Legal Basis (Section 3 and Net Proceeds)
Each third party transfer submitted to PM/RSAT for approval undergoes a legal review to ensure it meets the requirements outlined in the Arms Export Control Act AECA (AECA) and the Foreign Assistance Act (FAA).
§ 3(a) of the AECA specifically addresses third party transfers:
"In considering a request for approval for any transfer of any weapon, weapons system, munitions, aircraft, military boat, military vessel, or other implement of war to another country, the President will not give his consent...to the transfer unless the United States would itself transfer the defense article under consideration to that country."
Third party transfers when grant equipment is involved:
Grant (Military Assistance Program (MAP), Excess Defense Articles (EDA), Foreign Military Funding (FMF)). In terms of grant U.S.-origin equipment, the same laws, regulations, and policy apply to third party transfer, disposal and change of end-use of FMS, except for the issue of net proceeds. Recipients of MAP equipment hold title to the equipment, if a recipient decides to transfer or dispose of its grant articles, the FAA requires all net proceeds be returned to the USG from disposal or sale of grant equipment transferred after 1985. State may waive net proceeds in cases dealing with pre-1985 grant equipment. Returned net proceeds go to the FMF account and can then be reused within the account for other FMF priorities. As FMF accounts shrank through the 1990's, these proceeds were an important source of additional funding to support the Secretary's priorities. Returned net proceeds go to the FMF account and can then be reused within the account when weighed with the Secretary's other priorities.