WASHINGTON (AP) _ The United States has rejected a demand from North Korea for $3.5 million to pay the cost of searching for the remains of American servicemen missing from the Korean War.

``It sounds excessive,'' State Department spokesman Nicholas Burns said Friday.

The official Korean Central News Agency said working groups organized to look for remains will be dissolved if the U.S. Army refuses to compensate North Korea.

In reply, Burns said, ``We are prepared to discuss this issue with the North Koreans. We want this to be a reasonable set of negotiations.''

Burns said that the United States expects continued cooperation on the MIA issue from North Korea, consistent with its obligations.

Of the 54,246 Americans killed in the 1950-53 war, 8,168 are still listed as missing. That includes 866 bodies returned in 1954 and buried in Hawaii without being identified.

North Korea did not turn over any remains between 1954 and 1990. It turned over 46 sets of remains between 1990 and 1992 and received $897,000 from the United States as reimbursement.

The American-led U.N. Command and North Korea agreed in 1993 to cooperate in finding American MIAs from the Korean conflict.

The United States has since been pressing North Korea to allow a team including forensics experts to assist in excavations to help identify the remains.

U.S. military officials have said the only way to ensure fair compensation for expenses is for outside experts to take part to verify the costs.