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It will also eliminate recoupment on military products that are either not classified as MDE or not exported for military uses. Thus, for example, recoupment will no longer be required on the sale of aircraft engines for use on commercial airliners.

The Department's action will eliminate recoupment under all new non-MDE contracts and, to the extent permitted by law, under all existing non-MDE contracts as well.

In addition, the Administration will work with Congress to achieve the elimination of recoupment fees on MDE exportad for military uses.

The Arms Export Control Act currently requires the Department of Defense to collect recoupment fees on sales of MDE through the Foreign Military Sales Program, which accounts for mest MDE sales.

The Administration will work with Congress to lift this requirement, and to find mutually acceptable budget offsets.

2 Benefits of the New Policy. The new policy will produce several important benefits:

O

It will make U.§. companies more competitive against foreign suppliers, which typically are not subject to recoupment requirements. The new policy will enhance the ability of American firms to compete for billions of dollars of business that they might otherwise lose. It will also eliminate paperwork and administrative costs associated with the present policy, which, according to industry estimates, exceed $40 million per year.

It will fasilitate efforts by defens--oriented companies to shift toward commercial activiILE. The new policy will give defense contractors an incentive to develop products and technologies with larger markets. It will also eliminate costly tracking requirements that would otherwise discourage contractors from consolidating military and commercial operations. Such consolidation will facilitate the transfer of technology and ideas within companies, and will allow enhanced economies of scale and scope.

It will contribute to US. national security by strengthening defense-oriented U.S. companies. The new policy will also reduce defense costs by encouraging defense contractors to incorporate commercial technologies into military products. Eliminating recoupment will not affect national security controls, such as export licensing requirements, which will continue to ensure that sophisticated U.S. technologies do not fall into the wrong hands.

will preserve tens of thousands of American dobs in high- technology firms located throughout the country.