(Japanese Note) 

　Majuro, July 15, 1997

　Excellency, I have the honour to refer to the Exchange of Notes dated February 20, 1997, between the Government of Japan and the Government of the Republic of the Marshall Islands concerning Japanese economic cooperation for the execution of the Project for Improvement of the Road in Majuro Atoll (hereinafter referred to as "the Project").

　I have further the honour to refer to the recent discussions held between the representatives of the two Governments concerning additional Japanese economic cooperation to be extended with a view to strengthening friendly and cooperative relations between the two countries, and to propose on behalf of the Government of Japan the following arrangements:

1. For the purpose of contributing further to the execution of the Project by the Government of the Republic of the Marshall Islands, the Government of Japan will extend to the Government of the Republic of the Marshall Islands, in accordance with the relevant laws and regulations of Japan, a grant up to one billion four hundred and twenty million yen (1,420,000,000) (hereinafter referred to as "the Grant").

2. The Grant will, in accordance with the relevant laws and regulations of Japan, be made available during each of the following periods within the limit of the corresponding amount for each term, unless such period is extended by mutual agreement between the authorities concerned of the two Governments:

(1) term I 

　period between the date of coming into force of the present arrangements and March 31, 1998; three hundred and five million yen (305, 000,000)

(2) term II

　period between April l, 1998 and March 31, 1999;six hundred and twenty-three million yen (623, 000, 000)

(3) term III

　period between April l, 1999 and March 31, 2000; four hundred and ninety-two million yen (492, 000, 000).

3.(1) The Grant will be used by the Government of the Republic of the Marshall Islands properly and exclusively for the purchase of the products of Japan or the Republic of the Marshall Islands and the services of Japanese or the Marshall Islands nationals listed below: (The term nationals whenever used in the present arrangements means Japanese physical persons or Japanese juridical persons controlled by Japanese physical persons in the case of Japanese nationals, and the Marshall Islands physical or juridical persons in the case of the Marshall Islands nationals.)

(a) products and services necessary for the rehabilitation of the road (hereinafter referred to as "the Road" and the construction of drainage facilities and other related facilities (hereinafter jointly referred to as "the Facilities"); and

(b) services necessary for the transportation of the products referred to in (a) above to ports in the Republic of the Marshall Islands, and those for internal transportation therein.

(2) Notwithstanding the provisions of sub-paragraph (1) above, when the two Governments deem it necessary, the Grant may be used for the purchase of the products of the kind mentioned in (a) of sub-paragraph (1) above, which are products of countries other than Japan or the Republic of the Marshall Islands and the services of the kind mentioned in (a) and (b) of sub-paragraph (1) above, which are services of nationals of countries other than Japan or the Republic of the Marshall Islands.

4.The Government of the Republic of the Marshall Islands or its designated authority will enter into contracts in Japanese yen with Japanese nationals for the purchase of the products and services referred to in paragraph 3. Such contracts shall be verified by the Government of Japan to be eligible for the Grant.

5.(1) The Government of Japan will execute the Grant by making payments in Japanese yen to cover the obligations incurred by the Government of the Republic of the Marshall Islands or its designated authority under the contracts verified in accordance with the provisions of paragraph 4 (hereinafter referred to as "the Verified Contracts") to an account to be opened in the name of the Government of the Republic of the Marshall Islands in an authorized foreign exchange bank of Japan designated by the Government of the Republic of the Marshall Islands or its designated authority (hereinafter referred to as "the Bank").

(2) The payments referred to in sub-paragraph (1) above will be made when payment requests are presented by the Bank to the Government of Japan under an authorization to pay issued by the Government of the Republic of the Marshall Islands or its designated authority.

(3) The sole purpose of the account referred to in sub-paragraph (1) above is to receive the payments in Japanese yen by the Government of Japan and to pay to the Japanese nationals who are parties to the Verified Contracts. The procedural details concerning the credit to and debit from the account will be agreed upon through consultation between the Bank and the Government of the Republic of the Marshall Islands or its designated authority.

6.(1) The Government of the Republic of the Marshall Islands will take necessary measures: 

(a) to secure lots of land necessary for the rehabilitation of the Road and the construction of the Facilities and to clear the site;

(b) to provide facilities for distribution of electricity, water supply and drainage and other incidental facilities outside the site;

(c) to ensure prompt unloading and customs clearance at ports of disembarkation in the Republic of the Marshall Islands and internal transportation therein of the products purchased under the Grant;

(d) to exempt Japanese nationals from customs duties, internal taxes and other fiscal levies which may be imposed in the Republic of the Marshall Islands with respect to the supply of the products and services under the Verified Contracts;

(e) to accord Japanese nationals whose services may be required in connection with the supply of the products and services under the Verified Contracts such facilities as may be necessary for their entry into the Republic of the Marshall Islands and stay therein for the performance of their work;

(f) to ensure that the Road rehabilitated and the Facilities constructed under the Grant be maintained and used properly and effectively for the execution of the Project; and

(g) to bear all the expenses, other than those covered by the Grant, necessary for the execution of the Project.

(2) With regard to the shipping and marine insurance of products purchased under the Grant, the Government of the Republic of the Marshall Islands will refrain from imposing any restrictions that may hinder fair and free competition among the shipping and marine insurance companies.

(3) The products purchased under the Grant shall not be re-exported from the Republic of the Marshall Islands.

7. The two Governments will consult with each other in respect of any matter that may arise from or in connection with the present arrangements.

　I have further the honour to propose that this Note and Your Excellency's Note in reply confirming on behalf of the Government of the Republic of the Marshall Islands the foregoing arrangements shall be regarded as constituting an agreement between the two Governments, which will enter into force on the date of Your Excellency's reply.

　I avail myself of this opportunity to renew to Your Excellency the assurance of my highest consideration.

　(Signed) Atsuo Saegusa 
　Charg6 d'Affaires, a.i. of Japan to the Republic of the Marshall Islands

　His Excellency Mr. Phillip Muller 
　Minister of Foreign Affairs of the Republic of the Marshall Islands

(Marshall Note) 

　Majuro, July 15, 1997

　Sir, I have the honour to acknowledge the receipt of your Note of today's date, which reads as follows:

"(Japanese Note)" 

　I have further the honour to confirm on behalf of the Government of the Republic of the Marshall Islands the foregoing arrangements and to agree that your Note and this Note shall be regarded as constituting an agreement between the two Governments, which will enter into force on the date of this reply.

　I avail myself of this opportunity to renew to you the assurance of my high consideration. (Signed) Phillip Muller 
　Minister of Foreign Affairs of the Republic of the Marshall Islands

　Mr. Atsuo Saegusa 
　Charge d'Affaires, a.i. of Japan to the Republic of the Marshall Islands