Federal Programs and Services Agreement Concluded Pursuant to Sections 221, 224, 225 and 232 of The Compact of Free Association

This Agreement is concluded by the signatory Governments and sets forth their respective authority and responsibility for the provision of the services and related programs authorized by Article II of Title Two and Section 232 of the Compact of Free Association (the Compact).

1. The Definition of Terms set forth in Article VI of Title Four of the Compact is incorporated into this Agreement.

2. For the purposes of this Agreement only, the following terms shall have the following meanings:

(a) "Federal agency" refers to each authority of the Government of the United States which provides services and related programs in accordance with Article II of Title Two and Section 232 of the Compact, including any successor agency or agencies, and does not include:

(b) "United States contractors" means the legal entities, including corporations and natural persons, present in the Marshall Islands or the Federated States of Micronesia for the purpose of executing their contracts with the Government of the United States, or subcontracts of such contracts, in support of the Federal agencies acting pursuant to Article II of Title Two and Section 232 of the Compact and who are designated as such by the Government of the United States. The term "United States Contractors" does not include local contractors.

(c) "Local Contractors" means the legal entities, including corporations and natural persons organized under the laws of and who are in, the Marshall Islands or the Federated States of Micronesia, respectively.

(d) "United States personnel" means anyone who is included in any of the following categories:

(e) "third country contractor personnel" means natural persons other than United States personnel or local hire personnel who are in the Marshall Islands or the Federated States of Micronesia and who are United States contractors or officers or employees of United States contractors or dependents of any of them.

(f) "local hire personnel" means citizens and nationals of the Marshall Islands or the Federated States of Micronesia who are employed in the Marshall Islands or the Federated States of Micronesia, respectively, by Federal agencies or United States contractors.

(g) "rawinsonde" means a method of upper-air observation consisting of an evaluation of the wind speed and direction, temperature, pressure, and relative humidity aloft by means of a balloon-borne radiosonde tracked by a radar or radio direction-finder. If radar is used for tracking, a radar target is also attached to the balloon. Thus, it is a radiosonde observation combined with a type of rawin observation.

1. The provision by the Government of the United States of any programs and related services to the Government of the Marshall Islands or the Federated States of Micronesia, as may be appropriated by the United States Congress, pursuant to this Agreement shall be contingent upon compliance by the Government of the Marshall Islands or the Federated States of Micronesia with the provisions of Sections 173 and 225 of the Compact. The Government of the United States shall, on an annual basis, seek the appropriation of such funds.

2. (a) The Government of the United States, Federal agencies and United States contractors and their respective assets, income and other property shall be exempt from all direct taxes and shall be exempt from all customs duties on the import and export of articles required for the official functions and personal use of United States personnel and official offices established in the Marshall Islands or the Federated States of Micronesia by a Federal agency. The Government of the United States and Federal Agencies shall be exempt from all customs restrictions, inspection and examination on such import and export.

(b) Income received by United States personnel for services with or employment by the Federal agencies or United States contractors, or from sources outside the territory of the Government concerned, are exempt from any tax, fee or other charge imposed by the Government of the Marshall Islands or the Federated States of Micronesia, except that United States contractor personnel and dependents who are also United States contractor personnel are not exempt from a personal income tax generally applicable within the Marshall Islands or the Federated States of Micronesia up to a level of five percent of their annual income derived from their employment in the Marshall Islands or the Federated States of Micronesia, respectively, by United States contractors.

3. United States personnel may import into and export from the Marshall Islands or the Federated States of Micronesia furniture, household goods and personal effects for their private use, including all forms of privately owned land, sea and air transportation, free from customs duties, license requirements and other import and export taxes, fees or charges.

4. Animals and plants, including fruits and vegetables, imported by United States personnel, subject to the provisions of this Article, and by third country contractor personnel shall be subject to the laws and regulations of the Marshall Islands or the Federated States of Micronesia, respectively, governing the inspection of and restrictions on such importations.

5. The Federal agencies, in cooperation with the Government concerned, shall take appropriate measures, including inspection, to prevent importation of contraband and to prevent abuse of privileges granted to United States personnel under this Article.

6. Should property imported into the Marshall Islands or the Federated States of Micronesia under the exemptions provided by this Article subsequently be transferred to a person not entitled to such exemptions, such person shall be liable for import duties and other charges according to the laws and regulations of the Government concerned.

7. Civilian employees shall have the privileges and immunities of a resident representative as set forth in Sections 152(b) and (e) of the Compact, and immunity from civil and criminal process and liability relating to or resulting from any wrongful act or omission done within the scope and in the performance of official duty, except insofar as such immunity is expressly waived by the Government of the United States. Civilian employees who have been arrested in connection with an offense not related to the performance of their official duties, shall be released to the custody of the resident representative or the head of their agency in the Marshall Islands or the Federated States of Micronesia, unless in the case of a grave crime a competent judicial authority decides that such civilian employees shall remain subject to detention by the local authorities.

8. (a) The authorities of the Federal agencies shall pay just and reasonable compensation in settlement of meritorious, noncontractual claims arising out of the wrongful acts or omissions occurring subsequent to the effective date of this Agreement in the Marshall Islands or the Federated States of Micronesia of the Federal agencies themselves, or of their civilian and local hire personnel, if such act or omission occurred within the scope and in the performance of official duty of the civilian and local hire personnel. All such claims shall be processed and settled by the respective Federal agencies in accordance with the laws and regulations of the United States. Any such claims which cannot be settled as provided for in this paragraph, and which are espoused by the Government concerned, shall be disposed of pursuant to the provisions of Article II of Title Four of the Compact.

(b) Contractual claims against the Federal agencies shall be settled in accordance with the disputes clause of the contract if any, and the laws of the United States relating to the resolution of such disputes. In the absence of such clause, the claims shall be presented to the appropriate United States authority; if no settlement is reached, the appropriate court of the United States shall have jurisdiction over such claims.

(c) The Government concerned shall present claims arising under this Article to the United States Resident Representative who shall forward such claims to the Competent Authority of the Federal Agency concerned. 149

9. Except as otherwise expressly provided in this Agreement, any dispute arising under this Agreement shall be disposed of exclusively pursuant to the provisions of Article II of Title Four of the Compact.

(a) The Federal agencies shall not be subject to the jurisdiction of the courts of the Government of the Marshall Islands or the Federated States of Micronesia under Article VII of Title One of the Compact for any claim under paragraph 8 of this Article arising in the Marshall Islands or the Federated States of Micronesia from the acts or omissions of the Federal Agencies occurring subsequent to the effective date of the Compact. All such claims shall be processed and settled exclusively in accordance with this Article.

(b) Any judgment presented for certification to the United States Court of Appeals for the Federal Circuit pursuant to Section 174 of the Compact of Free Association shall be deemed manifestly erroneous as to law if the claim upon which such judgment is based would have been barred by the statute of limitations if such claim had been brought in a court of the United States.

10. For the purposes of carrying out the provisions of this Agreement, Competent Authorities shall be designated by each of the signatory Governments. The Competent Authorities of the Government of the United States and the Competent Authorities of the Marshall Islands and the Federated States of Micronesia may communicate directly with each other. In the case of the Government of the United States the Competent Authority shall be the head of or designee of the Federal agency concerned who shall be designated in writing to the Government concerned.

11. The Government of the Marshall Islands or the Federated States of Micronesia shall accept as valid, without a test or fee, the operator's permit or license or military driving permit issued to United States personnel or third country contractor personnel by the Government of the United States, the Governments of the States of the United States of America, its territories and possessions, the District of Columbia, the Commonwealth of Puerto Rico, or the Commonwealth of the Northern Mariana Islands.

