Security Assistance Management Manual (SAMM), E-Change 550 
Reduction to the Foreign Military Sales (FMS) Administrative Surcharge Initial Deposit Rate

1. Update SAMM Section C9.6.1.2.5. to read as follows:

   C9.6.1.2.5. The U.S. Mission to NATO budgets for waived FMS Administrative Surcharges, advises DSCA of agreements to reimburse DoD for waived FMS Administrative Surcharges before the LOA is issued to NSPO, and develops an understanding with NSPO concerning programs for which waivers are supported. The U.S. Mission reserves and obligates MFP 10 funds for waived FMS Administrative Surcharges under this legislation for the life of the FMS case. For cases where the calculated FMS Administrative Surcharge value is greater than $30,000, 35 percent of the FMS Administrative Surcharge is recouped as part of the initial deposit. The remaining 65 percent is recouped based on the delivery schedule of the line.

2. Update SAMM Section C9.9.1.5.2.8. to read as follows:

   C9.9.1.5.2.8. FMS Administrative Surcharge and Accessorial Charges. Payment schedule distributions for the FMS Administrative Surcharge and accessorial costs are based on estimated delivery of the primary items or services. The Initial Deposit includes 35 percent of the FMS Administrative Surcharge. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value is included in the Initial Deposit. Any exceptions to this policy must be approved by DSCA (Office of Business Operations (OBO), Financial Policy and Regional Execution (FPRE), Financial Policy (FP)).

3. Update SAMM Table C9.T17. to read as follows:

   CONDITION	INITIAL DEPOSIT AMOUNT
   Delivery of the defense article or service is longer than 90 days after LOA acceptance.	Any Small Case Management Line (SCML) value; plus dollar value associated with performance until a quarterly payment can be made; plus 35 percent of the total FMS Administrative Surcharge. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.
   No performance scheduled on the case and no contractual actions occur during the period prior to the first quarterly payment.	Any SCML value; plus 35 percent of the total FMS Administrative Surcharge. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.
   When items are placed on contract before the first quarterly payment and no Standby Letter of Credit (SBLC) applies.	Any SCML value; plus 35 percent of the total FMS Administrative Surcharge; plus that portion of TERMINATION LIABILITY required if the contract is terminated during the period covered by the Initial Deposit; plus contractor holdback. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.

Implementation Guidance
Reduction to the Foreign Military Sales (FMS) Administrative Surcharge Initial Deposit Rate

1. Scope

   1. The 35 percent FMS Administrative Surcharge Initial Deposit Rate applies to:

      All basic Letters of Offer and Acceptance (LOAs) "implemented" on or after 1 October 2021.

   2. The 35 percent FMS Administrative Surcharge Initial Deposit Rate does not apply to:

      Cases and/or case line items "implemented" prior to 1 October 2021. These existing cases will continue to be assessed at the rate that was in effect at the time they were implemented.

2. FMS Cases in "Offered" Status Prior to 1 October 2021.

   LOAs "offered" prior to 1 Oct 2021, will not reflect the lower admin surcharge Initial Deposit amount based on 35 percent. These LOAs will still reflect the 50 percent FMS Administrative Surcharge Initial Deposit amount. The partner must request a pen and ink change from their respective Country Financial Director (CFD) and Implementing Agency (IA) Case Manager if they want the initial deposit reduced. The pen and ink change will be made to the front page of the Letter of Offer and Acceptance initial deposit value, as well as the payment schedule outlined in the LOA, to reflect the 35 percent initial deposit requirement and updated payment schedule. The IA Case Manager must add a case remark referencing the change for auditability. After the funds are received, DSCA will coordinate with DFAS to implement the case.

3. FMS Cases in "Accepted" Status Prior to 1 October 2021.

   LOAs in "accepted" status prior to 1 Oct 2021 can no longer receive a pen and ink change. If the partner wants to pay the 35 percent initial deposit, they can request a deferment of the 15 percent difference to a later point in time through a waiver from their respective CFD and IA Case Manager. The IA Case Manager must add a case remark in reference to the deferment for auditability. After the funds are received, DSCA will coordinate with DFAS to implement the case and defer the remaining initial deposit. This does not require a restatement of the LOA.

4. LOAs in Development Prior to 1 October 2021.

   For cases in development with "D" development, "W" (write), "R" (review), or "P" (proposed) status prior to 1 October 2021, the Case Writing Division will process the LOA with the new FMS Administrative Surcharge Initial Deposit Rate applied to the LOA. The Defense Security Assistance Management System will calculate the required initial deposit amount based on the new 35 percent initial deposit rate. No additional steps need to be taken to receive the new rate.