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104th Congress                                            Rept. 104-519
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


 
 TO MAKE IMPROVEMENTS TO CERTAIN DEFENSE AND SECURITY ASSISTANCE LAWS 
   AND TO AUTHORIZE THE TRANSFER OF NAVAL VESSELS TO CERTAIN FOREIGN 
                               COUNTRIES

                                _______


 April 16, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Gilman, from the Committee on International Relations, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 3121]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on International Relations, to whom was 
referred the bill (H.R. 3121) to amend the Foreign Assistance 
Act of 1961 and the Arms Export Control Act to make 
improvements to certain defense and security assistance 
provisions under those Acts, to authorize the transfer of naval 
vessels to certain foreign countries, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                         Background and Purpose

    The purpose of title I of this bill, H.R. 3121, is to amend 
authorities under the Foreign Assistance Act (FAA) of 1961, as 
amended, and the Arms Export Control Act (AECA) to revise and 
consolidate defense and security assistance authorities, in 
particular by updating policy and statutory authorities. The 
genesis of this effort began nearly seven years ago with H.R. 
2655, the International Cooperation Act of 1989. Subsequent 
legislation by the then Committee on Foreign Affairs, including 
H.R. 2508, the International Cooperation Act of 1991, and later 
bills, continued efforts to amend and update these important 
authorities.
    On June 8, 1995, the House of Representatives passed H.R. 
1561, the American Overseas Interests Act of 1995, by a vote of 
222-192. Title XXXI of Division C, the ``Foreign Aid Reduction 
Act of 1995,'' was dedicated to defense and security assistance 
provisions. On March 12, 1996, the House of Representatives 
agreed to the conference report on H.R. 1561 by a vote of 226-
172. The conference report did not include provisions from 
Division C of the House-passed bill.
    This legislation, H.R. 3121, continues the effort by the 
Committee on International Relations to amend the FAA and AECA 
to make improvements to defense and security assistance 
provisions under those Acts. The provisions included in title I 
of this bill are nearly identical to title XXXI of H.R. 1561 
and are the product of bipartisan effort and cooperation and 
enjoy the strong support of the Departments of State and 
Defense.
    Central to consideration of this bill is the Committee's 
view that this legislation fulfills its responsibilities as an 
authorizing committee. Specifically, this legislation codifies 
in permanent law authorizing language which has been too long 
carried on annual appropriations measures.
    Title I of this bill is organized by chapter as follows:

          Chapter 1 modifies applicable provisions on terms and 
        criteria of financing assistance, including drawdown 
        authorities and a rewrite of the excess defense article 
        authority.
          Chapter 2 modifies terms of assistance for the 
        international military education and training (IMET) 
        program and includes language limiting Indonesia to E-
        IMET assistance.
          Chapter 3 clarifies current law authorities under 
        which Antiterrorism assistance is provided.
          Chapter 4 modifies authorities under which assistance 
        for international narcotics is provided.
          Chapter 5 deals with general provisions regarding 
        military assistance including approval of third-country 
        transfers, standardization of congressional review 
        procedures for arms sales, definitions, arms sales 
        certification thresholds, designation of major non-NATO 
        allies, end-use monitoring, and other miscellaneous 
        issues.

    The purpose of title II of this bill is to authorize the 
transfer of naval vessels to certain foreign countries pursuant 
to the Administration's request of January 29, 1996.
    Legislation authorizing the proposed transfer of these 
ships is required by section 7307(b)(1) of Title 10, United 
States Code, which provides in relevant part that ``a naval 
vessel in excess of 3,000 tons or less than 20 years of age may 
not be sold, leased, granted . . . or otherwise disposed of to 
another nation unless the disposition of that vessel is 
approved by law. . .'' Each naval vessel proposed for transfer 
under this legislation displaces in excess or 3,000 tons and/or 
is less than 20 years of age and therefore the Committee must 
act.
    Title II of this bill authorizes the transfer of ten naval 
vessels (8 sales, 1 lease, 1 grant) to the following countries:

        To the Government of Egypt
        1 ``OLIVER HAZARD PERRY'' class frigate GALLERY (FFG 
        26)
        Sales: $47.2 million

        To the Government of Mexico
        2 ``KNOX'' class frigates: STEIN (FF 1065) and MARVIN 
        SHIELDS (FF 1066)
        Sales: $5.9 million

        To the Government of New Zealand
        1 ``STALWART'' class ocean surveillance ship: TENACIOUS 
        (T-AGOS 17)
        Sale: $7.7 million

        To the Government of Portugal
        1 ``STALWART'' class ocean surveillance ship: AUDACIOUS 
        (T-AGOS 11)
        Grant: $13.7 million

        To Taiwan (the Taipai Economic and Cultural 
        Representative Office in the United States)
        3 ``KNOX'' class frigates: AYLWIN (FF 1081), PHARRIS 
        (FF 1094), and VALDEZ (FF 1096)
        Sale: $8.2 million.
        1 ``NEWPORT'' class tank landing ship: NEWPORT (LST 
        1179)
        Lease: No rent lease

        To the Government of Thailand
        1 ``KNOX'' class frigate: OUELLET (FF 1077)
        Sale: $2.7 million

    According to the Department of Defense, the Chief of Naval 
Operations has certified that these naval vessels are not 
essential to the defense of the United States.
    As detailed above, the U.S. plans to transfer eight naval 
vessels by sale pursuant to section 21 of the Arms Export 
Control Act; one of the vessels will be transferred as a lease 
pursuant to Chapter six of the Arms Export Control Act; and one 
of the vessels will be transferred as a grant pursuant to 
section 519 of the Foreign Assistance Act of 1961, as amended.
    The U.S. will incur no costs for the transfer of the naval 
vessels under this legislation. The foreign recipients will be 
responsible for all costs associated with the transfers of the 
vessels, including maintenance, repairs, training, and fleet 
turnover costs. Any expenses incurred in connection with the 
transfers will be charged to the foreign recipients.
    Through the sale of these naval vessels, this legislation 
generates $71.7 million in revenue for the U.S. Treasury. In 
addition, through repair and reactivation work, service 
contracts, ammunition sales, and savings generated from 
avoidance of storage/deactivation costs, the Navy estimates 
this legislation generates an additional $525 million in 
revenue for the U.S. Treasury and private U.S. firms.

                            Committee Action

    Numerous hearings were held by the Committee on 
International Relations in the fall of 1995 which were 
dedicated to Division C of H.R. 1561. For a full list of these 
hearings see House Report 104-128, Part I.
    On March 20, 1996, Chairman Benjamin A. Gilman, along with 
the Ranking Democratic Member, Lee Hamilton, introduced H.R. 
3121. On March 21, 1996, the Committee on International 
Relations received testimony on the legislation from Mr. John 
P. Caves, Deputy Director of Plans, Defense Security Assistance 
Agency, and Ms. Barbara Larkin, Acting Assistant Secretary for 
Legislative Affairs, Department of State. The Committee 
subsequently debated the measure and reported out H.R. 3121 
unanimously by voice vote.

            Rollcall Votes and Amendments and Final Passage

    During consideration of H.R. 3121 by the Committee on 
International Relations on March 21, 1996, there were no 
amendments and a rollcall vote was not requested on final 
passage.

     Description of Amendment, Motion, Order, or Other Proposition

    Mr. Roth moved and the Committee agreed that the Chairman 
or his designee be requested to seek consideration of H.R. 3121 
on the suspension calendar.

                      Section-By-Section Analysis

                Title I--Defense and Security Assistance

               Chapter I--Military and Related Assistance

Section 101. Terms of Loans Under the Foreign Military Financing 
                    Program.

    Section 101 states that loans made available under section 
23 of the Arms Export Control Act shall not be provided at 
concessional rates of interest. This section updates and 
codifies in the Arms Export Control Act the FMF loan terms that 
have been carried annually on the Foreign Operations 
Appropriation bill.

Section 102. Additional Requirements under the Foreign Military 
                    Financing Program.