12. Official vehicles of the Federal Agencies, vehicles owned or operated by United States contractors, and privately owned vehicles of United States personnel shall be identified by individual markings or license plates issued by the Government of the United States, the Governments of the States of the United States of America, its Territories and possessions, the District of Columbia, the Commonwealth of Puerto Rico, or the Commonwealth of the Northern Mariana Islands. However, the Government of the United States may use local individual markings or license plates in the Federated States of Micronesia.

(a) Official vehicles shall not be subject to the registration or safety inspection laws of the Government of the Marshall Islands or the Federated States of Micronesia.

(b) The Armed Forces of the United States may register vehicles of United States contractors and United States personnel which are not official vehicles, and may inspect such vehicles applying safety standards of general applicability in the Marshall Islands or the Federated States of Micronesia, respectively. Vehicles so registered and inspected shall be exempt from the registration and safety inspection laws of the Government of the Marshall Islands or the Federated States of Micronesia, respectively.

13. For purposes of this Article the term "vehicles" includes all forms of land, sea and air transportation.

14. Any reference in this Agreement to a provision of the law of the United States constitutes the incorporation of the language of such provision into this Agreement as such provision is in force on the effective date of this Agreement or as it may be amended thereafter on a non-discriminatory basis according to the constitutional process of the United States.

15. The Government of the United States may use local telecommunication systems and, in deter-mining its uses of such systems, shall take into consideration the cost and security of such systems and the availability of alternate United States systems. The Government of the United States shall encourage the use of local telecommunication systems by United States personnel for non-official purposes. To the extent that the Government of the Marshall Islands or the Federated States of Micronesia establishes telecommunications systems compatible with existing United States Government installations, the Government of the United States and the Government concerned may enter into negotiations for a use arrangement which includes normal billing procedures.

1. In providing services and related programs in the Marshall Islands or the Federated States of Micronesia pursuant to Section 221 of the Compact, the Federal agencies, United States contractors and local contractors:

(a) may employ persons possessing requisite skills and qualifications. Employment preference shall be given, without discrimination, to citizens, nationals and permanent resident aliens of the Marshall Islands or the Federated States of Micronesia, in their respective jurisdictions, and of the United States. In the employment of such persons pursuant to the preferences set forth in this paragraph, the Federal Agencies and the United States contractors shall exercise their best efforts to employ persons present in the Marshall Islands or the Federated States of Micronesia, respectively.

(b) shall utilize without discrimination, consistent with the laws and regulations of the United States, qualified local contractors and contractors which are legal entities of the United States. The Federal Agencies and United States contractors shall ensure that the specifications and instructions for contract bids shall permit such free and full competition as is consistent with the procurement of the goods and services needed by the Government of the United States.

2. Prior to the employment of third country personnel or the utilization of third country contractors, the Government of the United States shall notify the Government concerned and shall consult, if requested, with that Government as to the availability of qualified local hire personnel or qualified local contractors.

3. The laws and regulations of the Marshall Islands or the Federated States of Micronesia shall not apply to the terms and conditions of employment of United States personnel by Federal agencies, or United States contractors. The Government of the Marshall Islands or the Federated States of Micronesia shall not require United States personnel, third country contractor personnel or United States contractors to obtain any license, permit or certificate, or to undergo any examination, in connection with the performance of their duties on behalf of Federal agencies.

4. In the employment of local hire personnel by the Federal agencies and United States contractors, the Government of the United States shall adopt measures consistent with the standards of local labor laws to the extent they are compatible with laws, regulations and operational requirements of the United States.

1. The Government of the United States may bring into the Marshall Islands and the Federated States of Micronesia:

(a) United States personnel and United States contractors; and

(b) Third country contractor personnel in a manner consistent

with those laws of the Marshall Islands or the Federated States of Micronesia, respectively, relating to the exclusion of individual, undesirable aliens and taking into account paragraph 5 of this Article and Article III of this Agreement.

2. United States personnel shall be exempt from the passport and visa laws and regulations of the Marshall Islands and the Federated States of Micronesia. Taking into account paragraph l(b) of this Article and Article III of this Agreement applications of third country contractor personnel for visas shall be granted or denied expeditiously. All such personnel shall comply with medical immunization requirements of the Marshall Islands and the Federated States of Micronesia, respectively.

(a) No United States personnel or third country contractor personnel shall acquire any right to permanent residence or domicile solely as a result of their being United States personnel or third country contractor personnel.

(b) United States personnel shall be exempt from laws and regulations of the Marshall Islands and the Federated States of Micronesia on the entry, departure, registration and control of aliens and foreign agents.

3. Upon entry into or departure from the Marshall Islands or the Federated States of Micronesia, United States personnel shall have in their possession official orders or documents certifying the status of the individual or group. Such orders or documents shall be shown on request to the appropriate authorities of the Government concerned.

4. For the purpose of their identification while in the Marshall Islands or the Federated States of Micronesia, United States personnel ten years of age or older shall have in their possession a personal identification card authorized by the Government of the United States which shall show the name, date of birth, status, and photograph of the bearer. Such card shall be shown on request to the appropriate authorities of the Government concerned.

5. If the Government of the Marshall Islands or the Federated States of Micronesia requests the removal from the Marshall Islands or the Federated States of Micronesia, respectively, of any United States personnel or any third country contractor personnel, the request shall be directed to the United States resident representative, who shall consult with the Government concerned on the appropriate action to be taken regarding removal. If the Government of the United States and the other Signatory Government concerned so determine, the person whose removal has been requested shall immediately become subject to the jurisdiction of the other Signatory Government concerned in accordance with its laws.

6. Transportation costs attendant to the departure and removal of third country contractor personnel shall be the responsibility of the Government of the United States.

1. Specific arrangements for the establishment and use by the Government of the United States of facilities or areas for Federal agencies in the Marshall Islands or the Federated States of Micronesia shall be set forth in Exchanges of Notes, which, when signed, shall be annexed to this Agreement as Annex A.

2. If, in the exercise of its authority and responsibility under Section 221 of the Compact, the Government of the United States requires the use of facilities or areas in the Marshall Islands or the Federated States of Micronesia in addition to or in place of those for which specific arrangements are concluded pursuant to the exchanges of notes included in Annex A of this Agreement, it may request the Government concerned to satisfy those requirements through leases or other arrangements. That Government shall sympathetically consider any such request and shall establish suitable procedures and provide a prompt response to the Government of the United States.

3. If the Government of the Marshall Islands or the Federated States of Micronesia requires for some other purpose the use of facilities or areas which have been provided the Government of the United States pursuant to this Agreement, the Government concerned shall request the Government of the United States to accept equivalent facilities or areas. The Government of the United States shall sympathetically consider any such request and provide a prompt response. Any pertinent agreement shall be effected in accordance with paragraph 2 of Article XIII of this Agreement by an amendment to the Exchanges of Notes included in Annex A of this Agreement.

4. All property for which the Government of the United States determines that it has a continuing requirement in order to carry out its authority and responsibility pursuant to Section 221 of the Compact, title to which therefore remains vested in the Government of the United States pursuant to Section 234 of the Compact, is set forth in the separate agreement in implementation of Section 234 of the Compact.

5. Title to improvements to real property or to any item of equipment or other personal property hereinafter furnished, acquired, supplied, constructed or purchased by or with funds provided by the Government of the United States in connection with the programs and related services set forth in this Agreement is vested in the Government of the United States, except where expressly sold or otherwise conveyed.

6. Upon relinquishing facilities or areas designated for Federal agency use, or a portion thereof, whether at the termination of a specific service and its related programs or at an earlier date, the Government of the United States shall not be obligated to restore any such site or portion thereof to its former condition, or to make compensation in lieu of such restoration. The Signatory Governments may otherwise agree, based on considerations including the existence of conditions substantially or materially hazardous to human life, health and safety.

