Defense Security Cooperation Agency
Defense Solutions for America's Global Partners
C11.5. - Government Furnished Equipment and Materiel (GFE/GFM) Sales
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Arms Export Control Act (AECA), section 30 (22 U.S.C. 2770) authorizes the USG to sell defense articles and defense services to U.S. companies in connection with proposed direct commercial exports pursuant to the International Traffic in Arms Regulation (ITAR). The Implementing Agency (IA) executes the functions conferred by AECA, section 30 (22 U.S.C. 2770) and may delegate the authority to the commanding officer or head of a contracting activity of the Implementing Agency responsible for acquisition of the end item.

C11.5.1. Who May Purchase Under AECA, Section 30? AECA, section 30 (22 U.S.C. 2770) sales may be made to a company incorporated in the United States who has an approved license under the ITAR if the contractor’s license is for final assembly or manufacture of an end item or in the case of ammunition components, the contractor is using commercial practices that restrict actual delivery directly to a friendly foreign country or international organization. To be eligible, the U.S. company must intend to incorporate the item(s) or service(s) into end items (or concurrent or follow-on support) to be sold to a friendly foreign country or international organization.

C11.5.2. What May Be Purchased Under AECA, Section 30? AECA, section 30 (22 U.S.C. 2770) sales must meet the following criteria: any services provided must be performed in the United States; the end item being procured must be for the armed forces of a friendly country or international organization; the articles would be supplied to the prime contractor as GFE/GFM if the end item were being procured for the use of the U.S. Armed Forces; and the articles and services are available only from the USG sources or are not available to the prime contractor directly from the U.S. sources at such times as may be required to meet the prime contractor’s delivery schedule. Services may include transportation, installation, testing, or certification that are directly associated with the sale. Services alone may not be provided.

C11.5.2.1. AECA, Section 30 Sales from Stock. Unless approved by the Under Secretary for Policy (USD(P)) in coordination with the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)), sales are not authorized if they result in stocks dropping below the reorder point.

C11.5.2.2. AECA, Section 30 Sales from Procurement. When procurement or manufacture in Government-owned facilities is required, the IA determines if a sale shall be concluded. In determining production priorities, the IA considers existing requirements and schedules manufacture, allocation, and delivery on a first-in first-out basis guided by DoD 4140.1-R and related assignments of Force Activity Designators (FADs) by the Chairman of the Joint Chiefs of Staff. The Director, DSCA resolves questions of priority between two or more competing foreign requirements.

C11.5.3. AECA, Section 30 Sales Format. A unique sales agreement is used by the USG for the sale of defense articles and/or services to U.S. companies under the authority of AECA, section 30. The sales agreement includes the information outlined in Table C11.T9.

Table C11.T9. AECA, Section 30 Sales Agreement Requirements

Basic Descriptive Information

  1. Company Identity

  2. Items/Quantity

  3. Estimated Availability

  4. Source of Supply

  5. Estimated Price

  6. End Item Application (if applicable)

  7. End Item Purchaser (country or international organization)

  8. Number and date of the munitions export license or other DoS approval

General Provisions and/or Notes Required

  1. The USG retains the right to cancel in whole or in part or to suspend performance at any time under unusual or compelling circumstances if the national interest so requires.

  2. The USG provides no warranty or guarantee, either expressed or implied, regarding the item being sold.

  3. The USG shall provide best efforts to comply with the delivery lead time cited, but incurs no liability for failure to meet an indicated delivery schedule.

  4. The USG shall use its best efforts to deliver at the estimated price, but that the purchaser is obligated to reimburse the USG for the total cost if it is greater than that price.

  5. The item sold may be used only for incorporation into end items (or as concurrent or follow-on support in conjunction with a sale of the end item) for export under an approved export license and may not be used for other purposes.

  6. The purchaser renounces all claims against the USG, its officers, agents, and employees arising out of or incident to this agreement, whether concerning injury to or death of personnel, damage to or destruction of property, or other matters, and shall indemnify and hold harmless the USG, its officers, agents, and employees against any such claims of third parties and any loss or damage to USG property.

  7. The U.S. company agrees to provide protection of classified information and requires that the agreement with the foreign Government provides protection of U.S. classified information.

  8. The purchaser is responsible for any insurance desired and, when applicable, export customs clearance.

  9. The purchaser is required to reimburse the USG for all costs incurred by the USG if the purchaser cancels the purchase agreement before item delivery.

  10. Delivery is Free On Board (FOB) point of origin. The purchaser must arrange for continental U.S. (CONUS) transportation (except for sensitive or hazardous cargo that is normally shipped via the Defense Transportation System (DTS)).

  11. Payment terms:

    1. Sales of Articles from Stock. Total payment is required in advance for the full cost of any USG shipment.

    2. Sales of Articles or Services from Procurement, or Sales of Services from Resources on Hand. Payment is normally cash payable in full at the time the agreement is signed. Based on purchaser request, a payment schedule may be considered when full funding is not immediately required. When requested by the purchaser, the IA, in coordination with the contracting officer, may negotiate a payment schedule that complies with the Security Assistance Management Manual (SAMM). Funds must be available prior to USG entering into a contract, submitting a Military Interdepartmental Purchase Request (MIPR), or making other obligations. Payment is equal to the full cost of the obligations plus reasonable uncertainties, such as costs which could be incurred should it become necessary to prematurely terminate the Sales Agreement.

C11.5.3.1. Pricing of AECA, Section 30 Sales. Prices, accountability, and disposition of collections shall be in accordance with DoD 7000.14-R, Volume 15, Chapter 7. Administrative surcharges and accessorial charges are charged at the same rate as corresponding FMS charges. Sales shall be in cash, with payment upon signature of the sales agreement by the USG and U.S. company representatives. Payment in U.S. dollars shall precede procurement or production action or, in cases of stock sales, delivery. Funds obligated for a reimbursable procurement, internal production of articles, or provision of services may not exceed the cash received from an authorized purchaser. If there is an increase in the cost, the purchaser is required to make additional cash payments to fund the costs plus applicable surcharges. The cash received must be sufficient to fund the replacement cost of articles shipped from DoD stocks.

C11.5.3.2. Planning Data. To allow planning and marketing, IAs are authorized to provide cost and delivery data to authorized potential purchasers in advance of execution of a sales agreement. Such data are identified as estimates that are not binding on the USG.

C11.5.4. Records and Reporting. A central IA record is maintained showing the purchaser, item being sold, source (stock, DoD production, or procurement), cost estimate or (if delivered) billed price, end item (if applicable), ultimate recipient (country or international organization), and export license number and date or other DoS approval. Information from this record is provided to DSCA upon request.

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Page Updated 04-04-2012