Excess Defense Articles: Grants and Sales to Allies and Friendly Countries

Excess Defense Articles: Grants and Sales to Allies and Friendly Countries

Order Code RS20428
January 10, 2000
CRS Report for Congress
Received through the CRS Web
Excess Defense Articles: Grants and Sales
to Allies and Friendly Countries
(name redacted)
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The Excess Defense Articles (EDA) program provides one means by which the
United States can advance foreign policy objectives — assisting friendly and allied
nations through provision of equipment excess to the requirements of its own defense
forces. The current program is an outgrowth of military assistance programs developed
by the United States in the 1950s and 1960s to provide allies and friends with relatively
inexpensive military items during the Cold War. Since many EDA recipients already
have U.S. military equipment in their inventories, U.S. EDA items can supplement earlier
acquisitions at a reduced cost to the recipient. They can be made available through
outright grants or sales at a depreciated price. Among objectives furthered by transfer
of EDA are assisting modernization efforts of U.S. allies, assisting in multilateral
peacekeeping efforts, combating illegal narcotics production and narco-trafficking, and
aiding de-mining programs. United States Partnership for Peace (PfP) initiatives have
been augmented by providing grant EDA materiel which meets NATO standards;
supplying such equipment helps fulfill modernization and standardization needs of eligible
PfP partners in a timely and less costly manner.
This report provides background on the EDA program. It gives the rationale for the
program, discusses the key elements of the program, and how it operates. It provides
data on recent EDA transactions, and also discusses the means by which Congress
oversees the program and its uses. The report will be updated only if significant
developments occur regarding the EDA program.
Legal Authority
Authority for the EDA program is found in section 516 of the Foreign Assistance Act
of 1961, as amended (22 U.S.C. 2321j). Under current law, the President is authorized to
transfer excess defense articles if:
! such articles are drawn from existing stocks of the Defense Department;
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! Defense Department funds used for procurement of defense equipment are not
expended in connection with the transfer;
! transfer of the defense articles will not have an adverse impact on the military
readiness of the United States;
! transfers made on a grant basis are proposed because they are preferable to
transfers made on a sales basis after taking into account foreign policy benefits for
the United States of both kinds of transactions;
! the President determines that the transfers of these defense articles will not have an
adverse impact on the national technology and industrial base, in particular, that
they will not reduce opportunities for entities in the national technology and
industrial base to sell new or used equipment to nations to which such articles are
transferred;
! transfer of such defense articles is consistent with the U.S. policy framework for the
Eastern Mediterranean set out in section 620C of the Foreign Assistance Act of
1961, as amended.
Process for Making Excess Defense Articles Available to Recipients
Excess defense articles are defined in U.S. law as :
...defense articles (other than construction equipment, including tractors,
scrapers, loaders, graders, bulldozers, dump trucks, generators and
compressors) owned by the United States Government, and not required in
anticipation of military assistance or sales requirements, or pursuant to a military
assistance or sales order, which is in excess of the Approved Force Acquisition
Objective and Approved Force Retention Stock of all Department of Defense
Components at the time such articles are dropped from inventory by the
supplying agency for delivery to countries or international organizations....1
United States military departments determine what items are excess to their
requirements. Prior to any item being offered to a foreign country, it must also be excess
to the other military departments and agencies, as well as, the Reserves and National
Guard. The owning military department is responsible for conducting such screening.
Once an item has been declared excess, the Military Department will either propose it be
transferred to a foreign country or transfer it to the Defense Reutilization and Marketing
Office (DRMO) for further disposition. For major items, (e.g., tanks, ships, and weapons
systems) the military departments attempt to fill existing foreign requirements. If they
have more items than existing requirements, they will conduct a worldwide survey for
interest in these items. Whenever requirements exceed available items, the interagency
EDA Coordinating Committee will determine the allocation. Lesser items (e.g., clothing,
field equipment and vehicles) are usually transferred to the nearest DRMO for further
disposal. A foreign country may obtain items from the DRMOs by submitting a request
for them through official channels such as the U.S. Departments of State and Defense
either in the United States or overseas.
The EDA Coordinating Committee is co-chaired by the State Department and the
Defense Security Cooperation Agency (DSCA) of the Defense Department. It is
1Section 644(g) of the Foreign Assistance Act of 1961, as amended.