7. The Government of the United States has the right to remove any installations or improvements which it has constructed on an area designated for Federal agency use. If any installations or improvements which were constructed at the expense of the Government of the United States are to be left behind after relinquishing facilities or areas designated for Federal agency use, or a portion thereof, the Government the Marshall Islands or the Federated States of- Micronesia and the Government of the United States shall consult to determine the residual value, including scrap value, if any, of any such installations or improvements to the Government concerned and - to agree upon an appropriate method of compensating the Government of the United States for such residual value.

8. Except as may be otherwise expressly agreed, the Government of the United States, Federal agencies and United States contractors shall retain title to equipment, materials and other movable property brought into or acquired by them in the Marshall Islands or the Federated States of Micronesia and may remove such property at any time from the Marshall Islands or the Federated States of Micronesia, or dispose of it therein.

1. The Government of the Marshall Islands or the Federated States of Micronesia shall assume responsibility pursuant to its laws and regulations for all local postal services.

2. The Government of the Marshall Islands or the Federated states of Micronesia shall be responsible for all its postal staff, facilities and equipment.

3. From the effective date of this Agreement until its first anniversary, salaries for United States Postal Service (USPS) employee positions in the Marshall Islands and the Federated States of Micronesia shall be paid by the USPS, without reimbursement by the Government of the Marshall Islands or the Federated States of Micronesia, to the extent that employee costs remain at the level the USPS would have expended to maintain the level of service available in the Marshall Islands and the Federated States of Micronesia in the year prior to the effective date of this Agreement.

4. Prior to the first anniversary of the effective date of this Agreement, any postal employee serving in the Marshall Islands and the Federated States of Micronesia who was a USPS employee on the effective date of this Agreement shall have the right to transfer to a position of comparable pay level at a facility outside the Marshall Islands and the Federated States of Micronesia, as follows:

(a) the employee may choose to transfer to a facility designated by the USPS with reimbursement of moving expenses as provided in the USPS Methods Handbook M-9, "Travel"; or

(b) the employee may choose to transfer to an available position designated by the USPS in a location chosen by the employee at the employee's own expense.

5. Six months prior to the first anniversary of the effective date of this Agreement, the Governments of the Marshall Islands and the Federated States of Micronesia shall offer comparable positions, as determined by each such Government, to all employees referred to in paragraph 4 of this Article serving in post offices located in the Marshall Islands or the Federated States of Micronesia, respectively, who do not elect to transfer to another location pursuant to paragraph 4 of this Article. Such employees shall notify the Government concerned, within thirty days after such offer, whether they intend to accept such position. Such offer and the employee's election in response thereto shall not alter the employee's status under paragraph 3 of this Article prior to the first anniversary of the effective date of this Agreement

6. On the effective date of this Agreement the USPS shall, without compensation, turn over to the Government of the Marshall Islands or the Federated States of Micronesia all USPS facilities and equipment, in good repair and workable condition, in use in the Marshall Islands or the Federated States of Micronesia, respectively, as of that date.

7. The Governments of the Marshall Islands and the Federated States of Micronesia shall issue postage stamps-and other prescribed postal indicia which shall be used for prepayment of postage rates and other postal charges on all mail originating in its territory, except for mail sent through the military postal system provided for in Article VII of the Status of Forces Agreement Concluded Pursuant to Section 323 of the Compact of Free Association.

8. The USPS shall provide the following services for the Marshall Islands and the Federated States of Micronesia for a period of fifteen years commencing on the effective date of this Agreement without compensation by the Government of the Marshall Islands or the Federated States of Micronesia; provided that the provision of such services shall be based upon reimbursement of the USPS from funds appropriated by the United States Congress in implementation of this Agreement:

(a) conveyance of mail, at levels of service, including classes and special services, equivalent to those available to the Trust Territory of the Pacific Islands during the year prior to the effective date of this Agreement, to and from the designated exchange offices in the Marshall Islands and the Federated States of Micronesia; and

(b) dispatch, documentation, statistical, accounting, and settlement operations in connection with the international exchange of such mail.

9. The Governments of the Marshall Islands and the Federated States of Micronesia shall undertake to protect the postal services provided by the Government of the United States from exploitation for the monetary gain of private or government organizations or of individuals or of commercial enterprises, including the posting of bulk mail, books, catalogues, goods or materials. The Government of the United States shall provide mail service pursuant to this Agreement with the understanding that the volume of mail may increase in proportion to population increases and ordinary growth of local commercial enterprise. Should an increase in the volume of mail of twenty percent or more within a twelve-month period be anticipated or experienced by the Government of the Marshall Islands or the Federated States of Micronesia, the Government concerned shall enter into a separate agreement with the Government of the United States which shall establish the amount of reimbursement to be paid to the Government of the United States for the volume in excess of twenty percent.

10. The Governments of the Marshall Islands and the Federated States of Micronesia shall ensure that all mail turned over to the USPS for conveyance to the United States or other countries complies with the postal conventions to which the United States adheres and with the postal laws and regulations of the United States.

11. Pursuant to this Agreement, mail shall be exchanged at the exchange offices designated in this paragraph and outgoing mail from the Marshall Islands and the Federated States of Micronesia shall be merged with United States mail for conveyance to the United States or to other countries. Such outgoing mail from the Marshall Islands and the Federated States of Micronesia shall be treated as though it were mail from the United States for dispatch, documentation, statistical, accounting and settlement operations with other countries. The six designated exchange offices shall be located in the Marshall Islands, at Majuro and Ebeye, and the Federated States of Micronesia, at Kosrae, Ponape, Truk and Yap.

12. Until the effective date of the Compact, United States domestic postal rates shall apply to mail exchanged between addresses in the Marshall Islands and the Federated States of Micronesia and between those addresses and addresses in the United States. After the effective date of the Compact, the USPS may establish cost-related rates for mail from the United States to the Marshall Islands or the Federated States of Micronesia. Such United States-established rates shall establish the ceiling and United States domestic rates shall establish the floor for postage rates for mail from the Marshall Islands or the Federated States of Micronesia to the United States and to the Marshall Islands and the Federated States of Micronesia. International postal rates applicable in the United States shall apply to mail from the Marshall Islands and the Federated States of Micronesia addressed to other countries.

13. The Government of the Marshall Islands or the Federated States of Micronesia may determine postal rates for internal mail to local addresses within the Marshall Islands or the Federated States of Micronesia, respectively.

14. Revenues derived from the sale of stamps issued by the Government of the Marshall Islands or the Federated States of Micronesia for postal services or for philatelic purposes shall be retained by the Governments which issued such stamps. The Governments of the Marshall Islands and the Federated States of Micronesia agree to provide, pursuant to their constitutional processes, adequate funding for the operation of their postal services in a manner which will allow the USPS to perform its responsibilities under this Agreement in an efficient and economical manner, with any disputes arising under this paragraph to be resolved pursuant to Article II of Title Four of the Compact.

15. Liability for the loss of a registered or insured item shall rest with the Government which, having received it without comment, cannot prove either delivery to the addressee or correct transfer to another administration. Pursuant to paragraph 19 of this Article, the Government of the United States shall, upon request, assist the Government of the Marshall Islands or the Federated States of Micronesia in developing local practices and procedures to fulfill the requirements of this paragraph.

16. The Governments of the Marshall Islands and the Federated States of Micronesia shall not impose any terminal dues or other charges on the USPS or the postal administrations of any other government for mail conveyed to the Marshall Islands or the Federated States of Micronesia by the USPS pursuant to this Agreement.

17. Postal Money Orders shall be issued in the Marshall Islands and the Federated States of Micronesia on USPS forms and in accordance with USPS regulations. All amounts collected in connection with such issuance, including the Postal Money Order fees, shall he remitted to the USPS. Postal Money Orders paid in the Marshall Islands and the Federated States of Micronesia shall be deposited for the credit of each such Government in accordance with prescribed procedures. Such Postal Money Orders shall follow the normal bank clearance process for final payment by the USPS. The USPS shall be responsible for providing all necessary forms and for reconciling the Postal Money Order accounts. The Government of the Marshall Islands or the Federated States of Micronesia may terminate the category of service set forth in this paragraph in the same manner as this Article may be terminated in accordance with Article XII of this Agreement.

