Bush Moves to Give Break to Defense Firms : Commerce: The President abolishes fees on the sale of arms and commercial goods developed from military pacts. One estimate pegs industry savings at $40 million a year.

In a move to aid the battered U.S. defense industry, President Bush said Friday that he is eliminating federal fees paid by companies on the sale of arms and commercial goods developed from military contracts.

The President made the announcement at a luncheon sponsored by the Industrial League of Orange County, a business organization in a region--Southern California--whose big defense industry has been hit especially hard by ongoing defense budget cuts.

Bush said the move would help the defense industry compete for billions of dollars in foreign contracts by easing the cost of operations and providing incentives to develop items for both military and commercial use.

The fees the Defense Department charges on military commercial products sold to customers other than the U.S. government have hurt companies trying to cope with defense spending cuts, Bush said.

He described his decision as “an important regulatory change that will help many companies with defense-related businesses make the transition to the post-Cold War era.”

Industry estimates have said the move could save defense firms $40 million a year in paperwork and administrative costs alone.

Defense contractors were required to pay the fees to the government on non-government sales of products and technologies developed under government contracts as well as commercial spinoffs of those technologies.

Federal fees on most weapons and commercial products affected by the rule can be eliminated administratively, but Congress has to act to remove the fees on big weapons sales, officials said.

The Aerospace Industries Assn., a trade group, praised the action, which it had sought for years.

Besides helping the industry compete internationally, said association President Don Fuqua, the move “will also eliminate a major barrier to the free flow of technology between the commercial and defense sectors in the U.S. marketplace.”

A White House statement said the move to eliminate the “recoupment” fee would preserve tens of thousands of American jobs in high-technology companies.

“In today’s environment, the rule operates like a sales tax imposed only on U.S. companies: It hurts American workers by making it more difficult for their employers to compete for business, both in the U.S. and abroad,” the statement said.

The rule originated in the early 1960s as a means to share development costs of major weapons systems sold to U.S. allies, according to the White House.