oversight

Agreement for Disposal of Foreign Excess U.S. Personal Property in Iceland

Published by the Government Accountability Office on 1971-03-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  COMPTROLLER     GENERAL     OF   THE      UNITED       STATES
                                WASHINGTON,    D.C.      20548




                                                                                  llllllllllllllIIllllIIIlllllllllll
                                                                                        LM095676


B-l 72173                                                                     MAR 3 1 1971


Dear Senator Proxmire:
     In response to your request of November11, 1970, and subsequent
discussions with your office we are providing information relating to
                                      excess United States personal
                                      ~~~e~o~~~~~~~~~~-~~~~
                    % with the Iceland Governmentincludes, (2) whether
the provisions of the agreement were in accordance with relevant
policy guidance, and (3) how the agreement with Iceland compares with
agreements pertaining to disposal of foreign excess United States
personal property in other countries.   In addition it was agreed
that we would compare the rate of return from disposal activities in
Iceland with the rate of return worldwide.
     We reviewed the terms of the agreement between the United States
and Iceland pertaining to disposal of foreign excess United States
personal property and compared these terms with relevant policy
guidance, and with foreign excess property disposal agreements between
the United States and China, Italy, Denmark (concerning Greenland),
and Turkey.
      We found that:
            --The agreement with Iceland provides that any sales of
              foreign excess property in Iceland must be made through
              the Icelandic Government or its agent on a negotiated
              basis unless otherwise mutually agreed between the two
               Governments. The United States may remove the property
              from Iceland without any restrictions,   in the event the
              United States does not choose to sell the property in
               Iceland, or agreement for sale in Iceland is not reached.
            --The agreement with Iceland is within the allowable limits
               of Department of Defense policy guidance and was coordinated
              with the Department of State for foreign policy consideration
              as required by the Federal Property and Administrative
               Services Act of 1949, as amended.




                            SOTH ANNIVERSARY                     1921-   1971 b5a5i!
           --The agreement with Iceland, relative to the foreign
              excess property disposal agreements with four other
              countries, is generally more restrictive  in that it
              provides for negotiated sales whereas the other four
              agreements provide for a combination of negotiated
              and competitive bid sales. Also, the rates of return
              from foreign excess disposal activities  in Iceland for
              fiscal year 1970 were lower than the return on world-
             wide foreign sales.
      These matters are discussed in more detail     in the following
sections.
The Agreement with Iceland
      The general agreement between the United States and Iceland
entitled  "Defense of Iceland Pursuant to North Atlantic Treaty"
was signed and entered into force on May 5, 1951. The general
agreement contains the basic conditions for establishing U.S.
military facilities  in Iceland. Several annexes have been nego-
tiated implementing the detailed arrangement in the general
agreement. Disposal of U.S. excess personal property was provided
for in a classified general annex which allowed disposal in Iceland
by the United States as agreed upon with the Icelandic authorities.
The general annex was further implemented in an unclassified operating
agreement signed in 195'3 by a United States Air Force officer, as
commandingofficer of the Icelandic Air Defense Force, and a repre-
sentative of the Icelandic Government.
      The 195'3 operating agreement was updated in 1962 in the form of
a new agreement containing essentially the sameprovisions as the 1953
agreement. The new agreement was approved by the commandingofficer
of the Icelandic Defense Force and the Minister for Foreign Affairs
of the Republic of Iceland.    Both the 1953 and the current 1962
operating agreements provide that the agreement may be terminated by
either party upon written notice.
      The operating agreement further provides, in effect, for negotiated
sales in that all salvage, excess or surplus property sold in Iceland
must be sold to the duly appointed agent of the Icelandic Government
unless other disposal is arranged by mutual agreement. Otherwise the
United States may remove the property from Iceland as it chooses.




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    Conformance of Icelandic Agreement
    with Relevant Policy Guidance
      The Department of Defense Disposal Manual requires that foreign
excess disposal programs be developed and conducted with the coordi-
nation and approval of the State Department. The Federal Property
and Administrative Services Act of 1949, as amended, requires that
disposal of foreign excess property conform to the foreign policy of
the United States.
     The Department of Defense Disposal knual, .!tl60.21-M provides that
it is the policy to sell foreign excess property by competitive type
sales to the maximumextent practicable.    However, it also provides
exceptions to competitive bid sales as follows:
          fl+%~in some instances, the host government concerned
          may insist on having the first right of refusal on
          U.S. Foreign excess property generated in the country;
          or may insist on being the only authorized buyer or the
          only authorized sales agency. ++++* Sale by negotiation
          may be madewhen approved by the major overseas commander,
          whenever he determines that it will be in the best interest
          of the United States to dispose of the property by nego-
          tiation rather than by competitive bid.11
     The operating agreement with Iceland was negotiated and signed
in 1953 by the local United States military commander,and approved
by the State Department representative in Iceland and forwarded to
the State Department in Washington for their consideration.
      We believe the agreement with Iceland is within the allowable
limits of Department of Defense policy guidance and conforms to the
Federal Property and Administrative Services Act of 1949, as amended,
inasmuch as it was coordinated with the Department of State for
foreign policy consideration.
The Agreement with China
     The agreement with China was executed by the United States
Ambassadorat Taipei and the Chinese Knister of Foreign Affairs    by
an exchange of notes signed at Taipei July 22, 1959.
      In the agreement with China it is provided that the Chinese
Governmentneed not be consulted in connection with sales of waste
such as refuse, containers and packaging materials in less than
commercial quantities and such material may be sold directly.  All
other excess material, whether scrap or usable property, must be
offered first to the Chinese Government for first right of refusal,