    Section 102 amends section 23 of the Arms Export Control 
Act to codify several provisions which have been carried on 
annual appropriations bills. The first provision allows the 
President to exempt Israel from certain costs imposed on 
government-to-government arms sales. Utilization of this 
authority is contingent on Israel providing the U.S. the same 
authority on a reciprocal basis. The second provision directs 
the Secretary of Defense, as requested by the Director of the 
Defense Security Assistance Agency, to conduct audits on a 
nonreimbursable basis of firms which have entered into 
contracts with foreign governments under which grant or loan 
Foreign Military Financing under section 23 of the Arms Export 
Control Act is utilized. The third provision states that the 
Committee shall receive a 15-day pre-notification for any 
country or international organization which has been approved 
for cash flow financing for the procurement of defense 
articles, services or design and construction services in 
excess of $100 million that is financed in whole or in part 
with funds made available under the Arms Export Control Act or 
the Foreign Assistance Act of 1961. The fourth provision limits 
to $100 million the amount of grant or loan Foreign Military 
Financing under section 23 of the Arms Export Control Act that 
may be made available to countries, other than Egypt and 
Israel, for the purpose of financing commercial sales. Finally, 
the fifth provision in this section requires a report which 
details all articles, services, credits, guarantees, and any 
other form of assistance furnished by the U.S. in the preceding 
fiscal year to countries and international organizations for 
the detection and clearance of landmines.
    With respect to the demining activities, the Committee 
directs the Secretary of State to make all possible efforts to 
ensure that assistance, including the provision of mine 
detection/clearing equipment, mine clearing training and other 
assistance related to reducing the threat of injury from mines, 
especially to civilian personnel, be made available to 
Solvenia, Croatia, Bosnia-Herzegovina, Macedonia, Angola and 
Mozambique.

Section 103. Drawdown Special Authorities.

    Section 103 increases the special drawdown authorities of 
defense articles and services from stocks to assist foreign 
countries from $75 million to $100 million (for unforeseen 
emergencies) and from $75 million to $150 million (for national 
interests relating to international narcotics, international 
disaster assistance, migration and refugee assistance and POW/
MIA repatriation efforts). The POW/MIA repatriation drawdown is 
codified from the current appropriations law. It allows for the 
drawdown of up to $15 million in defense articles and services 
to Vietnam, Cambodia and Laos to support efforts to locate and 
repatriate members of the U.S. Armed Forces and civilian who 
remain unaccounted for since the end of the Vietnam war.

Section 104. Transfer of Excess Defense Articles.

    Section 104 streamlines and consolidates DOD authorities of 
current law to transfer excess defense articles.
    This new consolidated authority stipulates that only 
countries which are justified in the annual congressional 
presentation documents for military assistance or counter-
narcotics programs, or separately justified during the fiscal 
year for such purposes, are eligible to receive excess defense 
articles. This section retains current limitations on EDA 
transfers, including: excess defense articles must be drawn 
from existing DoD stocks; no DoD procurement funds may be 
expended in connection with the transfer; the transfer of EDA 
will not have an adverse impact on the military readiness of 
the U.S.; that an analysis be prepared on the impact of 
providing EDA on a grant versus sales basis; and the transfer 
of such articles is consistent with the policy framework for 
the Eastern Mediterranean pursuant to section 620C of the 
Foreign Assistance Act.
    An additional limitation on proposed transfers requires the 
President to determine that the transfer will not have an 
adverse impact on U.S. defense industry and that the transfer 
will not reduce opportunities of U.S. companies to sell new or 
used equipment to countries where transfers are either being 
transferred or being considered for transferred. Such 
determination is also required to be included as part of the 
congressional notification on any proposed transfer (see 
below). The Committee would note that such determination 
applies to both grant transfers and sales of EDA. The Committee 
expects the Defense Security Assistance Agency to work closely 
with U.S. defense industry to ensure that both the spirit and 
the law are met fully with regard to this limitation. The 
Committee will be monitoring the implementation of this 
provision closely.
    This section also codifies EDA provisions carried over form 
appropriations law including a provision which directs that EDA 
provided to NATO countries on the southern and southeastern 
flank of NATO and major non-NATO nations on such southern and 
southeastern flank shall be given priority to the maximum 
extent feasible on the delivery of EDA over other countries.
    This section also includes a subsection which prohibits the 
expenditure of DoD funds for packing, crating, and handling 
associated with transfers of EDA. Transportation may be 
provided and paid for with DoD funds but on the strict terms 
outlined in this subsection.
    Other subsections of this section include a provision for 
congressional notification of proposed transfers of EDA if the 
proposed transfer is significant military equipment or EDA 
valued at more than $7 million (acquisition cost). This 
notification requires that specific information and assessments 
be made with regard to the proposed transfer.
    This section also includes an aggrevate annual limitation 
of $350 million (current value) on the transfer of EDA under 
this section to countries in any fiscal year. The aggregate 
annual limitation shall apply beginning in fiscal year 1997. 
The Committee directs the Defense Security Assistance Agency to 
promptly consult with the Committee should DSAA consider 
changing the regulations or definitions addressing how current 
value is determined. The Aggregate ceiling does not apply to 
sales of EDA.
    Finally, this section requires that the Executive branch 
expand upon the current EDA section in the annual congressional 
presentation documents to provide the committee with specific 
information.

Section 105. Excess Defense Articles for Certain European Countries.

    Section 105 authorizes DoD to expend funds for crating, 
packing, handling and transportation of excess defense articles 
transferred under section 516 of the Foreign Assistance Act to 
countries that are eligible to participate in the Partnership 
for Peace and that are eligible under the SEED Act. Those 
countries include Albania, Bulgaria, the Czech Republic, 
Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia 
and Slovenia.

        Chapter 2--International Military Education and Training

Section 111. Assistance for Indonesia.

    Section 111 authorizes the resumption of IMET for Indonesia 
with the condition that all such IMET be comprised of the human 
rights-oriented Expanded IMET program as described in clauses 
(i) through (iv) of the second sentence of section 541 of 22 
U.S.C. Sec. 2347. The decision to resume targeted IMET for 
Indonesia is based on the importance of Indonesia as a trade 
and security partner, on professionalism and human rights 
sensitivity of the foreign military beneficiaries.
    This limited restoration of IMET, therefore, should not be 
interpreted as an expression of congressional satisfaction with 
the Government of Indonesia's human rights performance in East 
Timor or elsewhere in Indonesia. The Congress remains concerned 
about poor human rights conditions in Indonesia and urges the 
Administration to actively promote better human rights 
practices. Moreover, the Congress looks for improvements in 
these areas prior to restoration of the full range of security 
cooperation with Indonesia as it existed prior to the massacre 
in Dili, East Timor, in November 1991.

Section 112. Additional Requirements.

    Section 112 amends the Foreign Assistance Act to place into 
permanent law several provisions carried in annual 
appropriations law regarding the IMET program: first, a 
provision which allows NGOs to be eligible for Expanded IMET 
assistance; second, a new authority which allows foreign 
military and civilian defense personnel to attend U.S. flight 
training schools and programs if such attendance is agreed to 
on a reciprocal basis with a foreign country and is 
accomplished without charge. This authority will allow the Air 
Force to train pilots from the U.K. and France and other 
countries on a reciprocal basis without cost to the U.S. 
Government. A third provision modifies current law to prohibit 
grant IMET assistance to the following ``high-income 
countries'': Austria, Finland, the Republic of Korea, Singapore 
and Spain. For purposes of this section ``high-income country'' 
means any nation listed as high-income earning countries in the 
``World Development Report, 1994'' and the Government of 
Korea). Current law limits grant assistance to $100,000 to any 
high-income country.

                  Chapter 3--Antiterrorism Assistance

Section 121. Antiterrorism Training Assistance.

    Section 121 makes a variety of amendments to the Foreign 
Assistance Act relating to the manner in which Antiterrorism 
Training Assistance (ATA) assistance may be provided. When the 
ATA program was established, a variety of restrictions were 
imposed on how training could be provided and specified that 
only certain types of material assistance could be provided due 
to lingering sensitivities about U.S.-supported police training 
assistance. Some of these restrictions currently make the 
program less effective.
    Section 121 allows assistance through the ATA program to be 
provided outside the United States, mirroring other current law 
enforcement training authorities. This modification will make 
the program more efficient as well as more cost effective. 
Section 121 also removes the specific list of material 
assistance that may be provided in favor of a restriction on 
the provision of arms and ammunition. Arms and ammunition may 
only be provided if they are directly and integrally related to 
training being provided and if the Congress is notified 15 days 
in advance in accordance with regular reprogramming procedures. 
This change also makes the program consistent with other U.S.-
supported law enforcement training programs.

