To promote rationalization, standardization, and interoperability of defense equipment within the North Atlantic Treaty Organization (NATO), Congress enacted the Culver-Nunn Amendment to the fiscal year (FY) 1977 Defense Authorization Act, which authorized the Secretary of Defense to waive the Buy American Act of 1933. Under this authority, the Department of Defense (DoD) negotiated and signed reciprocal procurement Memoranda of Understanding (MOUs) with most NATO countries. A second piece of legislation, the Roth-Glenn-Nunn Amendment to the FY83 Defense Authorization Act, Public Law 97-252, reaffirmed the U.S. commitment to NATO cooperation.
As a result of the Camp David Accords of 1979, DoD also negotiated similar but more limited agreements with Israel and Egypt. These agreements were revised in 1987 and 1988, respectively, and were elevated to the status of reciprocal procurement MOUs. For national security considerations, MOUs were also negotiated with Switzerland, Australia, and more recently, Sweden.
An MOU is a bilateral agreement between the DoD of the United States of America and the Ministry of Defense of an allied or friendly country. It calls for the waiver of "buy national" restrictions, customs, and duties in order to allow the contractors of the signatories to participate, on a competitive basis, in the defense procurements of the other country. The goal is to promote standardization and interoperability of defense equipment so we may better support each other in wartime.
To comply with the MOUs, the United States waives the Buy American Act, the Balance of Payments Program, and customs and duties on DoD procurements for products originating in the countries with which we have signed such an agreement. Similarly, the allies must waive their "buy national" restrictions.
Not all restrictions are waived by the MOUs. DoD, for instance, restricts to U.S. and Canadian sources procurements of any items determined to be vital in case of national mobilization or emergency. In addition, DoD restricts to U.S. sources certain procurements that include classified information or sensitive technology, procurements set aside for small businesses, and any other items restricted by law or regulation. The allies restrict similar items although, in some cases, their restrictions are not as well defined.
The MOU Countries
The United States has negotiated and signed 19 reciprocal and 2 non-reciprocal MOUs and the partner countries are listed below.
MOU PARTNER COUNTRIES
NATO NON-NATO OTHER NON-RECIPROCAL
Belgium Austria Egypt Australia
Denmark Finland Israel Canada
The MOUs have generally served the best interests of the United States and have been a good foundation for armaments cooperation. However, relationships with our defense trading partners have changed and we must adjust to an economically integrated European market. Moreover, pressures for increased allied burden sharing come at a time of European perceptions of a reduced military threat. We must ensure that the MOUs continue to foster armaments cooperation while preserving business opportunities for U.S. industry in foreign markets.
DoD continues to review these MOUs to reflect the current security and foreign policy environment. Where necessary, we will amend them to assure reciprocity for U.S. industry seeking business in the defense markets of our allies, just as they guarantee opportunity for the industries of our allies in the U.S. defense market.
Additional information or copies of the MOUs can be obtained from the following office within the Department of Defense:
Office of the Secretary of Defense
Room 2A326, The Pentagon
Washington, DC 20301
Tel: (202) 697-9351