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comprised of representatives from the Joint Chiefs of Staff, the Commerce Department,
and key regional and policy program offices of the Defense Department. The State
Department is represented by its Politico-Military Bureau. The EDA Coordinating
Committee meets on an ad hoc basis to determine final allocation plans for EDA and
makes its recommendations to the State Department for approval. As the executive branch
agency responsible for arms transfer policy, the State Department has the ultimate
authority to approve or reject recommendations for EDA transfers made by the EDA
Coordinating Committee. The U.S. military departments, by regulation, are expressly
directed not to make a commitment of EDA items to a prospective recipient until the EDA
Coordinating Committee has reviewed and approved any such allocation, and such action
has been endorsed by the State Department.
The EDA Coordinating Committee, in reviewing prospective allocations of EDA
normally considers the following:
! the ability of the prospective recipient nation to utilize the items effectively;
! correlations of country requirements with items available;
! item location and transportation requirements;
! potential competition of EDA items with comparable new production items; and
! need for regional balancing in distribution of EDA as directed in U.S. law or to
achieve the maximum benefit for the United States through the transfer.
Excess defense articles are offered to eligible foreign recipients on an “as, where is” basis.
Articles can either be provided on a grant basis to certain eligible countries under section
516 of the Foreign Assistance Act of 1961, as amended, or sold at reduced cost (between
5% to 50% of original acquisition value, depending upon condition) to any Foreign
Military Sales (FMS) eligible country under section 21 of the Arms Export Control Act
(AECA). Although the excess item may be provided on a grant basis, the recipient is
responsible for any required refurbishment and repair of the EDA items, as well as any
associated packaging, crating, handling, and transportation costs. Services and follow-on
support may be purchased by EDA recipients from the Defense Department through the
Foreign Military Sales (FMS) program or commercially.
Although, by law, Defense Department funds are generally not to be expended for
“crating, packing, handling and transportation” of excess defense articles, the President
may provide for the “transportation” of such articles, without charge to the recipient
country, if it is determined to be in the “national interest” of the United States to do so and
the following additional criteria are met. The recipient must be a “developing nation”
receiving less than $10 million in Foreign Military Sales Financing or International Military
Education and Training (IMET) in the fiscal year the transportation is provided; the total
weight of the transfer must not exceed 25,000 pounds, and such transportation must be
provided on a “space available basis.”2
Congressional Role in Oversight of Excess Defense Articles Transfers
Congress in recent years has indicated its interest in using the Excess Defense Articles
program in support of U. S. foreign policy objectives by stipulating in law EDA program
2Section 516(e) of the Foreign Assistance Act of 1961, as amended..

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policy and requiring detailed reports from the President to facilitate its oversight of EDA
transfers. This interest has heightened as overall levels of U.S. foreign military assistance
funding have declined and the EDA program has become more useful as a low cost
supplement to America’s military aid programs. Congress has stipulated that NATO
member countries on the “southern and southeastern flank of NATO” and “major non-
NATO allies” on NATO’s southern and southeastern flank are to be given “priority to the
maximum extent feasible,” in the delivery of excess defense articles to other countries.3
Congress has further set a ceiling of $425 million on the aggregate value of grant excess
defense articles that may be transferred in any fiscal year beginning in FY2000.4
Before the President may transfer EDA items that are significant military equipment,
as defined by the Arms Export Control Act, (AECA) or excess defense articles valued at
$7 million or more (in terms of original acquisition cost) under either the AECA or the
Foreign Assistance Act of 1961, as amended, he must provide notice of such a proposed
transfer to specified congressional committees5 30 days in advance of such a transfer in
accordance with established reprogramming procedures. In the case of all sales of EDA,
prior to agreeing to such a transfer the President must submit details regarding the
proposed EDA transfer by sale at least 15 days in advance to the House and Senate
Appropriations Committees.
Once the congressional committees receive notification of prospective grants or sales
of excess defense articles, they can request detailed briefings on the prospective EDA
transfers if the committees deem them necessary. Current law does not provide for a
formal congressional disapproval process of a proposed Excess Defense Article transfer
such as it does for regular sales of defense articles and services. However, a practice has
developed between the Congress and the executive branch whereby the chairman of one
or more of the foreign policy committees or Foreign Operations subcommittees of the
Appropriations Committees can place a “hold” on a prospective EDA transfer until such
time as questions or concerns regarding it are met through consultations with the executive
branch. Even though it is not required to do so by law, as a matter of comity, the executive
branch has acknowledged congressional “holds” on proposed EDA transfers, and has
suspended them until congressional concerns have been addressed. This means that in
some cases, transfers of EDA have been suspended well past the 15 or 30 day statutory
notification period. Once a congressional “hold” has been lifted the EDA transfer can
commence immediately if the pertinent congressional notification period has passed.
Excess Defense Articles Transfer Activity
In fiscal years 1996 and 1997, the largest share of grant EDA offers went been to the
Near East and South Asian (NESA) region and to Europe. Based on the current value of
the EDA items, in FY1996, the NESA region received $289 million in grant offers and
$132 million in FY1997; $101 million in FY1998. During FY1996 the Europe region
3Section 516(c)(2) of the Foreign Assistance Act of 1961, as amended.
4Section 516(g) of the Foreign Assistance Act of 1961, as amended.
5Under section 634A(a) of the Foreign Assistance Act of 1961, these specified committees are the
Senate Foreign Relations Committee, the House Foreign Affairs (International Relations)
Committee and the House and Senate Appropriations Committees.