Section 122. Research and Development Expenses.

    Section 122 would allow the Bureau of Diplomatic Security's 
Office of Antiterrorism Assistance to use funds, as 
practicable, for the State Department's Technical Support 
Working Group. Such funds could be made available during the 
fiscal year only after the Office of Antiterrorism Assistance 
determines that its remaining annual training requirements, 
related equipment purchases, and contractual obligations can be 
effectively met by the existing funding allocation. Priority 
use of funds to carry out chapter 8 of part II of the Foreign 
Assistance Act (22 U.S.C. Sec. 2349aa et seq.; relating to 
antiterrorism assistance) shall continue to focus upon training 
and training-related equipment purchases.

                Chapter 4--Narcotics Control Assistance

Section 131. Additional Requirements.

    Section 131 makes the following technical and 
administrative amendments to the narcotics control authorities 
under the Foreign Assistance Act.
    Section 131(a) restates a one-year provision of the 
International Narcotics Control Corrections Act of 1994 
relating to programs to combat other international criminal 
activities and makes the provision permanent law. The section 
reflects concern over the increased level of organized 
international criminal activity and the threat posed by such 
activity to U.S. national security. The section is intended to 
allow the provision of assistance to address a variety of 
criminal activities that may not be directly related to 
narcotics production and trafficking, such as alien smuggling, 
counterfeiting, and other types of illegal international 
activity. The section also reflects the creation in the 
Department of State of the Bureau of International Narcotics 
and Law Enforcement Affairs. The Committee intends that all 
Department of State anticrime activities (other than 
antiterrorism activities) be conducted by that bureau.
    Section 131(b) establishes administrative authorities for 
the provision of international narcotics control assistance by 
allowing the President to accept contributions from other 
governments to augment existing narcotics control activities 
and to provide training and other assistance on a reimbursable 
basis. The United States has the most well-established 
mechanism for providing a wide variety of international 
counter-narcotics related assistance. An integral component of 
the U.S. international narcotics control strategy for the past 
seven years has been efforts to increase support for counter-
narcotics activities by other countries affected by the 
narcotics problem. However, most of these countries do not have 
any type of mechanism available that would allow the effective 
delivery of such assistance. The authority to accept 
contributions from other interested foreign governments will 
allow the President to administer another country's assistance 
efforts under the same terms and conditions as U.S. assistance.
    Section 131(c) requires that funds authorized under other 
sections of the Foreign Assistance Act for narcotics control or 
crime purposes be apportioned directly to the Bureau for 
International Narcotics and Law Enforcement Affairs. This 
provision is intended to address a problem with internal 
transfers of funds within the Department and between the 
Department and AID (or AID's successor). In FY95, $5 million in 
Economic Support Fund assistance was authorized for anticrime 
programs. These funds experienced a long delay in obligation 
because of the cumbersome inter-Department transfer system. A 
similar situation arose with respect to the $30 million 
authorized for law enforcement assistance to Central Europe and 
the independent states of the former Soviet Union. Despite the 
urgent problems in those countries which the assistance was 
designed to address, the obligation of these funds was delayed 
for several months due to the necessity to transfer the money 
from AID to the Department and then within the Department. 
Section 131(c) also allows the Secretary to receive property 
declared excess by other U.S. Government agencies and to 
transfer such property to foreign governments under the same 
terms and conditions as funds authorized for international 
narcotics control programs.

Section 132. Notification Requirement.

    Section 132 requires the Director of the Office of National 
Drug Control Policy to notify the appropriate congressional 
committees 15 days in advance of using the authority of the 
National Narcotics Control Leadership Act of 1988 to reallocate 
resources and personnel associated with international narcotics 
control programs and activities. The Committee believes that in 
order to fulfill its oversight responsibilities with respect to 
such programs and activities, no such reallocation of personnel 
or resources should be permitted without the prior consultation 
and approval of the Committee.

Section 133. Waiver of Restrictions for Narcotics-Related Economic 
                    Assistance.

    Section 133 restates for FY96 and FY97 a provision of law 
allowing the President to provide narcotics-related economic 
assistance without regard to other restrictions on assistance, 
except for countries which have been decertified for narcotics 
concerns or which systematically violate internationally 
recognized human rights.

                      Chapter 5--Other Provisions

Section 141. Standardization of Congressional Review Procedures for 
                    Arms Transfers.

    Section 141 eliminates anomalies in current law regarding 
congressional review procedures applicable to different 
categories of transfers to the same country or group of 
countries. This section creates common review procedures for 
given recipients irrespective of the nature of the type of 
transfer (for example, FMS or commercial sale). This section 
also equates the statutory period of time for enactment of a 
joint resolution of disapproval of a transfer to the period of 
time stipulated for review of that transfer. Finally, this 
section standardizes the requirements for all types of sales 
for any Presidential waiver of congressional notification.
    The Committee notes that this section does not affect the 
informal process agreed to between the Committee and the 
Administration regarding arms transfers.

Section 142. Standardization of Third Country Transfers of Defense 
                    Articles.

    Section 142 standardizes the rules governing the retransfer 
of certain U.S.-origin military equipment. Currently, 
retransfer regulations for direct commercial sales and FMS 
sales differ with respect to retransfers. By standardizing the 
rules governing third party transfers of FMS equipment and 
commercial sales this section provides equitable treatment of 
equipment previously bought under FMS or DCS. While requests to 
approve retransfers of the type permitted under this proposal 
are routinely granted under the current system, the requirement 
to seek U.S. government approval is administratively burdensome 
for both the foreign parties and the U.S. government. This 
section also details the specific conditions under which the 
consent of the President is required for retransfers to occur.

Section 143. Increased Standardization, Rationalization, and 
                    Interoperability of Assistance and Sales Programs.

    Section 143 amends the Foreign Assistance Act to remove 
country specific references with respect to standardization, 
rationalization and interoperability of assistance and sales 
programs, thereby allowing the U.S. to pursue these objectives 
with other nations. Section 515(a)(6) of the Foreign Assistance 
Act (current law) states that the President may assign members 
of the U.S. Armed Forces in a foreign country the function of 
``promoting rationalization, standardization and 
interoperability, and other defense cooperation measures among 
members of NATO, and the armed forces of Japan, Australia and 
New Zealand. . .'' By deleting the specific country references, 
this section makes it clear that U.S. security assistance 
officers may pursue those functions worldwide.

Section 144. Definition of Significant Military Equipment.

    Section 144 amends the Arms Export Control Act to provide a 
definition of significant military equipment as defined in the 
International Traffic in Arms Regulation (ITAR).

Section 145. Elimination of Annual Reporting Requirements relating to 
                    the Special Defense Acquisition Fund.

    Section 145 repeals an annual reporting requirement in the 
Special Defense Acquisition Fund (SDAF) which is no longer 
needed or useful. Section 53(a) of the Arms Export Control Act 
requires a report on specific SDAF issues related to the SDAF 
fund for which monies are no longer being appropriated. The 
report is therefore obsolete and this section eliminates the 
report.

Section 146. Cost of leased Defense Articles that Have been Lost or 
                    Destroyed.

    Section 146 conforms provisions within the AECA which 
require reimbursement for the cost of leased defense articles 
that have been lost or destroyed. Current law requires the 
leasing country to pay ``the replacement cost (less any 
depreciation in the value) of the articles if the articles are 
lost or destroyed while leased.'' In circumstances in which the 
leased item is not going to be replaced by the U.S. Government, 
the rationale that justifies charging the foreign government 
the full replacement cost is no longer valid or just. Section 
21(a)(1)(A) of the Arms Export Control Act contains a provision 
regarding the pricing of items to be sold which the U.S. does 
not intend to replace: ``The President may sell. . . if such 
country agrees to pay, in the case of a defense article not 
intended to be replaced at the time such an agreement is 
entered into, not less than the actual value thereof.'' This 
section applies the same rationale to the pricing of lost or 
destroyed leased items.