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If no agreement is reached on sale to the Chinese Government, and
the Chinese Government does not object for security reasons, the
material may be offered to other private customers for use in China
or for export.
The Agreement with Italy
     The agreement with Italy was executed by a representative of
the State Department and a representative of the Republic of Italy.
It was signed at Romeon June 22, 1957.
       In the case of Italy the agreement requires different procedures
depending on whether the excess property is waste, scrap or usable
property.    As in the agreement with China waste such as garbage,
refuse, or shipping containers may be sold without consultation with
the Italian Government. However, in Italy the amount of waste which
can be sold without consultation with the Italian Government is not
restricted to amounts less than commercial quantities.
      In regard to excess waste and scrap not in the class of refuse
or garbage and including materials such as ferrous and nonferrous
scrap metal, the agreement provides that the Italian Government has
the first right of refusal.   If the Italian Government does .not elect
to purchase the material it may be sold to individuals, firms or non-
governmental entities authorized to do business in Italy in aggregate
total of $400,000 sales value in a calendar year. The agreement also
provides that the ceiling of $kOO,OOO   may be increased to meet require-
ments in any particular year. We were also informed that Italy waived
the right of first refusal on waste and scrap in a note as of
June 10, 1958,
       In regard to usable excess property, the Italian Government has
the right to first refusal and the right to disapprove any sales to
Italian individuals, firms or other entities authorized to do business
in Italy whether the purchases might be for internal use or for export.
Sales to foreign customers for export are not subject to any restric-
tions.
The Agreement Concerning Greenland
     Greenland is an integral part of The Kingdomof Denmark. The
agreement concerning Greenland was executed by the United States
Ambassadorto Denmarkand a representative of the Government of The
Kingdomof Denmark. It was signed at Copenhagenon April 27, 1951
and entered into force on June 8, 1951.



                                                                            -4-
     The official agreement with Denmark concerning the Defense
of Greenland provides that after consultation with the Danish
authorities,  the United States may either remove the property
from Greenland free of restriction  or dispose of it in Greenland.
      To implement the excess property disposal provisions of the
agreement for the Defense of Greenland an operating agreement was
entered into on July 10, 1957 between the Chief of Staff of the
Headquarters Eighth U.S. Air Force and the Director of the Royal
Greenland Trade Department as agent for the Denmark Government.
The operating agreement provides that all salvage, excess or
surplus property sold in Greenland for internal use or for export
shall be first offered for sale to the Royal Greenland Trade
Department. If the Royal Greenland Trade Department does not make
an acceptable bid it may then be offered to all eligible bidders.
The Agreement with Turkey
     The agreement with Turkey was executed by the United States
Ambassadorto Turkey and the Turkish Minister of Foreign Affairs.
It was effected by an exchange of notes signed at Ankara October 6
and November13, 1959.
      The agreement with Turkey provides for disposal of excess
personal property in essentially the samemanner as provided in the
Icelandic agreement. For instance, the Turkish agreement provides
that the property may be sold in Turkey only through an agent desig-
nated in the agreement. However, the agreement with Turkey is more
liberal than the agreement with Iceland in that if no agreement is
reached with the agent the United States may sell the property to
a foreign customer (non-Turkish) for export from Turkey.
Comparison of Return Between Iceland
and Worldwide Property Disposal Activities
     We compared the acquisition cost, tonnage, sales receipts, and
the percent of return between Iceland and worldwide foreign excess
property disposal activities.
       In the case of usable property for fiscal year 1970, the disposal
activities   in Iceland reported sales of usable property having an
acquisition cost of $269,154 with receipt of $4,172 for a return of
1.5 percent. The Department of Defense reported worldwide foreign
excess property sales of usable property for fiscal year 1970 as having
an acquisition value of $231,148,7OL~.  and receipts of $14,824,2&6 for
a return of 6.4 percent.


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