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Cablegate: U.S.-Rok Sma Agreement Initialed

VZCZCXYZ0001
OO RUEHWEB

DE RUEHUL #2429/01 3530653
ZNR UUUUU ZZH
O 180653Z DEC 08
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2679
INFO RHMFISS/COMUSKOREA J5 SEOUL KOR PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY

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

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