The Trump administration will scrap the "weapon development expense waiver" it had provided to allies including Korea. It is effectively a notice to pay massive additional expense every time they import U.S. weapons. The move targets all key allies, including not only Korea but also Japan, Australia, and the North Atlantic Treaty Organization (NATO).
According to multiple well-informed sources on the 16th, the U.S. government officially notified the Korean government in August of this policy. It will eliminate the waiver on non-recurring costs (NC) that had applied to foreign military sales (FMS), government-to-government contracts.
FMS is a method in which the U.S. government sells weapons directly to allied governments. The U.S. government guarantees quality and contract performance. NC refers to "non-recurring expense" incurred during this FMS process. It is money paid only once when developing a specific weapons systems and establishing a production line. Initial research and development (R&D) expense, design expense, prototype manufacturing expense, and test and evaluation expense all fall under NC.
The Arms Export Control Act (AECA) requires the U.S. Department of Defense to recover these NC. When selling weapons via FMS, it charges the purchasing country a portion of the NC. The logic is that "U.S. taxpayers' money" invested in weapon development should be recouped from abroad. By law, charging the expense is the principle.
However, the U.S. Department of Defense has exercised discretion until now. It has waived NC for certain allies and friendly nations under the pretext of "strategic reasons." The measure aimed to unify allied countries' equipment with U.S. military weapons to enhance interoperability, or to secure price competitiveness in fierce arms procurement contests in third countries such as Europe. The U.S. military news outlet Defense News previously analyzed that "NC waivers are a key tool for the United States to outpace competitors when selling weapons to allies and to achieve equipment standardization with U.S. forces."
Outside of quotes, Korea has been classified as an "ally equivalent to NATO." It had routinely received NC waivers whenever bringing in U.S.-made weapons. But with this special treatment ending, the burden of defense expense is set to surge immediately. According to the sources, the expense saved by NC waivers has typically been known to be about 5% of the total purchase amount.
This policy change is seen as reflecting President Trump's firm, transaction-based view of alliances. President Trump has maintained the perception that allies have long enjoyed security thanks to the United States while running excessive trade surpluses with the United States. The "burden-sharing" logic that expense should be properly billed even to allies has led to the end of NC waivers.
The notice ending NC waivers does not apply only to Korea. Similar positions have reportedly been delivered to key Indo-Pacific allies such as Japan and Australia, as well as NATO allies. Pressure to increase defense burden-sharing is expected to intensify across U.S. alliances.