18. The USPS and the Governments of the Marshall Islands and the Federated States of Micronesia shall issue stamps to commemorate the inauguration of the new political status of free association between the United States and the Marshall Islands and the Federated States of Micronesia. Each Government shall retain all revenues from the sale of the stamps it issues.

19. Pursuant to this Agreement the USPS shall provide, without compensation, such technical assistance, including technical assistance to provide for the orderly transfer of postal responsibilities, and employee training as the USPS and appropriate officials authorized to act on behalf of the Governments of the Marshall Islands and the Federated States of Micronesia mutually agree to be necessary and appropriate. The USPS shall provide expedited training at no cost to the Marshall Islands or the Federated States of Micronesia for the replacement of employees who transfer pursuant to paragraph 4 of this Article so that the Governments of the Marshall Islands and the Federated States of Micronesia can continue to execute properly their postal responsibilities pursuant to this Agreement. In addition, appropriate officials of the Governments of the Marshall Islands and the Federated States of Micronesia shall consult with the USPS with regard to fiscal planning and postal administration for the purpose of promoting economical and efficient postal services and programs.

20. The obligations of the Governments signatory to this Agreement under this Article shall terminate fifteen years after the effective date of this Agreement. Prior to termination of this Agreement, the USPS and the Governments of the Marshall Islands and the Federated States of Micronesia shall enter into bilateral arrangements to establish mutually acceptable terms and conditions for the exchange of mail between the United States and the Marshall Islands and the Federated States of Micronesia.

21. As mutually agreed, the United States shall assist the Governments of the Marshall Islands and the Federated States of Micronesia in acquiring membership in relevant international or regional postal organizations.

22. If, prior to the effective date of this Agreement, the Government of the United States and the Government of the Marshall Islands or the Federated States of Micronesia have entered into a separate agreement for interim implementation of the postal services and programs provided for in this Agreement, the obligations of the Signatory Governments provided for in paragraphs 3, 4, 5, 6 and 19 of this Article shall be considered fully executed or shall be diminished to the extent such obligations have been discharged under such interim agreement prior to the effective date of this Agreement.

1. The National Weather Service of the United States, in cooperation with the United States Navy, shall provide weather services and related programs in the Marshall Islands and the Federated States of Micronesia at the levels equivalent to those available to the Trust Territory of the Pacific Islands during the year prior to the effective date of the Compact.

2. These services and related programs shall be provided pursuant to:

(a) the provisions of 15 U.S.C. 311-329; the International Aviation Facilities Act 49 U.S.C. 1151 et seq.; and section 803 of the Federal Aviation Act of 1958 49 U. @C. 1463;

(b) other provisions of the laws of the United States to the extent they expressly apply to the National Weather Service;

(c) weather treaties and other international weather agreements to which the United States is a party;

(d) applicable Executive orders of the President of the United States; and

(e) implementing National Weather Service regulations.

3. The Government of the Marshall Islands or the Federated States of Micronesia may issue weather forecasts under such terms as may be mutually agreed with the National Weather Service. The Government of the United States shall continue to provide public and aviation weather forecasts and severe weather warnings.

4. The Government of the Marshall Islands or the Federated States of Micronesia may take such transitional actions as may be necessary to prepare for the establishment and support of its own weather service. Such transitional actions may be initiated at any time prior to termination of the Compact pursuant to Article IV of Title Four of the Compact or prior to termination of this Article pursuant to Article XII of this Agreement. The National Weather Service shall provide advice in the development of the weather service of the Marshall Islands or the Federated States of Micronesia at the request of the Government concerned.

5. The National Weather Service shall provide weather services and related programs pursuant to this Article, in part, through weather service offices established in the Marshall Islands or the Federated States of Micronesia.

(a) As of the effective date of this Agreement all employees at Weather Service offices in the Marshall Islands or the Federated States of Micronesia shall be employed in like positions by the Government of the Marshall Islands or the Federated States of Micronesia, respectively.

(b) The National Weather Service and the Government of the Marshall Islands or the Federated States of Micronesia shall in an Exchange of Notes set forth the duties and qualifications of employees and provide procedures to reimburse the Government concerned for materials and for salaries and other expenses incurred in the performance of these duties; and

(c) The Government of the United States shall reimburse the Government concerned for costs incurred under this paragraph.

6. As required to implement the services and related programs provided pursuant to this Article or to meet technological change, the National Weather Service shall train employees of the Government of the Marshall Islands or the Federated States of Micronesia assigned to weather stations. The Government of the United States shall reimburse the Government concerned for costs incurred for training approved by the National Weather Service.

7. The National Weather Service shall inspect weather stations to assure the quality of meteorological operations.

8. The National Weather Service shall provide and maintain Weather Service offices pursuant to Article V of this Agreement, including meteorological observatories and other buildings, and shall maintain and replace meteorological and other equipment of the National Weather Service.

9. The National Weather Service shall provide the supplies required for the operation of its programs and related services.

10. Pursuant to Article III, Title One of the Compact, the radio operating frequencies in the bands 401-406 MHz and 1660-1700 MHz shall be protected by the Government of the Marshall Islands or the Federated States of Micronesia in order to ensure their interference-free use for rawinsonde observations, in accordance with the provisions of Radio Regulations annexed to the International Telecommunication Convention (ISBN 92-61-0081-5). Other radio operating frequencies may be substituted for those set forth in this paragraph by agreement of the Governments concerned.

11. The Governments of the Marshall Islands and the Federated States of Micronesia, in order to assure that they receive the most current meteorological information and that such information from them will be available on a global basis, shall provide continuing access to its telecommunications services, for meteorological traffic to and from Guam, or other points as may be designated by the Government of the United States.

12. The National Weather Service and the Federal Aviation Administration shall provide weather services and related programs in Kosrae, Federated States of Micronesia, to the extent that such services and related programs are determined by the Federal Aviation Administration to meet requirements for safe and efficient operation of United States air carriers engaged in domestic air service in Kosrae. The National Weather Service shall train employees of the Government of the Federated States of Micronesia assigned to Kosrae to enable such employees to provide weather reporting services required by the Federal Aviation Administration pursuant to this paragraph. The National Weather Service shall not be responsible for providing reimbursement to the Federated States of Micronesia for personnel costs, including salaries and expenses, incident to the provision of weather services in Kosrae pursuant to this paragraph.

1. The Government of the United States and the Governments of the Marshall Islands and the Federated States of Micronesia agree that the Federal Aviation Administration (FAA) shall provide aviation safety services in the Marshall Islands and the Federated States of Micronesia in accordance with this Article with the common desire to:

(a) promote the common interests of the Government of the United States and the Governments of the Marshall Islands and the Federated States of Micronesia in fostering safe and efficient air service; and

(b) facilitate the orderly establishment of aviation safety statutory and regulatory regimes and aviation safety authorities by the Governments of the Marshall Islands and the Federated States of Micronesia.

