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Viewing cable 08SEOUL2429, U.S.-ROK SMA AGREEMENT INITIALED

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Reference ID Created Released Classification Origin
08SEOUL2429 2008-12-18 06:53 2011-08-25 00:00 UNCLASSIFIED Embassy Seoul
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