Security of Supply Arrangements (SOSAs): Background and Issues

Security of Supply Arrangements (SOSAs): Background and Issues

August 10, 2021
Security of Supply Arrangements (SOSAs): Background and
Issues
The U.S. defense industrial base (DIB) sources goods,
from the Second World War and the Cold War.
services, and raw materials from the global marketplace to
International treaties and integration policies provide
support national security and defense requirements. To
Canada with various benefits and export control
facilitate the unhindered access to some key supplies, the
exemptions, notably including some exemptions to the
Department of Defense (DOD) has entered into bilateral
International Traffic in Arms Regulations (ITAR). The
Security of Supply Arrangements (SOSAs) with selected
U.S., meanwhile, has special access to supply chains and
foreign governments to secure the mutual timely provision
productive capacity based in Canada. In some respects,
of defense-related goods and services during peacetime,
SOSAs may be seen as intermediate DIB cooperation
emergency, and armed conflict. SOSAs allow DOD to
arrangements more specific and intensive than RDP MOUs
request prioritized performance of contracts from
or broader defense cooperation agreements, but less
companies in SOSA-signatory nations, and for SOSA
exclusive compared to the U.S.-Canada relationship
signatories to request the same from U.S. firms.
primarily, or the National Technology and Industrial Base
(NTIB)—a statutorily established designation that includes
This In Focus considers the background of SOSAs in the
the U.S., Australia, Canada, and the UK.
context of a globally integrated defense industrial base, as
well as potential policy considerations for Congress to
DPA Regulations and SOSAs
advance national security and homeland defense.
Under Title I of the Defense Production Act (DPA), the
President has the authority to prioritize the performance of
Background
a contract for the promotion of the national defense, broadly
SOSAs are non-binding international agreements that
defined. Title I authorities are governed under Executive
provide a framework for the U.S. to receive and provide
Order (E.O.) 13603, which delegates DPA authorities to
priority support for defense-related goods and services with
certain cabinet secretaries across multiple sectors of the
signatory nations. SOSAs are conducted under bilateral
civilian economy. Those delegations are:
“Declarations of Principles for Enhanced Cooperation in
Matters of Defense Equipment and Industry,” that establish
1. the Secretary of Agriculture with respect
a framework for the signatories to follow in order to assure
to food resources, food resource facilities,
supply. SOSAs are the practical extension of these
livestock resources, veterinary resources,
principles and are negotiated by DOD (in coordination with
plant health resources, and the domestic
other executive branch agencies, particularly the State and
distribution of farm equipment and
Commerce Departments) with a counterpart foreign
commercial fertilizer;
government agency—usually the defense ministry (MoD).
2. the Secretary of Energy with respect to all
Currently, the U.S. has active SOSAs with: Australia
forms of energy;
(signed in 2011); Finland (2007); Italy (2003); the
3. the Secretary of Health and Human
Netherlands (1978); Norway (2018); Spain (2015); Sweden
Services (HHS) with respect to health
(1987); and the United Kingdom (UK, 2017). Although
resources;
Canada does not have a SOSA, the Department of
Commerce has a Memorandum of Understanding (MOU)
4. the Secretary of Transportation with
with Public Services and Procurement Canada to mutually
respect to all forms of civil transportation;
prioritize defense purchases (signed in 1998). This MOU
5. the Secretary of Defense with respect to
operates like a SOSA.
water resources; and
6. the Secretary of Commerce with all other
SOSAs represent one of many potential mechanisms for
materials, services, and facilities,
multinational DIB cooperation. In addition to SOSAs, these
including construction materials.
mechanisms can include broad defense cooperation
agreements (which provide the framework for SOSAs), as
Under the same E.O., each Secretary is required to develop
well as more targeted agreements known as Reciprocal
regulations to prioritize and allocate resources and establish
Defense Procurement and Acquisition Policy (RDP)
standards and procedures to promote the national defense.
MOUs, which allow DOD to exempt designated countries
Although E.O. 13603 governs these standing designations,
they may be amended or superseded at the President’s
from procurement constraints under the Buy American
statute (see 41 U.S.C. §§83, et seq.).
discretion. Six such regulations exist, which in totality are
known as the Federal Priorities and Allocations System
Canada may be the United States’ closest international
(FPAS) and encompass: (1) the Agriculture Priorities and
defense partner, due in part to interdependencies that grew
Allocation System, by the Department of Agriculture (7
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Security of Supply Arrangements (SOSAs): Background and Issues
C.F.R. §789); (2) the Energy Priorities and Allocations
SOSAs, etc.). While they represent a spectrum of graduated
System, by the Department of Energy (10 C.F.R. §217); (3)
DIB integration, their relationship to each other—and to
the Health Resources Priorities and Allocations System, by
other international agreements (such as alliances, strategic
the Department of Health and Human Services (45 C.F.R.
partnerships, and various other special agreements or
§101); (4) the Transportation Priorities and Allocations
designations) is less clear. As such, Congress may consider
System by the Department of Transportation (49 C.F.R.
