U.S.-ROK SMA AGREEMENT INITIALED

UNCLAS SEOUL 002429 SIPDIS E.O. 12958: N/A TAGS: MARR PREL PGOV KS SUBJECT: U.S.-ROK SMA AGREEMENT INITIALED REF: SECSTATE 131917 ¶1. (SBU) In accordance with reftel, A/DCM Joseph Yun and MOFAT Ambassador Cho Byung-jae initialed the SMA Agreement on Wednesday, December 17, and agreed on the text for the accompanying diplomatic note. A scanned copy of the initialed agreement has been sent to both EAP/K and USFK. ¶2. (SBU) The initialed text of the documents follows: -------------- Begin SMA Agreement Text. -------------- AGREEMENT BETWEEN THE REPUBLIC OF KOREA AND THE UNITED STATES OF AMERICA CONCERNING SPECIAL MEASURES RELATING TO ARTICLE V OF THE AGREEMENT UNDER ARTICLE IV OF THE MUTUAL DEFENSE TREATY BETWEEN THE REPUBLIC OF KOREA AND THE UNITED STATES OF AMERICA REGARDING FACILITIES AND AREAS AND THE STATUS OF UNITED STATES ARMED FORCES IN THE REPUBLIC OF KOREA The Republic of Korea and the United States of America (hereinafter referred to as "the Parties") have agreed to take the following special measures relating to Article V of the Agreement under Article IV of the Mutual Defense Treaty between the Republic of Korea and the United States of America Regarding Facilities and Areas and the Status of United States Armed Forces in the Republic of Korea (hereinafter referred to as "the Status of Forces Agreement") signed at Seoul on July 9, 1966, as amended, which sets forth the principles on the sharing of expenditures incident to the maintenance of the United States Armed Forces in Korea, in recognition of the goal of a strong and mutual commitment to the Republic of Korea - United States of America alliance. Article I The Republic of Korea shall bear, for the duration of this Agreement, as a special measure relating to Article V of the Status of Forces Agreement, a part of the expenditures associated with the stationing of the United States Armed Forces in Korea. The contribution of the Republic of Korea shall be categorized into Labor Cost Sharing, Logistics Cost Sharing, and Republic of Korea Funded Construction. Implementation of this Agreement shall be in accordance with a separate implementation arrangement between the concerned authorities of the Parties. Article II This Agreement shall determine the contribution of the Republic of Korea for 2009 through 2013. The contribution of the Republic of Korea for 2009 is 760 billion Korean Won. The 2010, 2011, 2012, and 2013 contributions shall be determined 
by increasing the contribution of the previous year by the inflation rate (Consumer Price Index) published by the Korea National Statistical Office using 2008's rate for the 2010 contribution, 2009's rate for 2011, 2010's rate for 2012, and 2011's rate for 2013. Further, the inflation rate used for any given year shall not exceed four percent. Article III The Labor Cost Sharing contributions shall consist of cash support and the Logistics Cost Sharing contribution in-kind support. Republic of Korea Funded Construction shall consist of cash contributions and in-kind contributions. Republic of Korea Funded Construction shall be gradually shifted to the in-kind contributions from 2009, and the contributions of Republic of Korea Funded Construction shall be completely in-kind starting from 2011 except expenses associated with design and construction oversight of facilities. If unexecuted in-kind contributions of Republic of Korea Funded Construction remain at the end of the year, those contributions shall roll over to the next year. Implementation details of the Republic of Korea Funded Construction, such as guiding principles and specific procedures, shall be in accordance with separate documents between the concerned authorities of the Parties. Each year's Labor Cost Sharing payments shall be made in three equal payments on or before April 1, June 1, and August 1 of that year. Republic of Korea Funded Construction contributions provided in cash shall be paid, before the completion of the shift, in two equal payments with 50 percent paid on March 1 of the program year and 50 percent paid one year later (March 1). After the completion of the shift, expenses associated with design and construction oversight of facilities shall be paid on March 1 of each program year. Article IV All materials, supplies, equipment and services provided as part of the in-kind contribution shall be exempt from Republic of Korea taxes, or provided on an after-tax basis. Such materials, supplies, equipment and services procured by the Government of the Republic of Korea shall be exempt from special excise taxes and value added taxes. In the case of value added taxes, the zero rate shall be applied. If taxes are levied against any such materials, supplies, equipment or services, payment of such taxes shall not be made from cost-sharing funding. Article V This Agreement shall enter into force upon the date of the exchange of written notification by the Parties that their respective domestic legal procedures necessary for the entry into force of this Agreement have been completed, and shall remain in force until December 31, 2013. The termination of this Agreement shall not affect the carrying out of any Republic of Korea Funded Construction projects which are selected every year in accordance with the agreed procedures under this Agreement, and not fully executed on or after the termination of this Agreement. Article VI The Parties may consult on all matters regarding this Agreement through the Joint Committee provided for in Paragraph 1 of Article XXVIII of the Status of Forces Agreement, or through the Joint Cost-Sharing Committee, which is composed of representatives appointed by the Parties. Article VII This Agreement may be revised or amended in writing by mutual consent. The revision or amendment of this Agreement shall enter into force on the date when the Parties exchange written notifications that their domestic legal requirements for such revision or amendment have been fulfilled. IN WITNESS WHEREOF, the undersigned, duly authorized for the purpose, have signed this Agreement. DONE at Seoul this day of December 2008, in duplicate, in the Korean and English languages, both texts being equally authentic. FOR THE REPUBLIC OF KOREA FOR THE UNITED STATES OF AMERICA End Text. -------------- Begin Diplomatic Note Text -------------- No. XXX The Embassy of the United States of America presents its compliments to the Ministry of Foreign Affairs and Trade of the Republic of Korea and has the honor to refer to recent discussions between representatives of our two governments regarding the Agreement between the Republic of Korea and the United States of America concerning special measures relating to Article V of the agreement under