2. On behalf of the Governments of the Marshall Islands and the Federated States of Micronesia, the Government of the United States shall provide aviation safety services in the Marshall Islands and the Federated States of Micronesia at levels equivalent to those available to the Trust Territory of the Pacific Islands during the year prior to the effective date of this Agreement as follows:

(a) en route air traffic services within that air space including the Marshall Islands and the Federated States of Micronesia for which the Government of the United States has responsibility under the appropriate regional air navigation plan approved by the International Civil Aviation Organization (ICAO);

(b) flight inspection and ground certification of nondirectional beacons and distance-measuring equipment, and periodic review and evaluation of the need for, and the maintenance, modification, improvement or replacement of, nondirectional beacons, distance-measuring equipment and related support systems in the Marshall Islands or the Federated States of Micronesia;

(c) development and updating of instrument approach procedures, standard instrument departure procedures and standard terminal arrival routes for airports in the Marshall Islands or the Federated States of Micronesia, and issuance of appropriate Notices to Airmen; and

3. Each of the Governments of the Marshall Islands and the Federated States of Micronesia, pursuant to Section 471(b) of the Compact, shall take all necessary steps to ensure the conformity of its laws, regulations and administrative procedures with the provisions of this Article. The aviation safety services specified under paragraph 2 of this Article shall be provided exclusively pursuant to treaties and other international agreements relating to aviation safety to which the United States is a party and the laws and regulations of the United States. The Governments of the Marshall Islands and the Federated States of Micronesia:

(a) consistent with Resolution A23-11, Appendix N, Part II, Air Navigation of ICAO Assembly Resolutions in force as of October 7, 1980, U.N. Doc. 9349, assign and delegate to the Government of the United States sole authority and responsibility for providing aviation safety services as specified in paragraph 2(a) of this Article until such time as those responsibilities are transferred at the request of the Government of the Marshall Islands or the Federated States of Micronesia, and with the approval of the ICAO, from the Government of the United States to the Governments of the Marshall Islands and the Federated States of Micronesia; and

(b) grant unobstructed access by FAA personnel and FAA equipment to the property on which the navigational and landing aids set forth in paragraph 2(b) of this Article are located.

4. The FAA shall provide technical assistance to the Government of the Marshall Islands or the Federated States of Micronesia to develop civil aviation safety authorities and to assist the government concerned in the administration of safety certification and related aviation safety programs. Such technical assistance shall be provided pursuant to implementing agreements to be negotiated from time to time between the Government of the United States and the Government concerned. The FAA shall provide such technical assistance in accordance with the provisions of the Federal Aviation Act of 1958, 49 U.S.C. 1301 et seq. and the International Aviation Facilities Act, 49 U.S.C. 1151 et seq. The technical assistance provided by the FAA includes:

(a) continuing development of aviation safety statutes, regulations and aviation safety authorities;

(b) training, in the United States, of personnel designated by the Government of the Marshall Islands or the Federated States of Micronesia, respectively; and

(c) the stationing of FAA personnel in the Marshall Islands or the Federated States of Micronesia to provide continuing advice and guidance to aviation safety authorities at the request of the Government concerned. Such advice and guidance may include assistance required for certification by the Government of the Marshall Islands or the Federated States of Micronesia of airmen, aircraft, airports and air agencies, as the term "air agencies" is defined in 49 U.S.C. 607.

5. Pursuant to Article II, Title One, of the Compact, the Governments of the Marshall Islands and the Federated States of Micronesia shall protect radio frequency bands allocated in accordance with Article 5 of the Radio Regulations of the International Telecommunications Union to the aeronautical mobile, mobile, aeronautical fixed, fixed, aeronautical radionavigation, and radionavigation services in accordance with the provisions of Radio Regulations annexed to the International Telecommunication Convention, in order to ensure their use free of interference for these allocated purposes in support of civil aviation.

6. The Governments of the Marshall Islands and the Federated States of Micronesia, in order to ensure that they transmit and receive the most current meteorological information for civil aviation purposes and that such information provided by them shall be available on a global basis, shall provide continuing access to their telecommunications services for meteorological traffic to and from Guam or other points as may be designated by the Government of the United States in consultation with the Government of the Marshall Islands or the Federated States of Micronesia.

7. The Governments of the Marshall Islands and the Federated States of Micronesia, in order to ensure that they transmit and receive the most current flight movement and airmen information data for civil aviation purposes, and that such information received or provided by them will be available on a global basis, shall provide continuing access to their telecommunications services for flight movement and airmen information traffic to and from Guam or other entry points into the Aeronautical Fixed Service of the International Civil Aviation organization as may be designated in accordance with the Convention on International Civil Aviation, Annex 10, Volumes 1 and 2, by the Government of the United States in consultation with the Government of the Marshall Islands or the Federated States of Micronesia.

8. The Government of the United States and the Government of the Marshall Islands or the Federated States of Micronesia shall from time to time enter into such agreements as may be necessary to implement subparagraphs (b) and (c) of paragraph 2 of this Article.

1. The Government of the United States and the Governments of the Marshall Islands and Federated States of Micronesia agree that the following provisions shall apply to the economic regulation of air services of the Marshall Islands and the Federated States of Micronesia.

2. The Governments of the Marshall Islands and the Federated States of Micronesia shall exercise independent economic regulatory jurisdiction over air services to, from and within the Federated States of Micronesia, respectively, which for the purposes of this Agreement are points outside the United States, as the term "United States" is defined in 49 U.S.C. 1301(41).

3. In accordance with Section 124 of the Compact, the Government of the United States, if requested and as mutually agreed, shall negotiate or assist in negotiations for air rights with third countries on behalf of the Government of the Marshall Islands or the Federated States of Micronesia.

4. The Civil Aeronautics Board, upon request, shall provide the following assistance to the Governments of the Marshall Islands and the Federated States of Micronesia:

(a) preparation of statutory and regulatory proposals for the economic regulation of civil aviation;

(b) processing, in Washington, D.C., on behalf of and on the basis of procedures mutually agreed with the Government of the Marshall Islands or the Federated States of Micronesia of applications from any person seeking authority from those governments to engage in air services to, from or within the Federated States of Micronesia; the power of ultimate disposition of such applications rests with the Government of the Marshall Islands or the Federated States of Micronesia, respectively;

(c) training in the processing of air service applications, in Washington, D.C., of not more than two persons per government annually, and a total of not more than six persons, per government during the life of this Agreement. The designating Government shall be responsible for travel, subsistence and similar expenses of its designated persons while in such training; and

(d) such other assistance as may from time to time be specifically agreed to by the Civil Aeronautics Board.

5. Subject to approval of the Congress of the United States, the Government of the United States shall establish:

(a) Until October 24, 1988 and thereafter if extended by the laws of the United States, eligibility of United States air carriers for subsidy compensation necessary to support essential air transportation, at a level determined by the Civil Aeronautics Board, between the United States and points in the Marshall Islands and the Federated States of Micronesia receiving regularly scheduled air service by Continental Air Micronesia on August 26, 1982, and between such points in the Marshall Islands and the Federated States of Micronesia. In determining the level of essential air transportation, the Civil Aeronautics Board shall take account of all air service, including connecting service, provided to the Federated States of Micronesia, including service by United States, Freely Associated State and all other carriers.

(b) A distinct classification of foreign air carrier, as the term "foreign air carrier" is defined in 49 U.S.C. 1301(22), to be known as "Freely Associated State Air Carrier." This classification shall apply exclusively to a carrier which:

(1) is organized under the laws of the Marshall Islands, the Federated States of Micronesia or the United States; and

(2) has consent to such classification from the Government of the Marshall Islands or the Federated States of Micronesia, concerned, and consent to such classification from the Government of the United States pursuant to standards adopted by the Government of the United States for such classification.

(c) Authority for the Civil Aeronautics Board to authorize Freely Associated States Air Carriers to carry local traffic between Guam, the Commonwealth of the Northern Mariana Islands, and Honolulu, and within the Commonwealth of the Northern Mariana Islands.

(d) Eligibility of Freely Associated State Air Carriers to receive subsidy compensation at a level determined by the Board in accordance with paragraph 5(a) of this Article either if no United States air carrier is available to provide the essential air transportation or if the subsidy required for the provision of essential air transportation by a Freely Associated State Air Carrier would be substantially less than the subsidy which would be paid to an available United States air carrier, provided that unilateral action by the Government of the Marshall Islands or the Federated States of Micronesia under subparagraph 5(b)(2) of this Article shall impose no obligation on the Government of the United States to increase the level of such compensation.