Section 147. Designation of Major Non-NATO Allies.

    Section 147 designates Australia, Egypt, Israel, Japan, 
Korea and New Zealand as major non-NATO allies for purposes 
under the Foreign Assistance Act and Arms Export Control Act. 
This section also authorizes the President to designate 
additional major non-NATO allies and terminate such 
designations if he notifies the Congress.

Sections 148. Certification Thresholds.

    Section 3189 amends the Arms Export Control Act to increase 
the dollar thresholds for reporting arms sales to the Congress: 
from $14 million to $25 million for major defense equipment; 
from $50 million to $75 million for defense articles and 
services; and from $200 million to $300 million for design and 
construction services.

Section 149. Depleted Uranium Ammunition.

    Section 149 amends the Foreign Assistance Act to place into 
permanent law a provision carried in annual appropriations law 
that restricts the sale or transfer of M-833 antitank shells or 
any comparable antitank shell containing a depleted uranium 
penetrating component to any country except for NATO member 
states, major non-NATO states and Taiwan. The section also 
contains a national security interest waiver for the President.

Section 150. End-Use Monitoring of Defense Articles and Defense 
                    Services.

    Section 150 directs the President to establish a 
comprehensive end-use monitoring program for defense articles 
and services in order to improve accountability with respect to 
those defense articles and services sold, leased or exported 
under the Arms Export Control Act or Foreign Assistance Act. 
The Committee believes that the benefits of an effective system 
of pre-and post-shipment verifications are clear. A random 
selection of licenses/applications for bona fides and end use 
checks will deter those who would illegally acquire and/or 
divert U.S defense articles. Having proven the effectiveness of 
this type of program for commercial arms transactions through 
the Blue Lantern program at the Office of Defense Trade 
Controls in the Department of State, the Committee believes 
that there would be clear benefits in using a similar procedure 
for FMS sales. Accordingly, this section directs the President 
to establish a comprehensive program which covers both 
commercial and FMS types of transactions. This section outlines 
the purposes and objectives of the program and requires a 
report on the implementation of the new program.
    The Committee places a high priority on the timely 
establishment and effective implementation of such a program.

Section 151. Brokering Activities relating to Commercial Sales of 
                    Defense Articles and Services.

    Section 151 requires U.S. persons (and foreign persons 
located in the U.S.) involved in defense trade of U.S. and non-
U.S. defense equipment or technology to register with the U.S. 
government and provides the U.S. government authority to 
regulate such brokering activities. The Arms Export Control Act 
provides the Department of State with the authority to regulate 
the destination and use of U.S. origin and U.S.-made defense 
commodities. However, the AECA does not authorize the 
Department to regulate the activities of U.S. persons (and 
foreign persons located in the U.S.) brokering defense 
transactions overseas (except for transactions involving a 
small number of terrorist countries). Nor does the AECA 
authorize the Department to regulate the brokering of non-U.S. 
defense articles or technology.
    This provision provides those new authorities to ensure 
that arms export support the furtherance of U.S. foreign policy 
objectives, national security interests and world peace. More 
specifically, in some instances U.S. persons are involved in 
arms deals that are inconsistent with U.S. policy. Certain of 
these transactions could fuel regional instability, lend 
support to terrorism or run counter to a U.S. policy decision 
not to sell arms to a specific country or area. The extension 
of U.S. legal authority under this provision to regulate 
brokering activities would help to curtail such transactions.

Section 152. Return and Exchanges of Defense Articles Previously 
                    Transferred Pursuant to the Arms Export Control 
                    Act.

    Section 152 authorizes repairable exchange programs and 
permits the Department of Defense to accept for return defense 
articles previously sold through the Foreign Military Sales 
program. This section provides clear statutory authority in 
both of these areas, increasing the readiness of both the U.S. 
and its allies and friends, particularly in contingency 
situations.
    Under the present procedure for the repair of items for FMS 
customers, the item is received into the repair system and 
tracked through the repair cycle to ensure that the exact same 
item is returned to the FMS customer. Both the cost and the 
time taken to repair the item is increased by the requirement 
to track the item through the process. Section 152(a) would 
allow the FMS process to mirror the process used by the rest of 
the U.S. Government. That process allows for immediate exchange 
for a serviceable replacement part from DoD stocks. No tracking 
of individual items is required.
    Section 152(b) of this provision would allow DoD to accept 
the return of items previously sold to a foreign government 
when either the U.S. has a requirement for the item for when 
another eligible foreign country or international organization 
wishes to receive the item pursuant to FMS procedures.

Section 153. National Security Interest Determination to Waive 
                    Reimbursement of Depreciation for Leased Defense 
                    Articles.

    Section 153 modifies current law to delete language which 
permits the President to provide no-cost leases for U.S. 
defense articles to countries and international organizations 
if such defense articles have passed three-quarters of their 
normal service life. In lieu of current law, this section 
allows the President to provide no-cost leases for U.S. defense 
articles if such articles have passed three-quarters of their 
normal service life and only if the President determines to do 
so is important to the national security interests of the U.S.
    The Committee intends that this waiver be used sparingly 
and is not to be delegated below of the Secretary of Defense.

    Title Ii--Transfer of Naval Vessels to Certain Foreign Countries

Section 201. Authority to Transfer Naval Vessels.

    Section 201 authorizes the transfer of ten naval vessels to 
six countries. Specifically, it authorizes the Secretary of the 
Navy to sell eight naval vessels, lease one naval vessel and 
grant one naval vessel. Sales include: To the Government of 
Egypt, the ``OLIVER HAZARD PERRY'' class frigate GALLERY; To 
the Government of Mexico, the ``KNOX'' class frigates STEIN (FF 
1065) and MARVIN SHIELDS (FF 1066); To the Government of New 
Zealand, the ``STALWART'' class ocean surveillance ship 
TENACIOUS; To the Government of Taiwan the ``KNOX'' class 
frigates AYLWIN, PHARRIS and VALDEZ; and to the Government of 
Thailand, the ``KNOX'' class frigate OUELLET. The lease is to 
the Government of Taiwan, the ``NEWPORT'' class tank landing 
ship NEWPORT. The grant transfer is to the Government of 
Portugal, the ``STALWART'' class ocean surveillance ship 
AUDACIOUS.

Section 202. Costs of Transfers.

    Section 202 states that any expense to the U.S. in 
connection with a transfer authorized by Title II of this bill 
shall be charged to the recipient country.

Section 203. Expiration of Authority.

    Section 203 provides that the authority to transfer naval 
vessels in section 201 expires at the end of a 2-year period 
beginning on the date of the enactment of this bill.

Section 204. Repair and Refurbishment of Vessels in United States 
                    Shipyards.

    Section 204 requires the Secretary of the Navy, to the 
maximum extent possible, to have repair and refurbishment work 
performed at shipyards located in the U.S., including U.S. Navy 
shipyards.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives are incorporated in the 
descriptive portions of this report. Among the principal 
oversight activities which contributed to the Committee's 
formulation of H.R. 3121 were:

          Extensive hearings and previous legislation 
        considered by the Committee (see background and 
        purpose) and numerous consultations and briefings 
        between staff, Committee Members and Executive branch 
        officials.

    As a result of these oversight activities, the Committee 
recommends that the House approve H.R. 3121, as reported.

         Committee on Government Reform and Oversight Function

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    The Committee adopts the cost estimate of the Congressional 
Budget Office, set out below, as its submission of any required 
information on new budget authority, new spending authority, 
new credit authority or an increase or decrease in the national 
debt required by clause 2(l)(3)(B) of rule XI of the Rules of 
the House of Representatives.

                     Inflationary Impact Statement

    In compliance with clause 2(l)(4) of rule XI of the Rules 
of the House of Representatives, the Committee estimates that 
H.R. 3121 will have no significant inflationary impact on 
prices and costs in the operation of the national economy.