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received $164 million in grant offers. In FY1997, such offers to Europe totaled $150
million, and in FY1998 totaled $102 million. During FY1996, the nations receiving the
largest grant EDA offers were: Egypt ($133 million), Bahrain ($82 million), Greece ($63
million), Albania ($33 million), Morocco ($28 million) and Portugal ($22 million). In
fiscal year 1997, the countries receiving the largest grant EDA offers were: Turkey ($112
million), Jordan ($54 million), Greece ($26 million), Morocco ($26 million), and Argentina
($23 million). In fiscal year 1998 the countries receiving the largest grant EDA offers
were: Morocco ($61 million), Portugal ($55 million), Turkey ($25 million), Chile ($23
million), and Bahrain ($20 million).6
Total sales of EDA offered during fiscal years 1996 and 1997, by contrast, were
smaller than the totals for grant EDA offers during the same periods and were spread
primarily among the Near East and South Asia, Europe, and East Asia and Pacific regions.
In FY1996, the Near East and South Asia region received $92 million in EDA sales offers,
(based on the items current values), Europe received $91 million, and East Asia and the
Pacific $79 million. In FY1997, East Asia and the Pacific received $57 million in EDA
sales offers, while Europe received $11 million. The principal recipients of these EDA
sales offers in FY1996 were: Egypt ($90 million), the United Kingdom ($76 million),
Australia ($28 million), Taiwan ($23 million), and New Zealand ($13 million). In FY1997,
the leading recipients of EDA sales offers were: Australia ($56 million) and Germany ($7
million). In FY1998 the Near East and South Asia region received $127 million, while the
East Asia and Pacific region received $17 million in EDA sales offers. In FY1998, the
leading recipients of EDA sales offers were: Egypt ($126 million), Taiwan ($9 million),
Australia ($7 million), Mexico ($2) million, and Spain ($1 million).7
The Defense Department has stated that over time a number of excess defense article
items have been eliminated from United States defense equipment inventories, as U.S.
military forces have been reduced both overseas and at home. Some of these items were
transferred to U.S. allies and friends in Europe and in the Middle East in the late 1980s and
early 1990s. The Defense Department projects that in the future the overall quantity of
EDA available for transfer will decline as it nears the end of military downsizing efforts.
The following table shows the dollar value of Excess Defense Articles that have been
offered to foreign nations or organizations worldwide by the United States, either by grant
or by sale, for fiscal years 1991-1998. Figures are for current value of EDA offered.
It should be noted that EDA transfers have not approached the levels of U.S. Foreign
Military Sales (FMS) totals, even as FMS figures have declined in the post-Cold War
period. For example, during fiscal years 1997 and 1998, the total values of U.S. Foreign
Military Sales agreements worldwide were nearly $8.8 billion and $8.2 billion
respectively.8 The figures for total EDA grants and sales offered worldwide as shown in
Table 1 were, by contrast, $379 million and $399 million for fiscal years 1997 and 1998
respectively. The Defense Department notes that less than half of these offers have been
accepted. The FY1996 figure for all EDA offers ($765 million) is the highest annual EDA
6Data provided by Defense Security Cooperation Agency, Department of Defense.
7Ibid.
8Ibid

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offers total to date. It is a figure that is skewed by the fact that it contains within it the
values of offers to transfer excess Perry-class frigates and P-3 maritime patrol aircraft.
These defense equipment items are much more costly than EDA items typically
transferred.9 An examination of the data in Table 1 reveals that EDA offers totals have
been less than $400 million in most years in the period from FY1991-FY1998.
Table 1. Grants and Sales of Excess Defense Articles Offered and Accepted
Worldwide,
FY1991-FY1998
(in millions of dollars)a
Excess Defense
Excess Defense
Total Excess
Total Excess
Articles Grants
Articles Sales
Defense Articles
Defense Articles
Offered
Offered
Offered
Accepted
FY 1991
406
29
435
NA
FY 1992
178
52
230
NA
FY 1993
290
88
378
141
FY 1994
170
97
267
107
FY 1995
308
196
504
242
FY 1996
495
270
765
368
FY 1997
310
69
379
176
FY 1998
242
157
399
161
aData provided by Defense Security Cooperation Agency, Department of Defense. Comprehensive
data on excess defense articles grants and sales values have only been reported to Congress
since FY1991. Data on excess defense articles cases accepted were not systematically tracked
until FY1993.
9Ibid.

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