(e) Authority for the Civil Aeronautics Board to require that any United States, Freely Associated State or other carrier which provides service in a subsidized market comply with specified service, rate or fare conditions as may be necessary or desirable to minimize subsidy without undue impairment of the service provided.

(f) Notwithstanding the provisions of 49 U.S.C. 1301(16), Air Micronesia, Inc. shall qualify as a U.S. citizen air carrier, within the meaning of 49 U.S.C. 1301(3), for so long as it continues to be (1) incorporated in the United States or its Territories or possessions, and (2) controlled by citizens of the United States or by a corporation or corporations controlled by citizens of the United States.

(g) Compensation determined by the Civil Aeronautics Board to be necessary to maintain essential air transportation shall be provided from funds specifically appropriated for compensation for service under paragraph 5(a) of this Article.

(h) The Civil Aeronautics Board shall adopt rules to implement the provisions of this paragraph as the Board in its discretion, deems appropriate.

6. Notwithstanding paragraph 2, the Governments of the Marshall Islands and the Federated States of Micronesia shall authorize, without restrictions or impairment, United States air carriers to operate air services to, through, beyond, within and between the Marshall Islands and the Federated States of Micronesia and to establish tariffs applicable to such air services. The Government of the United States shall promptly notify the Government of the Federated States of Micronesia of the filing with the Civil Aeronautics Board of any application by a United States air carrier for authority under the laws of the United States to operate air services pursuant to this paragraph. The Government of the Federated States of Micronesia shall designate competent authorities pursuant to Article 11, paragraph 10, of this Agreement for the purpose of receiving such notice. The Government concerned shall be accorded an opportunity to present its views which shall be considered in reaching any decision. Should a formal or informal proceeding be instituted by the Government of the United States in connection with any such application, the Government concerned shall be made a party to such proceeding with full rights in accordance with the applicable procedural rules.

7. The Government of the United States shall sympathetically consider requests by the Government of the Federated States of Micronesia for negotiations of a bilateral air transport agreement between the Government of the United States and the requesting government. The Governments of the Marshall Islands, the Federated States of Micronesia and the United States shall, on the basis of reciprocity, exempt air carriers which are authorized by any other government signatory to this Article to provide air services, from customs duties and taxes imposed by their national authorities, and shall not impose user charges which exceed an equitable proportion of the reasonable costs of providing the facilities, or which are discriminatory.

8. The Government of the Marshall Islands or the Federated States of Micronesia may terminate the operation of any of four categories of economic services described in the subparagraphs of this Article and set forth below. Such partial termination, which may be effected in the same manner as this Article may be terminated in accordance with Article XII of this Agreement, may be exercised only for the categories listed below.

(a) Category 1 -- paragraph 4;

(b) Category 2 -- subparagraphs (a), (d) and (e) of paragraph 5;

(c) Category 3 -- subparagraph (c) of paragraph 5; or

(d) Category 4 -- subparagraphs (a), (b), (c), (d) and (e) of paragraph 5.

If the Government of the Marshall Islands or the Federated States of Micronesia terminates the operation of the subparagraphs in Category 4, that Government may, in accordance with Article XII of this Agreement, also terminate the operation of paragraph 6 of this Article.

If the Government of the Marshall Islands or the Federated States of Micronesia elects to terminate both the operation of the subparagraphs in Category 4 and the operation of paragraph 6 of this Article, the remaining provisions of this Article shall cease to be in effect two years after such termination, unless otherwise agreed by the Government of the Marshall Islands or the Federated States of Micronesia, concerned, and the Government of the United States.

1. The Federal Emergency Management Agency of the United States (FEMA) shall make available disaster assistance in the Marshall Islands or the Federated States of Micronesia at the levels equivalent to those available to the Trust Territory of the Pacific Islands during the year prior to the effective date of the Compact.

2. These disaster assistance services and related programs shall be provided pursuant to:

(a) The provisions of the Disaster Relief Act of 1974, 42 U.S.C. 5121, et seq.;

(b) Applicable Executive Orders of the President of the United States; and

(c) Implementing FEMA regulations.

3. Assistance under the Disaster Relief Act of 1974 shall be made available to the Marshall Islands or the Federated States of Micronesia in the same manner as assistance is made available to a "State". Solely for the purpose of applying the Disaster Relief Act of 1974 pursuant to this Article, the Marshall Islands or the Federated States of Micronesia shall be considered included within the definitions of "United States" and "State" as those terms are defined in 42 U.S.C. 5122.

4. The President of the Marshall Islands or the President of the Federated States of Micronesia may request a determination by the President of the United States that an emergency or a major disaster exists in the Marshall Islands or the Federated States of Micronesia, respectively, in accordance with 42 U.S.C. 5141.

(a) In order to expedite such determination, the request shall simultaneously be forwarded to the Regional Director of FEMA in whose region the Marshall Islands or the Federated States of Micronesia are included for the purposes of this Article. The request shall conform with the provisions of the FEMA Disaster Assistance Regulations, 44 C.F.R. 205.

(b) Upon the declaration of an emergency or a major disaster by the President of the United States pursuant to this Section, an Exchange of Notes for each such emergency or major disaster shall be executed by the President of the Government of the Marshall Islands or the Federated States of Micronesia on behalf of such Government and the designated FEMA official on behalf of the Government of the United States. The Exchange of Notes shall set forth the type, extent, terms and conditions of disaster assistance to be provided by the Government of the United States. The Exchange of Notes shall be executed in lieu of the Federal State Agreement for an emergency or-major disaster as required by 44 C.F.R. 205.

5. The President of the Marshall Islands or the President of the Federated States of Micronesia may request a determination by FEMA that fire suppression assistance be provided to the Marshall Islands or the Federated States of Micronesia, respectively, pursuant to 42 U.S.C. 5187.

(a) The request shall conform with Subpart G of the FEMA Disaster Assistance Regulations, 44 C.F.R. 205.

(b) Upon a determination that fire suppression assistance shall be provided, an Exchange of Notes shall be executed by the President of the Government of the Marshall Islands or the Federated States of Micronesia on behalf of such Government and the designated FEMA official on behalf of the Government of the United States. The Exchange of Notes shall set forth the type, extent, terms and conditions of fire suppression assistance to be provided by FEMA. The Exchange of Notes shall be executed in lieu of the Federal - State Agreement for Fire Suppression required by Subpart G of the FEMA Disaster Assistance Regulations.

6. The Government of the Marshall Islands or the Federated States of Micronesia may request an annual grant pursuant to 42 U.S.C. 5131(d). The requesting Government shall use such grants for improving, maintaining and updating the applicable portion of the disaster assistance plan developed by the Trust Territory of the Pacific Islands pursuant to 42 U.S.C. 5131(c) or any other disaster assistance plan of the requesting Government.

7. The Government of the Marshall Islands or the Federated States of Micronesia assumes all rights, obligations and liabilities arising out of services and related programs provided after the effective date of the Compact, including matching fund obligations which may be required by law or for which a commitment has been made by agreement between FEMA and the Government concerned. The Government of the Marshall Islands or the Federated States of Micronesia shall assume administrative responsibilities for procedures required to close out disaster relief efforts begun in connection with any disaster which is "open", as determined by FEMA pursuant to the Disaster Relief Act of 1974, on the effective date of this Compact.