                  Congressional Budget Office Estimate

    In compliance with clause 2(1)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets forth 
with respect to H.R. 3121 the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 27, 1996.
Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations,
Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3121, a bill to 
amend the Foreign Assistance Act of 1961 and the Arms Export 
Control Act to make improvements to certain defense and 
security assistance provisions under those Acts, to authorize 
the transfer of naval vessels to certain foreign countries, and 
for other purposes, as ordered reported by the House Committee 
on International Relations on March 21, 1996.
    Section 4 of the Unfunded Mandates Reform Act of 1995, P.L. 
104-4, excludes legislative provisions that are necessary for 
the national security from the application of that act. CBO has 
determined that all provisions of H.R. 3121 fit within that 
provision.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               Congressional Budget Office Cost Estimate

    1. Bill number: H.R. 3121.
    2. Bill title: A bill to amend the Foreign Assistance Act 
of 1961 and the Arms Export Control Act to make improvements to 
certain defense and security assistance provisions under those 
Acts, to authorize the transfer of naval vessels to certain 
foreign countries, and for other purposes.
    3. Bill status: As ordered reported by the House Committee 
on International Relations on March 21, 1996.
    4. Bill purpose: The bill would authorize the sale or 
disposal of certain naval vessels and would otherwise address 
defense and security assistance programs.
    5. Estimated cost to the Federal Government: Table 1 shows 
the estimated cost to the Federal Government. The costs of the 
bill would fall within budget function 150 (international 
affairs).
    6. Basis of estimate: The estimate assumes enactment of the 
bill by June 1, 1996, and subsequent appropriation of the 
estimated authorization amounts. CBO used historical spend-out 
rates for estimating outlays.

                              Asset Sales

    The bill would authorize the Secretary of the Navy to sell 
eight naval vessels to certain foreign countries and otherwise 
dispose of two other vessels. The Navy estimates the sale would 
generate $72 million in offsetting receipts in 1996.
    Under the 1996 budget resolution, proceeds from asset sales 
are counted in the budget totals for purposes of Congressional 
scoring. Under the Balanced Budget Act, however, proceeds from 
asset sales are not counted in determining compliance with the 
discretionary spending limits or pay-as-you-go requirement.

                      Direct Spending and Revenues

    The bill contains three provisions affecting direct 
spending and receipts.
    Fees for Activities Supporting Arms Sales.--Section 151 
would require persons engaged in financing, transporting, 
freight forwarding, or other activity facilitating the 
manufacture, export, or import of a defense article or service 
to register with the Federal Government as a broker and to pay 
a fee. Based on information from the Department of State, the 
fees are estimated to increase revenues by less than $500,000 a 
year.
    Waiver of Charges for Contract Administration Services.--
Section 102 would permit the President to provide without 
charge on a reciprocal basis certain contract administration 
services on military sales to Israel. The U.S. government 
currently charges 1.5 percent of the value of sales for such 
services. CBO estimates that enactment of the provision would 
have little effect on collections in 1996, but should lower 
collections by $20 million a year beginning in 1997.
    International Narcotics Control.--Section 131 would 
authorize the President to accept and to spend contributions 
from other governments for international narcotics control 
activities and to provide narcotics control services on a 
reimbursable basis. Although CBO cannot estimate the amount of 
activity that might be undertaken using this authority, it 
would have no net budgetary impact over the long run.

               Spending Subject to Appropriations Action

    The bill would impose new responsibilities on the 
Departments of State and Defense but would not explicitly 
authorize additional appropriations. Section 150 would require 
the President to monitor the use of defense articles and 
services sold, leased, or exported under U.S. laws. Section 151 
would also require additional resources to register arms 
brokers and enforce compliance. The Department of State 
estimates that it would require 6 to 12 staff-years to comply 
with these requirements. CBO estimates that it would require an 
additional $1 million in funding to implement the new 
requirements.

 TABLE 1.--BUDGETARY IMPACTS OF H.R. 3121 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON INTERNATIONAL RELATIONS 
                                                ON MARCH 21, 1996                                               
----------------------------------------------------------------------------------------------------------------
                                                              1996       1997       1998       1999       2000  
----------------------------------------------------------------------------------------------------------------
                     ASSET SALES \2\                                                                            
                                                                                                                
Estimated Budget Authority...............................        -72          0          0          0          0
Estimated Outlays........................................        -72          0          0          0          0
                                                                                                                
               DIRECT SPENDING AND REVENUES                                                                     
                                                                                                                
Estimated Revenues.......................................      (\1\)      (\1\)      (\1\)      (\1\)      (\1\)
Estimated Budget Authority...............................      (\1\)         20         20         20         20
Estimated Outlays........................................      (\1\)         20         20         20         20
                                                                                                                
        SPENDING SUBJECT TO APPROPRIATIONS ACTION                                                               
                                                                                                                
Estimated Authorization of Appropriations................          0          1          1          1          1
Estimated Outlays........................................          0          1          1          1          1
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,00.                                                                                          
\2\ Under the 1996 budget resolution, proceeds from asset sales are counted in the budget totals for purposes of
  Congressional scoring. Under the Balanced Budget Act, however, proceeds from asset sales are not counted in   
  determining compliance with the discretionary spending limits or pay-as-you-go requirement.                   

    7. Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts through 1998. H.R. 3121 would have the following pay-
as-you-go impact:

------------------------------------------------------------------------
                                            1996       1997       1008  
------------------------------------------------------------------------
Change in Outlays......................          0         20         20
Change in Receipts.....................          0          0          0
------------------------------------------------------------------------

    8. Estimated cost to state, local, and tribal governments: 
Section 4 of the Unfunded Mandates Reform Act of 1995 excludes 
legislative provisions that are necessary for the national 
security from the application of that act. CBO has determined 
that all provisions of H.R. 3121 fit within that provision.
    9. Estimated impact on the private sector: Section 4 of the 
Unfunded Mandates Reform Act of 1995 excludes legislative 
provisions that are necessary for the national security from 
the application of that act. CBO has determined that all 
provisions of H.R. 3121 fit within that provision.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Joseph C. Whitehill prepared the 
estimate of costs to the federal government. Pepper Santalucia 
prepared the estimated impact on state, local, and tribal 
governments. Eric Labs prepared the estimated impact on the 
private sector.
    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                         Jurisdictional Issues

    H.R. 3121, as ordered reported by the Committee on 
International Relations, contains provisions which fall within 
the shared jurisdiction of other committees of the House, 
including the committee on Rules and the Committee on National 
Security.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italics, existing law in which no change is proposed 
is shown in roman):