Article IV of the Mutual Defense Treaty between the Republic of Korea and the United States of America regarding facilities and areas and the Status of United States Armed Forces in the Republic of Korea signed on December XX, 2008 (hereinafter referred to as "the SMA") and proposes that the in-kind construction contributions be implemented in accordance with the following principles: (1) The Republic of Korea Funded Construction remains under the SMA. (2) The United States of America, after consultation with the Republic of Korea, selects and prioritizes construction projects based on military needs. (3) The Republic of Korea awards construction contracts and implements construction projects in accordance with the corresponding timeline as identified and developed during project design. (4) The United States is responsible for project design. (5) The United States provides design specifications and a list of acceptable contractors to the Republic of Korea. Contractors shall be Republic of Korea companies selected from the United States Army Corps of Engineers Far East District's Pre-Qualified contractor list. (6) Design and Construction oversight, which averages twelve (12) percent of the total project costs, is paid by the Republic of Korea in cash. (7) Any bid savings shall be used for future projects. (8) The United States and the Republic of Korea shall establish proper procedures to prevent unexecuted contributions. In the unlikely event that unexecuted contributions exist at the end of the year, those contributions shall roll over to the next year. (9) An annual review system shall be established to ensure "in-kind" procedures are working. For the project or projects where it is determined "in-kind" procedures are not working, the Republic of Korea and the United States shall consult in an effort to resolve the problem, and take proper actions to complete the project or projects including providing cash to the United States. Thirty (30) percent of the 2009 Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind, sixty (60) percent of the 2010 Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind, and from 2011 to 2013 eighty-eight (88) percent of the Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind. If the foregoing is acceptable to the Republic of Korea, the Embassy has the honor to propose that this note, together with the Ministry's reply, shall constitute an agreement between the two governments, which shall enter into force at the same time as the SMA. The Embassy of the United States of America avails itself of this opportunity to renew to the Ministry of Foreign Affairs and Trade the assurances of its highest consideration. Seoul, December XX, 2008. Reply Note: OSJ 2008- The Ministry of Foreign Affairs and Trade of the Republic of Korea presents its compliments to the Embassy of the United States of America and has the honor to refer to the Embassy's note (number) dated XXX, 2008, which reads as follows: The Embassy of the United States of America presents its compliments to the Ministry of Foreign Affairs and Trade of the Republic of Korea and has the honor to refer to recent discussions between representatives of our two governments regarding the Agreement between the Republic of Korea and the United States of America concerning special measures relating to Article V of the agreement under Article IV of the Mutual Defense Treaty between the Republic of Korea and the United States of America regarding facilities and areas and the Status of United States Armed Forces in the Republic of Korea signed on December XX, 2008 (hereinafter referred to as "the SMA") and proposes that the in-kind construction contributions be implemented in accordance with the following principles: (1) The Republic of Korea Funded Construction remains under the SMA. (2) The United States of America, after consultation with the Republic of Korea, selects and prioritizes construction projects based on military needs. (3) The Republic of Korea awards construction contracts and implements construction projects in accordance with the corresponding timeline as identified and developed during project design. (4) The United States is responsible for project design. (5) The United States provides design specifications and a list of acceptable contractors to the Republic of Korea. Contractors shall be Republic of Korea companies selected from the United States Army Corps of Engineers Far East District's Pre-Qualified contractor list. (6) Design and Construction oversight, which averages twelve (12) percent of the total project costs, is paid by the Republic of Korea in cash. (7) Any bid savings shall be used for future projects. (8) The United States and the Republic of Korea shall establish proper procedures to prevent unexecuted contributions. In the unlikely event that unexecuted contributions exist at the end of the year, those contributions shall roll over to the next year. (9) An annual review system shall be established to ensure "in-kind" procedures are working. For the project or projects where it is determined "in-kind" procedures are not working, the Republic of Korea and the United States shall consult in an effort to resolve the problem, and take proper actions to complete the project or projects including providing cash to the United States. Thirty (30) percent of the 2009 Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind, sixty (60) percent of the 2010 Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind, and from 2011 to 2013 eighty-eight (88) percent of the Republic of Korea Funded Construction contribution shall be provided by the Republic of Korea in-kind. If the foregoing is acceptable to the Republic of Korea, the Embassy has the honor to propose that this note, together with the Ministry's reply, shall constitute an agreement between the two governments, which shall enter into force at the same time as the SMA. The Embassy of the United States of America avails itself of this opportunity to renew to the Ministry of Foreign Affairs and Trade the assurances of its highest consideration. Seoul, December XX, 2008. The Ministry of Foreign Affairs and Trade of the Republic of Korea has the honor to inform the Embassy of the United States of America that the proposals set forth in the Embassy's note are acceptable to the Republic of Korea and to agree that the Embassy's note and this note shall be regarded as constituting an agreement between the two governments, which shall enter into force at the same time as the SMA. The Ministry of Foreign Affairs and Trade avails itself of the opportunity to renew to the Embassy of the United States of America the assurances of its highest consideration. Seoul, December xx, 2008 End text. STEPHENS