8. To the extent necessary to permit FEMA to fulfill its obligations under this Article following the declaration of a major disaster or emergency, the Government of the Marshall Islands or the Federated States of Micronesia concerned shall, as set forth in the Exchange of Notes referred to in paragraphs 4 and 5 of this Article:

(a) make available to FEMA, at no cost, equipment or facilities in its territory, including facilities necessary for communications:

(b) permit FEMA to operate telecommunications services in its territory;

(c) endeavor to make available radio frequencies for the exclusive use by FEMA;

(d) assist FEMA representatives in inter-island and intraisland movement for the purpose of accomplishing predeclaration damage assessment, post-declaration damage survey and the provision of disaster assistance to include the movement of supplies and equipment; and

(e) in addition to the periodic audit provisions of Section 233 of the Compact, upon request, provide representatives of FEMA and the Controller General of the United States access to any books, documents, papers, and records that pertain to federal funds, equipment and supplies received under this Article, for the purpose of audit and examination.

9. The Governments of the Marshall Islands and the Federated States of Micronesia shall each set forth in a governmental emergency plan the procedures and assignments of responsibility which are required for each Government to prepare for and respond to disasters and to facilitate the delivery of disaster assistance by the Government of the United States.

10. The Government of the Marshall Islands or the Federated States of Micronesia may appeal any determination of the Regional Director related to federal assistance provided under this Article. An appeal shall first be submitted to the Regional Director of FEMA for reconsideration; if such appeal is denied, the Government may submit a second appeal in accordance with FEMA regulations. Action on the second appear shall be final.

1. The Government of the United States recognizes the special needs of the Marshall Islands and the Federated States of Micronesia, particularly in the fields of education and health care. The Governments of the Marshall Islands and the Federated States of Micronesia have determined that their special needs, particularly in the fields of education and health care, can be addressed through provision by the Government of the United States of a special block grant of assistance. In light of this determination and in implementation of Section 221(b) of the Compact, the Government of the United States shall assist those Governments in meeting their special needs through provision of the assistance set forth in this Article.

2. The Government of the United States shall provide annually to each of the Governments of the Marshall Islands and the Federated States of Micronesia a special block grant to be used in accordance with the purposes set forth in paragraph 3 of this Article. Except as otherwise provided pursuant to Section 221(b) of the Compact, the annual amount of this special block grant shall be $3 million for the Government of the Marshall Islands and $7 million for the Government of the Federated States of Micronesia.

3. The special block grant provided by the Government of the United States is divided into the program categories set forth in this paragraph. In any year, the Government of the Marshall Islands or the Federated States of Micronesia may dedicate its overall block grant to any combination of these program categories subject to the guidelines set forth in paragraph 5 of this Article. The special block grant provided pursuant to Section 221(b) of the Compact and this Article is intended to complement the programs of the Governments of the Marshall Islands and the Federated States of Micronesia in the same program categories.

(a) Health Care Program Category

Funding dedicated to the health care program category may support program efforts including the following areas:

-- Preventive Health Care and Services;

-- Maternal and Child Health Services;

-- Alcohol, Drug Abuse and Mental Health;

-- Primary Health Care including provision of grants to private non- profit, public or governmental entities for planning, development and operation of community health centers and for the delivery of family health services;

-- Social Services including support for private non-profit, community, public or governmental efforts in child care services, family planning, day-care services, counseling, and preparation and delivery of meals or other health support services; and

-- Community Services including support for in the area of emergency health assistance, community health systems rehabilitation or reestablishment and housing.

(b) Education program category

Funding dedicated to the education program category may be used to support programs including the following areas:

-- Vocational Education including support for private non-profit, public and governmental institutions of vocational education and maintenance of vocational education physical plants;

-- Primary and Secondary Education including grants to public or private non-profit primary and secondary educational institutions for curriculum development, staffing and personnel, supplies, teacher training, and maintenance of primary and secondary education physical plants;

-- Post-secondary Education including grants to private non-profit or public institutions of post-secondary education, maintenance of post-secondary education physical plants, curriculum development, teacher training and recruitment; and

-- Educational planning and research.

(c) Technical Assistance

Funding provided in this program category may be used by the Governments of the Marshall Islands and the Federated States of Micronesia to employ technical experts in any area of specific need. This technical assistance may be used as transitional assistance or to mount sustained program efforts including the training of local personnel in the particular program areas.

(d) Housing Assistance

Funding dedicated to this program category may be-used generally for housing assistance programs sponsored by the Government of the Marshall islands or the Federated States of Micronesia including guarantees of commercial loans for initial construction or improvements.

(e) Food Supplement Assistance

Funding dedicated to this program category may be used to support governmental efforts and programs including those designed to ensure that the citizens of the Marshall Islands or the Federated States of Micronesia are not without resources to meet minimum nutritional requirements.

4. The Governments of the Marshall Islands and the Federated States of Micronesia shall each present annual special block grant program plans to the Government of the United States which plans shall set forth the purposes for which the special block grant funding shall be used. The annual special block grant program plans may take any form which is most convenient to the Government submitting it, but the plan must indicate that the funds will be expended in a manner consistent with paragraphs 3 and 5 of this Article.

5. The use of the special block grant funds by the Government of the Marshall Islands or the Federated States of Micronesia shall comply with the guidelines set forth in this paragraph.

(a) Transferability.

Funding may be transferred by the Government of the Marshall Islands or the Federated States of Micronesia among specific program purposes within the program categories set forth in paragraph 3 as well as among the program categories from year to year.

(b) Guidelines for expenditures.

Funding available to the Governments of the Marshall Islands and the Federated States of Micronesia in their annual special block grant allocations may not be used for the following purposes:

-- cash assistance payments to individual citizen program recipients which totals more than ten percent of any year's total allocation to the Government concerned;

-- payment to or support of for-profit organizations;

-- investment in any interest bearing instruments;

-- purchase of equipment not primarily related to the program category purposes set forth in paragraph 3.

-- purchase of technical assistance or services from any individual government other than the Government of the United States or the Government of the Marshall Islands or the Federated States of Micronesia.

In any year, not more than 10% of the total annual- allocation of special block grant funds available to the Government of the Marshall Islands or the Federated States of Micronesia may be used for administrative expenses attendant to program or service delivery, exclusive of medical referral and other transportation costs directly related to delivery of programs and services to recipients.

(c) Audit.

The Governments of the Marshall Islands and the Federated States of Micronesia shall keep current records of all funding transactions of the special block grant funds and shall make such records available to the Government of the United States in connection with any audits conducted pursuant to Section 233 of the Compact.

6. Funds made available by the Government of the United States to the Governments of the Marshall Islands and the Federated States of Micronesia pursuant to Section 221(b) of the Compact and this Article do not require any matching with local funds.

7. In the event that the audit conducted pursuant to Section 233 of the Compact and paragraph 5(c) of this Article reveals that the expenditure of funds by the Government of the Marshall Islands or the Federated States of Micronesia, respectively, in connection with a prior year special block grant was not in conformity with the requirements of this Article, the Government of the United States may withhold, for the subsequent year, special block grant funding which would otherwise be made available to the Government not in conformity. Should the Government of the United States determine to withhold special grant funding pursuant to this paragraph, such action shall be subject to the consultation and dispute resolution provisions of Article II of Title Four of the Compact. The Government of the United States and the concerned recipient government shall consult regarding the nature of actions required.

8. Funding for the special block grant shall be disbursed by the Government of the United States to the Governments of the Marshall Islands and the Federated States of Micronesia in the same fashion as the current account grant funding referred to in Article I of Title Two of the Compact.

1. Whenever the Government of the Marshall Islands or the Federated States of Micronesia desires to terminate a category of the services and related programs set forth in Articles VI, VII, VIII, IX, X or XI of this Agreement, that Government shall give written notice to the United States resident representative and to the Federal agency concerned. The Government of the United States shall assist in the orderly transfer of authority and responsibility. unless otherwise agreed, the authority and responsibility of the Government of the United States under this Agreement shall terminate one year after receipt of such notice by the resident representative.