                        ARMS EXPORT CONTROL ACT

          * * * * * * *

    CHAPTER 1.--FOREIGN AND NATIONAL SECURITY POLICY OBJECTIVES AND 
                               RESTRAINTS

  Sec. 3. Eligibility.--(a)  * * *
  (b) The consent of the President under paragraph (2) of 
subsection (a) or under paragraph (1) of section 505(a) of the 
Foreign Assistance Act of 1961 (as it relates to subparagraph 
(B) of such paragraph) shall not be required for the transfer 
by a foreign country or international organization of defense 
articles sold by the United States under this Act if--
          (1) such articles constitute components incorporated 
        into foreign defense articles;
          (2) the recipient is the government of a member 
        country of the North Atlantic Treaty Organization, the 
        Government of Australia, the Government of Japan, or 
        the Government of New Zealand;
          (3) the recipient is not a country designated under 
        section 620A of the Foreign Assistance Act of 1961;
          (4) the United States-origin components are not--
                  (A) significant military equipment (as 
                defined in section 47(9));
                  (B) defense articles for which notification 
                to Congress is required under section 36(b); 
                and
                  (C) identified by regulation as Missile 
                Technology Control Regime items; and
          (5) the foreign country or international organization 
        provides notification of the transfer of the defense 
        articles to the United States Government not later than 
        30 days after the date of such transfer.
          * * * * * * *
  (d)(1) The President may not give his consent under paragraph 
(2) of subsection (a) or under the third sentence of such 
subsection, or under section 505(a)(1) or 505(a)(4) of the 
Foreign Assistance Act of 1961, to a transfer of any major 
defense equipment valued (in terms of its original acquisition 
cost) at [$14,000,000] $25,000,000 or more, or any defense 
article or related training or other defense service valued (in 
terms of its original acquisition cost) at [$50,000,000] 
$75,000,000 or more, unless the President submits to the 
Speaker of the House of Representatives and the Committee on 
Foreign Relations of the Senate a written certification with 
respect to such proposed transfer containing--
          (A)  * * *
          * * * * * * *
  (2) (A) Except as provided in subparagraph (B), unless the 
President states in the certification submitted pursuant to 
paragraph (1) of this subsection that an emergency exists which 
requires that consent to the proposed transfer become effective 
immediately in the national security interests of the United 
States, such consent shall not become effective until 30 
calendar days after the date of such submission and such 
consent shall become effective then only if the Congress does 
not enact, within such 30-day period, a joint resolution[, as 
provided for in sections 36(b)(2) and 36(b)(3) of this Act] 
prohibiting the proposed transfer.
  (B) In the case of a proposed transfer to the North Atlantic 
Treaty Organization, or any member country of such 
Organization, Japan, Australia, or New Zealand, unless the 
President states in the certification submitted pursuant to 
paragraph (1) of this subsection that an emergency exists which 
requires that consent to the proposed transfer become effective 
immediately in the national security interests of the United 
States, such consent shall not become effective until fifteen 
calendar days after the date of such submission and such 
consent shall become effective then only if the Congress does 
not enact, within such fifteen-day period, a [law] joint 
resolution prohibiting the proposed transfer.
  (C) If the President states in his certification under 
subparagraph (A) or (B) that an emergency exists which requires 
that consent to the proposed transfer become effective 
immediately in the national security interests of the United 
States, thus waiving the requirements of that subparagraph, the 
President shall set forth in the certification a detailed 
justification for his determination, including a description of 
the emergency circumstances which necessitate immediate consent 
to the transfer and a discussion of the national security 
interests involved.
  (D)(i) Any joint resolution under this paragraph shall be 
considered in the Senate in accordance with the provisions of 
section 601(b) of the International Security Assistance and 
Arms Export Control Act of 1976.
  (ii) For the purpose of expediting the consideration and 
enactment of joint resolutions under this paragraph, a motion 
to proceed to the consideration of any such joint resolution 
after it has been reported by the appropriate committee shall 
be treated as highly privileged in the House of 
Representatives.
  (3)(A) The President may not give his consent to the transfer 
of any major defense equipment valued (in terms of its original 
acquisition cost) at [$14,000,000] $25,000,000 or more, or of 
any defense article or defense service valued (in terms of its 
original acquisition cost) at [$50,000,000] $75,000,000 or 
more, the export of which has been licensed or approved under 
section 38 of this Act, unless [at least 30 calendar days] 
before giving such consent the President submits to the Speaker 
of the House of Representatives and the Chairman of the 
Committee on Foreign Relations of the Senate a [report] 
certification containing the information specified in 
subparagraphs (A) through (E) of paragraph (1). [Such consent 
shall become effective then only if the Congress does not 
enact, within a 30-day period, a joint resolution, as provided 
for in sections 36(c)(2) and 36(c)(3) of this Act prohibiting 
the proposed transfer.] Such certification shall be submitted--
          (i) at least 15 calendar days before such consent is 
        given in the case of a transfer to a country which is a 
        member of the North Atlantic Treaty Organization or 
        Australia, Japan, or New Zealand; and
          (ii) at least 30 calendar days before such consent is 
        given in the case of a transfer to any other country,
unless the President states in his certification that an 
emergency exists which requires that consent to the proposed 
transfer become effective immediately in the national security 
interests of the United States. If the President states in his 
certification that such an emergency exists (thus waiving the 
requirements of clause (i) or (ii), as the case may be, and of 
subparagraph (B)) the President shall set forth in the 
certification a detailed justification for his determination, 
including a description of the emergency circumstances which 
necessitate that consent to the proposed transfer become 
effective immediately and a discussion of the national security 
interests involved.
  (B) Consent to a transfer subject to subparagraph (A) shall 
become effective after the end of the 15-day or 30-day period 
specified in subparagraph (A)(i) or (ii), as the case may be, 
only if the Congress does not enact, within that period, a 
joint resolution prohibiting the proposed transfer.
  (C)(i) Any joint resolution under this paragraph shall be 
considered in the Senate in accordance with the provisions of 
section 601(b) of the International Security Assistance and 
Arms Export Control Act of 1976.
  (ii) For the purpose of expediting the consideration and 
enactment of joint resolutions under this paragraph, a motion 
to proceed to the consideration of any such joint resolution 
after it has been reported by the appropriate committee shall 
be treated as highly privileged in the House of 
Representatives.
          * * * * * * *

