
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-107 Section 343(a)]
[CITE: 10USC2563]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                PART IV--SERVICE, SUPPLY, AND PROCUREMENT
 
        CHAPTER 152--ISSUE OF SUPPLIES, SERVICES, AND FACILITIES
 
Sec. 2563. Articles and services of industrial facilities: sale 
        to persons outside the Department of Defense
        
    (a) Authority To Sell Outside DOD.--(1) The Secretary of Defense may 
sell in accordance with this section to a person outside the Department 
of Defense articles and services referred to in paragraph (2) that are 
not available from any United States commercial source.
    (2)(A) Except as provided in subparagraph (B), articles and services 
referred to in paragraph (1) are articles and services that are 
manufactured or performed by any working-capital funded industrial 
facility of the armed forces.
    (B) The authority in this section does not apply to sales of 
articles and services by a working-capital funded Army industrial 
facility (including a Department of the Army arsenal) that manufactures 
large caliber cannons, gun mounts, recoil mechanisms, ammunition, 
munitions, or components thereof, which are governed by regulations 
required by section 4543 of this title.
    (b) Designation of Participating Industrial Facilities.--The 
Secretary may designate facilities referred to in subsection (a) as the 
facilities from which articles and services manufactured or performed by 
such facilities may be sold under this section.
    (c) Conditions for Sales.--(1) A sale of articles or services may be 
made under this section only if--
        (A) the Secretary of Defense determines that the articles or 
    services are not available from a commercial source in the United 
    States;
        (B) the purchaser agrees to hold harmless and indemnify the 
    United States, except in any case of willful misconduct or gross 
    negligence, from any claim for damages or injury to any person or 
    property arising out of the articles or services;
        (C) the articles or services can be substantially manufactured 
    or performed by the industrial facility concerned with only 
    incidental subcontracting;
        (D) it is in the public interest to manufacture the articles or 
    perform the services;
        (E) the Secretary determines that the sale of the articles or 
    services will not interfere with the military mission of the 
    industrial facility concerned; and
        (F) the sale of the goods and services is made on the basis that 
    it will not interfere with performance of work by the industrial 
    facility concerned for the Department of Defense.

    (2) The Secretary of Defense may waive the condition in paragraph 
(1)(A) and subsection (a)(1) that an article or service must be not 
available from a United States commercial source in the case of a 
particular sale if the Secretary determines that the waiver is necessary 
for reasons of national security and notifies Congress regarding the 
reasons for the waiver.
    (d) Methods of Sale.--(1) The Secretary shall permit a purchaser of 
articles or services under this section to use advance incremental 
funding to pay for the articles or services.
    (2) In the sale of articles and services under this section, the 
Secretary shall--
        (A) charge the purchaser, at a minimum, the variable costs, 
    capital improvement costs, and equipment depreciation costs that are 
    associated with the articles or services sold;
        (B) enter into a firm, fixed-price contract or, if agreed by the 
    purchaser, a cost reimbursement contract for the sale; and
        (C) develop and maintain (from sources other than appropriated 
    funds) working capital to be available for paying design costs, 
    planning costs, procurement costs, and other costs associated with 
    the articles or services sold.

    (e) Deposit of Proceeds.--Proceeds from sales of articles and 
services under this section shall be credited to the funds, including 
working capital funds and operation and maintenance funds, incurring the 
costs of manufacture or performance.
    (f) Relationship to Arms Export Control Act.--Nothing in this 
section shall be construed to affect the application of the export 
controls provided for in section 38 of the Arms Export Control Act (22 
U.S.C. 2778) to items which incorporate or are produced through the use 
of an article sold under this section.
    (g) Definitions.--In this section:
        (1) The term ``advance incremental funding'', with respect to a 
    sale of articles or services, means a series of partial payments for 
    the articles or services that includes--
            (A) one or more partial payments before the commencement of 
        work or the incurring of costs in connection with the 
        manufacture of the articles or the performance of the services, 
        as the case may be; and
            (B) subsequent progress payments that result in full payment 
        being completed as the required work is being completed.

        (2) The term ``not available'', with respect to an article or 
    service proposed to be sold under this section, means that the 
    article or service is unavailable from a commercial source in the 
    required quantity and quality or within the time required.
        (3) The term ``variable costs'', with respect to sales of 
    articles or services, means the costs that are expected to fluctuate 
    directly with the volume of sales and--
            (A) in the case of articles, the volume of production 
        necessary to satisfy the sales orders; or
            (B) in the case of services, the extent of the services 
        sold.

(Added Pub. L. 103-337, div. A, title III, Sec. 339(a)(1), Oct. 5, 1994, 
108 Stat. 2718, Sec. 2553; amended Pub. L. 106-65, div. A, title III, 
Sec. 331(a)(2), (b), Oct. 5, 1999, 113 Stat. 566, 567; renumbered 
Sec. 2563, Pub. L. 106-398, Sec. 1 [[div. A], title X, Sec. 1033(b)(1)], 
Oct. 30, 2000, 114 Stat. 1654, 1654A-260.)


                               Amendments

    2000--Pub. L. 106-398 renumbered section 2553 of this title as this 
section.
    1999--Subsec. (c). Pub. L. 106-65, Sec. 331(a)(2), designated 
existing provisions as par. (1), redesignated former pars. (1) to (6) as 
subpars. (A) to (F), respectively, of par. (1), and added par. (2).
    Subsec. (g)(2), (3). Pub. L. 106-65, Sec. 331(b), added par. (2) and 
redesignated former par. (2) as (3).


                             Effective Date

    Section 339(b) of Pub. L. 103-337 provided that: ``Section 2553 [now 
2563] of title 10, United States Code, as added by subsection (a), shall 
take effect on April 1, 1995.''

                  Section Referred to in Other Sections

    This section is referred to in section 7300 of this title.