2. Upon termination of a category of services and related programs pursuant to paragraph 1 of this Article, the applicability of all laws of the United States, its regulations, practices, policies, treaties, conventions, or arrangements, which are applicable to that category solely by virtue of this Agreement, shall cease to be applicable in the territory of the Government which has given notice, and any authority and responsibility of the Government of the United States for the conduct of foreign affairs in respect to such services and related programs shall also cease.

1. This Agreement shall enter into force simultaneously with the Compact; its related Exchanges of Notes shall enter into force in accordance with their own terms.

2. The provisions of this Agreement may be amended as to all of the Governments of the Marshall Islands and the Federated States of Micronesia and as to the Government of the United States at any time by mutual agreement.

3. The provisions of this Agreement or its related Exchanges of Notes may be amended as to any one of the Governments of the Marshall Islands or the Federated States of Micronesia and as to the Government of the United States at any time by mutual agreement. The effect of any amendment made pursuant to this Section shall be restricted to the relationship between the Governments agreeing to such amendment, but the other Governments signatory to this Agreement shall be notified promptly by the Government of the United States of any such amendment.

4. This Agreement shall remain in force for a period of fifteen years, subject to Section 231 and Article IV, Title Four of the Compact.

5. This Agreement may be accepted, by signature or otherwise, by the Government of the United States, the Government of the Marshall Islands and the Government of the Federated States of Micronesia. Each Government accepting this Agreement shall possess an original English language version.

IN WITNESS WHEREOF, the undersigned, duly authorized, have signed this Federal Programs and Services Agreement which shall come into effect in accordance with its terms between the Government of the United States and the other Governments signatory to this Agreement.

Federal Programs and Services Agreement: The provisions of this Agreement relating to technical assistance to be provided in connection with specific programs and services are without prejudice to the provision of technical assistance pursuant to Section 226 or other provisions of the Compact.

Article II, paragraph 6, Legal Status of Programs and Related Services, Federal Agencies, United States Contractors and United States Personnel: Paragraph 6 is without prejudice to the Government concerned adopting laws and regulations which require the giving of notice of such transfer.

Article VI, Postal Services and Related Programs, paragraph 10:

This Agreement does not impair the authority of the Governments of the Marshall Islands or the Federated States of Micronesia, pursuant to paragraph 1 of this Article, to enact laws and promulgate regulations governing the operation of their respective local postal services.

Article VIII, Civil Aviation Safety Services and Related Programs: The Signatory Governments intend that aviation safety authorities be in place in the Marshall Islands and the Federated States of Micronesia on or as soon after .-the effective date of this Agreement as is necessary or practicable. To this end, the Government of the United States agrees to provide FAA technical assistance in the preparation of aviation safety statutes and regulations for the Governments of the Marshall Islands and the Federated States of Micronesia. On or after the effective date of this Agreement, such technical assistance shall be provided through agreements concluded pursuant to paragraph 4 of this Article. Prior to the effective date of this Agreement, such technical assistance shall be provided only if funding is obtained to reimburse the FAA for such assistance. The Governments of the Marshall Islands and the Federated States of Micronesia have been advised that such funds will have to be provided by the Government receiving FAA technical assistance should such funds not otherwise be available.

Article IX, Civil Aviation Economic Services and Related Programs: It is the intention of the Government of the United States to provide to the Government of the Federated States of Micronesia assistance in the negotiation of air rights with third countries, or to negotiate such rights on behalf of those Governments, if mutually agreed as provided for in paragraph 3 of Article IX of this Agreement. Such assistance will be provided by the United States in as timely and effective a manner as available personnel and resources permit, and will not be unreasonably withheld. Should the Government of the United States determine that it would not be consistent with the interests of the United States to agree to provide such assistance in accordance with a particular request for same by the Government of the Federated States of Micronesia, the Government of the United States shall advise that Government of the basis for such determination.

Article IX, Civil Aviation Economic Services and Related Programs: The Government of the United States has notified the Government of the Federated States of Micronesia that it is the intention of the Government of the United States that its consent to the classification of a foreign air carrier as a Freely Associated State Air Carrier, shall be conditioned upon the carrier's demonstration to the satisfaction of the Civil Aeronautics Board that it is substantially owned and effectively controlled by citizens of the Federated States of Micronesia or the United States.

Article XI, Implementation of Section 221(b) of the Compact, paragraph 5(b): The Governments of the Marshall Islands and the Federated States of Micronesia may, consistent with the expenditure guidelines set forth in paragraph 5(b), purchase technical assistance from the Government of the United States of America, its territories and possessions, the District of Columbia, Guam, the Virgin Islands, American Samoa, the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.

Article XI, Implementation of Section 221(b) of the Compact, paragraph 5(b): The provisions of paragraph 5(b) of the Compact for payments to or support of for-profit organizations are not intended to preclude acquisition of goods and services for public purposes within the programs categories set forth in paragraph 3 of Article XI.

Article XI, Implementation of Section 221(b) of the Compact, paragraph 7: Should the United States determine to withhold special grant funding from the Federated States of Micronesia pursuant to paragraph 7 of Article XI, such withholding action shall be effective three months after the Government of the Federated States of Micronesia receives notice of the intention of the Government of the United States. During this period, the Government of the United States and the Government of the Federated States of Micronesia shall consult to determine the nature of the actions which, if taken, would result in restoration of the special block grant funding which the Government of the United States has determined to withhold.

Conditions of Signature

Subsequent to signature of this Agreement, the Government of the United States and the Government of the Federated States of Micronesia expressly reserve the right to negotiate further concerning the provisions of Paragraph 7 of Article X of this Agreement and the manner in which that paragraph is to be implemented. The provisions of paragraph 7 of Article X of this Agreement shall not take effect or bind the Government of the United States or the Government of the Federated States of Micronesia until the Government of the United States and the Government of the Federated States of Micronesia have expressly agreed to all such provisions and by written declaration have withdrawn this reservation.

This Condition of Signature shall be appended to the signature of the Government of the United States and the Government of the Federated States of Micronesia on the Federal Programs and Services Agreement Concluded Pursuant to Article II of Title Two and Section 232 of the Compact of Free Association.

1. This Amendment to the Federal Programs and Services Agreement is concluded by the signatory Governments in accordance with paragraph 2 of Article XIII (Effective Dates, Amendment and Duration) of that Agreement, and shall amend said agreement as between the signatory Governments hereto.

2. Paragraph 5(f) of Article IX (Civil Aviation Economic Services and Related Programs) of that Agreement is hereby amended to read as follows:

"(f) Notwithstanding the provisions of 49 U.S.C. 1301(16), Continental Micronesia Airlines, Inc., shall qualify as a U.S. citizen air carrier, within the meaning of 49 U.S.C. 1301(3), for so long as it continues to be (1) incorporated in the United States or its Territories or possessions, and (2) controlled by citizens of the United States or by a corporation or corporations controlled by citizens of the United States; provided, that any agreement to provide specified levels of service to any Freely Associated State by Continental Micronesia Airlines, Inc., (or agreement to reduce such levels by three-fourths of the minority directors of the Board of Directors of Continental Micronesia Airlines, Inc.,) shall not affect U.S. citizen control of Continental Airlines, Inc."

3. The Government of the United States shall seek appropriate Congressional approval in order to give effect to this Agreement (which shall be known as "Amendment One to the Federal Programs and Services Agreement Concluded Pursuant to Article II of Title Two and Section 232 of the Compact of Free Association").

DONE AT Washington, D.C., THIS 20th DAY OF September, ONE THOUSAND NINE HUNDRED EIGHTY-FIVE FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA

DONE AT Washington, D.C., THIS 20th DAY OF September, ONE THOUSAND NINE HUNDRED EIGHTY-FIVE FOR THE GOVERNMENT OF THE FEDERATED STATES OF MICRONESIA