           CHAPTER 2.--FOREIGN MILITARY SALES AUTHORIZATIONS

  Sec. 21. Sales From Stocks.--(a)(1) The President may sell 
defense articles and defense services from the stocks of the 
Department of Defense to any eligible country or international 
organization if such country or international organization 
agrees to pay in United States dollars--
          (A)  * * *
          * * * * * * *
          (C) in the case of the sale of a defense service, the 
        full cost to the United States Government of furnishing 
        such service, except that in the case of training sold 
        to a purchaser who is concurrently receiving assistance 
        under chapter 5 of part II of the Foreign Assistance 
        Act of 1961 or to any high-income foreign country (as 
        described in that chapter), only those additional costs 
        that are incurred by the United States Government in 
        furnishing such assistance.
          * * * * * * *
  (g) The President may enter into North Atlantic Treaty 
Organization standardization agreements in carrying out section 
814 of the Act of October 7, 1975 (Public Law 94-106), and may 
enter into [similar agreements with Japan, Australia, and New 
Zealand, and with other countries] similar agreements with 
countries which are major non-NATO allies, for the cooperative 
furnishing of training on a bilateral or multilateral basis, if 
the financial principles of such agreements are based on 
reciprocity. Such agreements shall include reimbursement for 
all direct costs but may exclude reimbursement for indirect 
costs, administrative surcharges, and costs of billeting of 
trainees (except to the extent that members of the United 
States Armed Forces occupying comparable accommodations are 
charged for such accommodations by the United States). Each 
such agreement shall be transmitted promptly to the Speaker of 
the House of Representatives and the Committees on 
Appropriations, Armed Services, and Foreign Relations of the 
Senate. [As used in this subsection, the term ``major non-NATO 
allies'' means those countries designated as major non-NATO 
allies for purposes of section 2350a(i)(3) of title 10, United 
States Code.]
  (h)(1) The President is authorized to provide (without 
charge) quality assurance, inspection, contract administration 
services, and contract audit defense services under this 
section--
          (A) in connection with the placement or 
        administration of any contract or subcontract for 
        defense articles, defense services, or design and 
        construction services entered into after the date of 
        enactment of this subsection by, or under this Act on 
        behalf of, a foreign government which is a member of 
        the North Atlantic Treaty Organization or the 
        Government of Israel, if such government provides such 
        services in accordance with an agreement on a 
        reciprocal basis, without charge, to the United States 
        Government; or
          * * * * * * *
  (2) In carrying out the objectives of this section, the 
President is authorized to provide cataloging data and 
cataloging services, without charge, to the North Atlantic 
Treaty Organization [or to any member government of that 
Organization if that Organization or member government], any 
member government of that Organization, or the Government of 
Israel, if the Organization, member government, or Government 
of Israel, as the case may be, provides such data and services 
in accordance with an agreement on a reciprocal basis, without 
charge, to the United States Government.
          * * * * * * *
  (k) Before entering into the sale under this Act of defense 
articles that are excess to the stocks of the Department of 
Defense, [the President shall first consider the effects of the 
sale of the articles on the national technology and industrial 
base, particularly the extent, if any, to which the sale 
reduces the opportunities of entities in the national 
technology and industrial base to sell new equipment to the 
country or countries to which the excess defense articles are 
sold.] the President shall determine that the sale of such 
articles will not have an adverse impact on the national 
technology and industrial base and, particularly, will not 
reduce the opportunities of entities in the national technology 
and industrial base to sell new or used equipment to the 
countries to which such articles are transferred.
  (l) Repair of defense articles.--
          (1) In general.--The President may acquire a 
        repairable defense article from a foreign country or 
        international organization if such defense article--
                  (A) previously was transferred to such 
                country or organization under this Act;
                  (B) is not an end item; and
                  (C) will be exchanged for a defense article 
                of the same type that is in the stocks of the 
                Department of Defense.
          (2) Limitation.--The President may exercise the 
        authority provided in paragraph (1) only to the extent 
        that the Department of Defense--
                  (A)(i) has a requirement for the defense 
                article being returned; and
                  (ii) has available sufficient funds 
                authorized and appropriated for such purpose; 
                or
                  (B)(i) is accepting the return of the defense 
                article for subsequent transfer to another 
                foreign government or international 
                organization pursuant to a letter of offer and 
                acceptance implemented in accordance with this 
                Act; and
                  (ii) has available sufficient funds provided 
                by or on behalf of such other foreign 
                government or international organization 
                pursuant to a letter of offer and acceptance 
                implemented in accordance with this Act.
          (3) Requirement.--(A) The foreign government or 
        international organization receiving a new or repaired 
        defense article in exchange for a repairable defense 
        article pursuant to paragraph (1) shall, upon the 
        acceptance by the United States Government of the 
        repairable defense article being returned, be charged 
        the total cost associated with the repair and 
        replacement transaction.
          (B) The total cost charged pursuant to subparagraph 
        (A) shall be the same as that charged the United States 
        Armed Forces for a similar repair and replacement 
        transaction, plus an administrative surcharge in 
        accordance with subsection (e)(1)(A) of this section.
          (4) Relationship to certain other provisions of 
        law.--The authority of the President to accept the 
        return of a repairable defense article as provided in 
        subsection (a) shall not be subject to chapter 137 of 
        title 10, United States Code, or any other provision of 
        law relating to the conclusion of contracts.
  (m) Return of Defense Articles.--
          (1) In general.--The President may accept the return 
        of a defense article from a foreign country or 
        international organization if such defense article--
                  (A) previously was transferred to such 
                country or organization under this Act;
                  (B) is not significant military equipment (as 
                defined in section 47(9) of this Act); and
                  (C) is in fully functioning condition without 
                need of repair or rehabilitation.
          (2) Limitation.--The President may exercise the 
        authority provided in paragraph (1) only to the extent 
        that the Department of Defense--
                  (A)(i) has a requirement for the defense 
                article being returned; and
                  (ii) has available sufficient funds 
                authorized and appropriated for such purpose; 
                or
                  (B)(i) is accepting the return of the defense 
                article for subsequent transfer to another 
                foreign government or international 
                organization pursuant to a letter of offer and 
                acceptance implemented in accordance with this 
                Act; and
                  (ii) has available sufficient funds provided 
                by or on behalf of such other foreign 
                government or international organization 
                pursuant to a letter of offer and acceptance 
                implemented in accordance with this Act.
          (3) Credit for transaction.--Upon acquisition and 
        acceptance by the United States Government of a defense 
        article under paragraph (1), the appropriate Foreign 
        Military Sales account of the provider shall be 
        credited to reflect the transaction.
          (4) Relationship to certain other provisions of 
        law.--The authority of the President to accept the 
        return of a defense article as provided in paragraph 
        (1) shall not be subject to chapter 137 of title 10, 
        United States Code, or any other provision of law 
        relating to the conclusion of contracts.
          * * * * * * *
  Sec. 23. Credit Sales.--(a)  * * *
          * * * * * * *
  (f) For each fiscal year, the Secretary of Defense, as 
requested by the Director of the Defense Security Assistance 
Agency, shall conduct audits on a nonreimbursable basis of 
private firms that have entered into contracts with foreign 
governments under which defense articles, defense services, or 
design and construction services are to be procured by such 
firms for such governments from financing under this section.
  (g)(1) For each country and international organization that 
has been approved for cash flow financing under this section, 
any letter of offer and acceptance or other purchase agreement, 
or any amendment thereto, for a procurement of defense 
articles, defense services, or design and construction services 
in excess of $100,000,000 that is to be financed in whole or in 
part with funds made available under this Act or the Foreign 
Assistance Act of 1961 shall be submitted to the congressional 
committees specified in section 634A(a) of the Foreign 
Assistance Act of 1961 in accordance with the procedures 
applicable to reprogramming notifications under that section.
  (2) For purposes of this subsection, the term ``cash flow 
financing'' has the meaning given such term in the second 
subsection (d) of section 25.
  (h) Of the amounts made available for a fiscal year to carry 
out this section, not more than $100,000,000 for such fiscal 
year may be made available for countries other than Israel and 
Egypt for the purpose of financing the procurement of defense 
articles, defense services, and design and construction 
services that are not sold by the United States Government 
under this Act.
          * * * * * * *
  Sec. 25. Annual Estimate and Justification for Sales 
Program.--(a) Except as provided in subsection (d) of this 
section, no later than February 1 of each year, the President 
shall transmit to the Congress, as a part of the annual 
presentation materials for security assistance programs 
proposed for the next fiscal year, a report which sets forth--
          (1)  * * *
          * * * * * * *
          (11) the status of each loan and each contract of 
        guaranty or insurance theretofore made under the 
        Foreign Assistance Act of 1961, predecessor Acts, or 
        any Act authorizing international security assistance, 
        with respect to which there remains outstanding any 
        unpaid obligation or potential liability; the status of 
        each extension of credit for the procurement of defense 
        articles or defense services, and of each contract of 
        guaranty in connection with any such procurement, 
        theretofore made under the Arms Export Control Act with 
        respect to which there remains outstanding any unpaid 
        obligation or potential liability; [and]
          (12)(A) a detailed accounting of all articles, 
        services, credits, guarantees, or any other form of 
        assistance furnished by the United States to each 
        country and international organization, including 
        payments to the United Nations, during the preceding 
        fiscal year for the detection and clearance of 
        landmines, including activities relating to the 
        furnishing of education, training, and technical 
        assistance for the detection and clearance of 
        landmines; and
          (B) for each provision of law making funds available 
        or authorizing appropriations for demining activities 
        described in subparagraph (A), an analysis and 
        description of the objectives and activities undertaken 
        during the preceding fiscal year, including the number 
        of personnel involved in performing such activities; 
        and
          [(12)] (13) such other information as the President 
        may deem necessary.
          * * * * * * *

