AMERICAN EMBASSY

No. 447

The Hague, April 15, 1954

Excellency:

I have the honor to refer to conversations which have taken place between representatives of our two Governments relating to a Memorandum of Understanding and a Model Contract for the United States Offshore Procurement Program in the Netherlands. These discussions resulted in agreement on a Memorandum of Understanding reading as follows:

“Memorandum of Understanding between the United States and the Netherlands Government relating to Offshore Procurement

“This Memorandum sets forth certain principles and policies which the Netherlands Government and the Government of the United States have agreed will govern the United States Offshore Procurement Program in the Netherlands.

“1. Scope and Purpose of the Offshore Procurement Program

“It is the intent of the United States Government under the offshore procurement program to conduct a program of military procurement in countries participating in the Mutual Security Program of those types of materials, services, supplies and equipment appropriate for United States military procurement and required either for the mutual security military aid program or for the direct use of United States Forces. The extent of this program in the Netherlands is dependent upon the ability of the United States Government to place contracts at reasonable prices and with satisfactory delivery dates. It is intended that the carrying out of this program will materially contribute to the combined defense productive capacity of the nations which are members of the North Atlantic Treaty Organization and the European Defense Community and will at the same time provide a means for increasing the dollar earnings of these countries.

“The United States Government will conduct the offshore procurement program in accordance with the laws of the United States governing military procurement and the Mutual Security Program. It is also the intent of the United States that the offshore procurement program shall be carried out in the Netherlands in furtherance of the principles set forth in Section 516 (A) of the Mutual Security Act of 1951, as amended, the Mutual Defense Assistance Control Act of 1951, and Article II (3) of the Economic Cooperation Agreement between the Netherlands Government and the Government of the United States of America signed in The Hague on July 2, 1948, as amended.

“2. Intergovernmental Coordination

“The procurement program of the United States Government of military items in the Netherlands will be coordinated with the defense program of the Netherlands Government as it develops. Appropriate officials of the two governments will consult together on a continuing basis to study production problems and the carrying out of recommendations for the procurement of items required by the United States Government. The two governments will exchange information, as needed, and on a continuing basis, with respect to procurement plans, production facilities in the Netherlands and progress in the achievement of production objectives in the Netherlands.

“Copies or abstracts of contracts executed with Netherlands private contractors will be furnished the Netherlands Government by the United States Government.

“3. Contract Placement by Contracting Officers

“It is understood that offshore procurement contract will be placed and administered on behalf of the United States Government by contracting officers of the United States Military Departments.

“4. Parties to Contracts

“United States contracting officers may contract with the Netherlands Government or directly with individuals, firms or other legal entities. It is the preference of the Netherlands Government that the United States Government contract directly with individuals, firms or other legal entities.

“5. Contract Assistance

“The Netherlands Government will, upon request of the contracting officer, provide assistance in the selection of contractors and technical information concerning prospective sub-contractors, and will assist the United States Government and individual contractors, to the extent necessary and appropriate, in the administering and carrying out of offshore procurement contracts.

“6. Supply of Equipment, Materials and Manpower

“The Netherlands Government will accord to offshore procurement contractors and their sub-contractors priorities for securing equipment, materials, manpower and services equal to those which are accorded contractors having similar types of contracts with the Netherlands Government.

“7. Security

“In the case of procurement contracts placed by the United States Government with the Netherlands Government, any classified material, including information, delivered by one government to the other, will be given a security classification by the recipient government which will afford to the material substantially the same degree of security as that afforded by the originating government and will be treated by the recipient government as its own classified material of that security grading. The recipient government will not use such material, or permit it to be used, for other than military purposes and will not disclose such material, or permit it to be disclosed, to another nation without the consent of the originating government. In cases of government-to-government contracts which involve the disclosure of top secret information, the Netherlands Government shall, when so requested by the contracting officer, undertake to assist the United States Government in maintaining restricted areas in accordance with Netherlands law concerning 'prohibited places'.

“In the case of procurement contracts placed by the United States Government with individuals, firms or other legal entities, security arrangements for classified material will be followed similar to those described in the preceding paragraph. Prior to the placement of the contract, the contracting officer will notify the prospective producer and the Netherlands Government of the security classification of the contract. Classified material of the United States Government needed by a Netherlands contractor will be delivered to the appropriate ministry of the Netherlands Government for transmittal to the contractor. Such material will, prior to transmittal, receive a security classification of the Netherlands Government which will afford to the material substantially the same degree of security as that afforded by the United States Government and at the time of transmittal the Netherlands Government will notify the contractor that the classified material delivered to it is also classified material of the Netherlands Government and is subject to the provisions of the Act on the Protection of Official Secrets. The Netherlands Government undertakes to enforce the security requirements and obligations placed upon private Netherlands contractors in possession of such classified material.

“In order to ensure adequate protection of classified information and material, the appropriate ministry of the Netherlands Government will, upon request, conduct a security investigation of any prospective Netherlands contractor with the United States Government in the same manner as such investigations are conducted in cases of defense procurement by the Netherlands Government, and a recommendation resulting from such investigation will be made to the United States Government.

“No charges will be made by the Netherlands Government for services rendered by its security services.

“8. Inspection