Authority, limitations, and terms of loans

General authority for the President to furnish military assistance.

Authority to make loans under FAA, section 503 (22 U.S.C. 2311) does not exist at this time. See FAA, section 503 (22 U.S.C. 2311) for information on the general authority, terms and conditions for making loans under this section.

The Assistant Secretary/Deputy Agency Director level or higher must sign the written agreement.

Mutual benefits of the loan (or gift) must be shown in supporting documentation.

Each Implementing Agency (IA) shall maintain a single repository for agreements and documents and provide a signed copy of each agreement to USD(AT&L).

IAs are responsible for any funding required for loans.

IAs must provide appropriate legal, fiscal, and industrial base factors analysis and security plans for each agreement, as specified in DoD Directive 5530.3.

IAs must provide 15 days advance notification to the Office of the Secretary of Defense (OSD), through USD(AT&L), before the loan agreement is executed. Advance notification must include the appropriate legal, fiscal, and industrial base factors analysis and security plans.

IAs must obtain appropriate security and technology transfer clearances for each loan (if offices responsible for those clearance so require).

Transfers of materiel, supplies, and equipment under this authority are based on the principle of reciprocity, although item-for-item exchanges are not expected or required.

The existence of this authority in no way affects the ability to use AECA, section 61 (22 U.S.C. 2796) leases for cooperative research and development purposes.

AECA, section 65 (22 U.S.C. 2796d) does not provide authority for the exchange of information beyond basic operational and simple maintenance for test purposes. Accordingly, any exchange of additional information related to an AECA, section 65 (22 U.S.C. 2796d) loan or gift may only take place pursuant to an approved test and evaluation or Data Exchange Agreement, Information Exchange Project, a cooperative research and development agreement, or coproduction agreement approved in accordance with DoD Directive 5530.3.

If required, USD(AT&L) (after coordination with Under Secretary of Defense for Policy (USD(P)) and DoD General Counsel) consults with the Department of Commerce (DoC) for an assessment of U.S. industrial base impact and U.S. industry's international trade position.

The loan agreement shall not require either party to provide materiel, supplies, or equipment that would impair its own priorities, requirements, or commitments, or would otherwise be inconsistent with its national laws or regulations or other international agreements.

The loan agreement describes how the type and quantity of materiel, supplies, or equipment meets the objectives of the cooperative RDT&E program.

The loan agreement sets out the intellectual property rights applicable to the transfer and use of materiel, supplies, and equipment and the results of the research, development, test, and evaluation conducted with the materiel, supplies, and equipment.

Loan agreements shall include the following terms/conditions:

• The materiel, supplies, and equipment shall remain the property of the providing party.
• Classified information or materiel shall be protected in accordance with applicable security agreements in force.
• The receiving party shall use the items only to meet the RDT&E objectives specified in the agreement.
• The receiving party shall maintain materiel, supplies, and equipment in good order, repair, and operable condition and return the items in operable condition and in as good condition as when received, normal wear and tear excepted, unless the providing party agrees that the loaned materiel, supplies, or equipment may be expended or otherwise consumed in connection with the RDT&E programs without reimbursement to the providing party.
• The receiving party shall not transfer materiel, supplies, equipment, or information to a third party without the prior consent of the providing party.
• Subject to the limitations of national disclosure policies, the receiving party shall submit (without charge) a report of its use of the materiel, supplies, and equipment to the providing party.
• Each party agrees not to assert a claim against the other for injury, loss, or damage resulting from the use of the materiel, supplies, or equipment loaned by the other party.

NATO or a major non-NATO ally requests or makes a loan (or gift) of materiel, supplies, or equipment for RDT&E purposes from/to a DoD Component.

The DoD Component develops the agreement and supporting documentation in accordance with the legal and policy provisions.

The DoD Component provides 15 days advance notification to OSD, through USD(AT&L) before loan execution.

USD(AT&L) coordinates each loan with USD(P) and DoD General Counsel. If required, USD(AT&L) consults with the DoC for the U.S. industrial base impact assessment and the international trade position of U.S. industry. Such consultation is conducted by USD(AT&L) after coordination with USD(P), USD(C), DoD General Counsel, DSCA and the other MILDEPs/Defense Agencies (as required).

Upon OSD notification completion and barring non-concurrence, the Assistant Secretary/Deputy Agency Director level (or higher) signs the loan agreement.

The receiving party signs the loan agreement and the Implementing Agency distributes copies to USD(AT&L) and the loan repository.

The loan is executed and monitored by the Implementing Agency.