for FMS LOAs in Figure C5.F6. applies to section 607 LOAs except as identified in Figure C11.T8.

Table C11.T8. Unique Instructions for Preparing Section 607 LOAs

C11.4.3.4. Pricing of LOAs.

C11.4.3.4.1. Commodities. The price of commodities sold under this authority is the acquisition cost adjusted, as appropriate, for condition and age; or the Defense Working Capital Fund (DWCF) standard price.

C11.4.3.4.2. Services and/or Training. The price of services and/or training sold under this authority is the amount of additional costs incurred by the DoD to provide such services. For DoD airlift services, the rate is that specified for Joint Chiefs of Staff exercises in the Catalog of USG and Non-USG Airlift Rates published annually by the US Transportation Command (TRANSCOM).

C11.4.3.4.3. Surcharges and Accessorials. FMS surcharges (i.e. FMS Administration Fee and Contract Administrative Surcharge (CAS)) and accessorial rates apply (i.e. Transportation and Packing, Crating and Handling - PC&H). DoD FMS resources support this effort and are reimbursed through the normal FMS surcharges and accessorial accounts. Any request to deviate from the application of these surcharges and accessorials must be sent to DSCA (Business Operations Directorate) for approval.

C11.4.3.4.4. Nonrecurring Cost (NC). NC does not apply to section 607 LOAs.

C11.4.3.5. Additional LOA Information. Each section 607 LOA must include, as an attachment, a copy of a State Department or USAID determination authorizing the sale. The LOA Standard Terms and Conditions apply to section 607 LOAs as do all other mandatory notes. Notes regarding inclusion of charges on the document (e.g., Administrative Surcharge and CAS notes) apply to these LOAs as well. See Appendix 6 for exact wording of these notes.

C11.4.3.6. DSCA Coordination and Countersignature of LOAs. All section 607 LOA documents require DSCA countersignature. See Section C5.4.13. The Implementing Agency posts the country acceptance milestone in DSAMS after purchaser signature.

C11.4.3.7. Support to the United Nations (UN). Rather than signing the LOA, when the UN accepts a section 607 LOA it incorporates the documents into a UN Letter of Assist (UNLOA). UNLOAs are considered by the UN to be firm fixed-price contracting documents. They are submitted, with a copy to DSCA, to the IA for review of prices, delivery dates, and other data. After coordination with the IA and appropriate OSD and DoS activities, DSCA grants approval to IA to provide the commodities or services. Multiple UNLOAs should not be executed on a single LOA. However, multiple LOAs may be prepared to support a single UNLOA.

C11.4.4. Management of Funds. Section 607 sales are cash in advance. Defense Finance and Accounting Service (DFAS) Indianapolis establishes a sub-account within the FMS Trust Fund for these transactions. If advance payments are deposited into this account, standard procedures, including direct citing of the FMS Trust Fund on the DoD contract, apply.

C11.4.5. LOA Reporting. The DSCA 1200 system is used to record section 607 LOAs and is distinguished by the type of sales code of "S-FAA" from other FMS agreements. The Implementing Agency submits delivery reporting for these cases. Transportation costs for section 607 LOAs are reported as actual costs on above-the-line delivery reports. All delivery reports must contain Transportation Bill Code (TBC) "D." Government Bills of Lading cite the transportation line of the section 607 case and do not cite the FMS Trust Fund Transportation Clearing Account.

C11.4.6. LOA Billing. For non-UN support, standard billing procedures are used for section 607 LOAs. For UN support, the following guidelines apply:

C11.4.6.1. "S6" LOAs (Payment in Advance). The IA provides DFAS Indianapolis a monthly forecast using a payment schedule. DFAS Indianapolis prepares a special monthly bill on or about the 15th of each month. The bill shows the LOA and the UNLOA designators and forecasted payment amount for the current month. It is based on delivery reports received from the IA. Monthly delivery listings are also provided to the UN. DFAS Indianapolis coordinates the bill with DSCA and forwards it to the UN through the U.S. Mission to the United Nations (USUN).

C11.4.6.2. "S5" LOAs (Reimbursable). As a matter of policy, "S5" or reimbursable section 607 cases are no longer executed by DSCA.