elaborating in statute how such agreements, including
§33); (5) the Defense Priorities and Allocations System
SOSAs, fit into U.S. national security and defense policy,
(DPAS) by the Department of Commerce (15 C.F.R. §700);
and provide statutory authorization for their development.
and (6) the Emergency Management Priorities and
Allocations System (EMPAS) by the Federal Emergency
Relatedly, given interest among allies and partners to
Management Agency under E.O. 13911 (44 C.F.R. §333).
integrate more closely with the U.S. DIB, Congress may
consider establishing principles to create mutual defense
DOD has not issued a priorities and allocations system with
industry integration pathways that support U.S. defense and
respect to water resources. DOD, by far the most
national security requirements and take a broader view of
historically frequent user of DPA authorities, has received
international and national security cooperation. This could
sub-delegated Title I authorities from the Department of
potentially privilege treaty allies (e.g. NATO members,
Commerce’s Bureau of Industry and Security (BIS), which
Japan, and Australia) primarily, and Major Non-NATO
issues and oversees DPAS implementation. SOSAs are
Ally designees (e.g., Argentina, Israel, New Zealand, etc.)
implemented through the DPAS, which is the most
and strategic partners (e.g., Bahrain, Georgia, Mexico, etc.)
frequently used and broadest regulatory framework among
secondarily.
the FPAS.
In addition, because SOSAs are non-binding, they are
SOSAs and the DPAS
potentially more vulnerable to contravention, including
Although the DPAS and DPA have no legal authority
during emergencies or other contingencies. As a result, it is
outside of the United States, DPAS also includes guidance
conceivable that a company within a SOSA partner country
for exercising non-binding assistance for selected foreign
could benefit from preferred access to the U.S. DIB, but
partners. The DPA priorities authority applies to the
may fail to fulfill U.S. requests later. As such, Congress
prioritization of contracts to support an approved national
may consider developing statutory mechanisms to better
defense and/or energy program. Under the DPAS, the
incentivize cooperation and discourage non-compliance—
BIS—or its designated delegate, like DOD—may place
such as the termination of a SOSA for a designated period
priority ratings on certain contracts. The DPAS allows for
after a determination of improper non-compliance.
requests for priority assistance from any foreign entity, but
it provides special preferences for countries with which
Related Reading
DOD has a SOSA.
The following CRS reports and products may provide
additional context:
SOSAs allow DOD to request priority delivery of goods,
via contracts, subcontracts, or orders, from companies in
 CRS Report R43767, The Defense Production Act of
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the signatory country, and vice versa. The DPAS also
1950: History, Authorities, and Considerations for
provides guidance to signatory countries making requests
CongressThe Defense Production Act of 1950: History,
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for priority delivery from U.S. companies or a SOSA
Authorities, and Considerations for Congress, by
partner country, indicating that they should contact the
Michael H. Cecire and Heidi M. Peters;
DOD DPAS lead, which currently resides within the DOD
Industrial Policy office. Although SOSAs provide priority
 CRS In Focus IF10548, Defense Primer: U.S. Defense
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assistance preferences to the U.S. and the partner country,
Industrial BaseDefense Primer: U.S. Defense Industrial
they are non-binding and confer no legal obligations.
Base, by Heidi M. Peters;
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Individual SOSAs provide more detailed guidance for
 CRS In Focus IF11311, Defense Primer: The National
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requesting priority assistance. The most recent SOSA,
Technology and Industrial BaseDefense Primer: The
signed in 2018 between DOD and Norway’s MoD, includes
National Technology and Industrial Base, by Heidi M.
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language to communicate intent behind the SOSA; actions
Peters;
for the SOSA’s implementation; designated points of
contact and review (DOD and Norway’s MoD); and the
 CRS Report R46814, The U.S. Export Control System
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effective date and terms of the SOSA. Several SOSAs,
and the Export Control Reform Act of 2018The U.S.
including the one with Norway, provide for the issuance of
Export Control System and the Export Control Reform
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a code of conduct to govern SOSA implementation for
Act of 2018, coordinated by Ian F. Fergusson;
priority assistance. Four SOSA partner countries—Finland,
Italy, Sweden, and the UK—have promulgated codes of
 CRS Report R46628, COVID-19 and Domestic PPE
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conduct and published lists of participating companies.
Production and Distribution: Issues and Policy
OptionsCOVID-19 and Domestic PPE Production and
Policy Considerations
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Distribution: Issues and Policy Options, coordinated by
Currently, SOSAs may be considered part of a broader
Michael H. Cecire; and
overlapping array of international mechanisms for DIB
cooperation and integration (e.g., U.S.-Canada; NTIB;
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Security of Supply Arrangements (SOSAs): Background and Issues
 CRS In Focus IF11767, The Defense Production Act
Michael H. Cecire, , Analyst in Intergovernmental
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Committee (DPAC): A PrimerThe Defense Production
Relations and Economic Development
Act Committee (DPAC): A Primer, by Michael H.
Policymcecire@crs.loc.gov, 7-7109
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Cecire.
Heidi M. Peters, , Analyst in U.S. Defense Acquisition
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Policyhpeters@crs.loc.gov, 7-0702
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