                  CHAPTER 3.--MILITARY EXPORT CONTROLS

  Sec. 31. Authorization and Aggregate Ceiling on Foreign 
Military Sales Credits.--(a)  * * *
          * * * * * * *
  [(c) For fiscal year 1986 and fiscal year 1987, the principal 
amount of credits provided under section 23 at market rates of 
interest with respect to Greece, the Republic of Korea, the 
Philippines, Portugal, Spain, Thailand, and Turkey shall (if 
and to the extent each country so desires) be repaid in not 
more than twenty years, following a grace period of ten years 
on repayment of principal.
  [(d) The aggregate acquisition cost to the United States of 
excess defense articles ordered by the President in any fiscal 
year after fiscal year 1976 for delivery to foreign countries 
or international organizations under the authority of chapter 2 
of part II of the Foreign Assistance Act of 1961 or pursuant to 
sales under this Act may not exceed $250,000,000 (exclusive of 
ships and their onboard stores and supplies transferred in 
accordance with law, and of any defense articles with respect 
to which the President submits a certification under section 
36(b) of this Act).]
  (c) Loans available under section 23 shall be provided at 
rates of interest that are not less than the current average 
market yield on outstanding marketable obligations of the 
United States of comparable maturities.
          * * * * * * *
  Sec. 36. Reports on Commercial and Governmental Military 
Exports; Congressional Action.--(a)  * * *
  (b)(1) In the case of any letter of offer to sell any defense 
articles or services under this Act for [$50,000,000] 
$75,000,000 or more, any design and construction services for 
[$200,000,000] $300,000,000 or more, or any major defense 
equipment for [$14,000,000] $25,000,000 or more, before such 
letter of offer is issued, the President shall submit to the 
Speaker of the House of Representatives and to the chairman of 
the Committee on Foreign Relations of the Senate a numbered 
certification with respect to such offer to sell containing the 
information specified in clauses (i) through (iv) of subsection 
(a), or (in the case of a sale of design and construction 
services) the information specified in clauses (A) through (D) 
of paragraph (9) of subsection (a), and a description, 
containing the information specified in paragraph (8) of 
subsection (a), of any contribution, gift, commission, or fee 
paid or offered or agreed to be paid in order to solicit, 
promote, or otherwise to secure such letter of offer. Such 
numbered certifications shall also contain an item, classified 
if necessary, identifying the sensitivity of technology 
contained in the defense articles, defense services, or design 
and construction services proposed to be sold, and a detailed 
justification of the reasons necessitating the sale of such 
articles or services in view of the sensitivity of such 
technology. In a case in which such articles or services listed 
on the Missile Technology Control Regime Annex are intended to 
support the design, development, or production of a Category I 
space launch vehicle system (as defined in section 74), such 
report shall include a description of the proposed export and 
rationale for approving such export, including the consistency 
of such export with United States missile nonproliferation 
policy. Each such numbered certification shall contain an item 
indicating whether any offset agreement is proposed to be 
entered into in connection with such letter of offer to sell 
(if known on the date of transmittal of such certification). In 
addition, the President shall, upon the request of such 
committee or the Committee on Foreign Affairs of the House of 
Representatives, transmit promptly to both such committees a 
statement setting forth, to the extent specified in such 
request--
          (A)  * * *
          * * * * * * *
  (5)(A)  * * *
          * * * * * * *
  (C) If the enhancement or upgrade in the sensitivity of 
technology or the capability of major defense equipment, 
defense articles, defense services, or design and construction 
services described in a numbered certification submitted under 
this subsection costs [$14,000,000] $25,000,000 or more in the 
case of any major defense equipment, [$50,000,000] $75,000,000 
or more in the case of defense articles or defense services, or 
[$200,000,000] $300,000,000 or more in the case of design or 
construction services, then the President shall submit to the 
Speaker of the House of Representatives and the chairman of the 
Committee on Foreign Relations of the Senate a new numbered 
certification which relates to such enhancement or upgrade and 
which shall be considered for purposes of this subsection as if 
it were a separate letter of offer to sell defense equipment, 
articles, or services, subject to all of the requirements, 
restrictions, and conditions set forth in this subsection. For 
purposes of this subparagraph, references in this subsection to 
sales shall be deemed to be references to enhancements or 
upgrades in the sensitivity of technology or the capability of 
major defense equipment, articles, or services, as the case may 
be.
          * * * * * * *
  (c)(1) In the case of an application by a person (other than 
with regard to a sale under section 21 or section 22 of this 
Act) for a license for the export of any major defense 
equipment sold under a contract in the amount of [$14,000,000] 
$25,000,000 or more or of defense articles or defense services 
sold under a contract in the amount of [$50,000,000] 
$75,000,000 or more, before issuing such license the President 
shall transmit to the Speaker of the House of Representatives 
and to the chairman of the Committee on Foreign Relations of 
the Senate an unclassified numbered certification with respect 
to such application specifying (A) the foreign country or 
international organization to which such export will be made, 
(B) the dollar amount of the items to be exported, and (C) a 
description of the items to be exported. Each such numbered 
certification shall also contain an item indicating whether any 
offset agreement is proposed to be entered into in connection 
with such export (if known on the date of transmittal of such 
certification). In addition, the President shall, upon the 
request of such committee or the Committee on Foreign Affairs 
of the House of Representatives, transmit promptly to both such 
committees a statement setting forth, to the extent specified 
in such request a description of the capabilities of the items 
to be exported, an estimate of the total number of United 
States personnel expected to be needed in the foreign country 
concerned in connection with the items to be exported and an 
analysis of the arms control impact pertinent to such 
application, prepared in consultation with the Secretary of 
Defense. In a case in which such articles or services listed on 
the Missile Technology Control Regime Annex are intended to 
support the design, development, or production of a Category I 
space launch vehicle system (as defined in section 74), such 
report shall include a description of the proposed export and 
rationale for approving such export, including the consistency 
of such export with United States missile nonproliferation 
policy. A certification transmitted pursuant to this subsection 
shall be unclassified, except that the information specified in 
clause (B) and the details of the description specified in 
clause (C) may be classified if the public disclosure thereof 
would be clearly detrimental to the security of the United 
States.
  (2) Unless the President states in his certification that an 
emergency exists which requires the proposed export in the 
national security interests of the United States, a license for 
export described in paragraph (1)--
          [(A) shall not be issued until at least 30 calendar 
        days after the Congress receives such certification; 
        and
          [(B) shall not be issued then if the Congress, within 
        such 30-day period, enacts a joint resolution 
        prohibiting the proposed export, except that this 
        subparagraph does not apply with respect to a license 
        issued for an export to the North Atlantic Treaty 
        Organization, any member country of that Organization, 
        Japan, Australia, or New Zealand.]
          (A) in the case of a license for an export to the 
        North Atlantic Treaty Organization, any member country 
        of that Organization or Australia, Japan, or New 
        Zealand, shall not be issued until at least 15 calendar 
        days after the Congress receives such certification, 
        and shall not be issued then if the Congress, within 
        that 15-day period, enacts a joint resolution 
        prohibiting the proposed export; and
          (B) in the case of any other license, shall not be 
        issued until at least 30 calendar days after the 
        Congress receives such certification, and shall not be 
        issued then if the Congress, within that 30-day period, 
        enacts a joint resolution prohibiting the proposed 
        export.
If the President states in his certification that an emergency 
exists which requires the proposed export in the national 
security interests of the United States, thus waiving the 
requirements of subparagraphs (A) and (B) of this paragraph, he 
shall set forth in the certification a detailed justification 
for his determination, including a description of the emergency 
circumstances which necessitate the immediate issuance of the 
export license and a discussion of the national security 
interests involved.
          * * * * * * *
  (d)(1) In the case of an approval under section 38 of this 
Act of a United States commercial technical assistance or 
manufacturing licensing agreement [for or in a country not a 
member of the North Atlantic Treaty Organization] which 
involves the manufacture abroad of any item of significant 
combat equipment on the United States Munitions List, before 
such approval is given, the President shall submit a 
certification with respect to such proposed commercial 
agreement in a manner similar to the certification required 
under subsection (c)(1) containing comparable information, 
except that the last sentence of such subsection shall not 
apply to certifications submitted pursuant to this subsection.
  (2) A certification under this subsection shall be 
submitted--
          (A) at least 15 days before approval is given in the 
        case of an agreement for or in a country which is a 
        member of the North Atlantic Treaty Organization or 
        Australia, Japan, or New Zealand; and
          (B) at least 30 days before approval is given in the 
        case of an agreement for or in any other country;
unless the President states in his certification that an 
emergency exists which requires the immediate approval of the 
agreement in the national security interests of the United 
States.
  (3) If the President states in his certification that an 
emergency exists which requires the immediate approval of the 
agreement in the national security interests of the United 
States, thus waiving the requirements of paragraph (4), he 
shall set forth in the certification a detailed justification 
for his determination, including a description of the emergency 
circumstances which necessitate the immediate approval of the 
agreement and a discussion of the national security interests 
involved.
  (4) Approval for an agreement subject to paragraph (1) may 
not be given under section 38 if the Congress, within the 15-
day or 30-day period specified in paragraph (2) (A) or (B), as 
the case may be, enacts a joint resolution prohibiting such 
approval.
  (5)(A) Any joint resolution under paragraph (4) shall be 
considered in the Senate in accordance with the provisions of 
section 601(b) of the International Security Assistance and 
Arms Export Control Act of 1976.
  (B) For the purpose of expediting the consideration and 
enactment of joint resolutions under paragraph (4), a motion to 
proceed to the consideration of any such joint resolution after 
it has been reported by the appropriate committee shall be 
treated as highly privileged in the House of Representatives.
          * * * * * * *
  Sec. 38. Control of Arms Exports and Imports.--(a)  * * *
  (b)(1)(A) [As prescribed in regulations] (i) As prescribed in 
regulations issued under this section, every person (other than 
an officer or employee of the United States Government acting 
in an official capacity) who engages in the business of 
manufacturing, exporting, or importing any defense articles or 
defense services designated by the President under subsection 
(a)(1) shall register with the United States Government agency 
charged with the administration of this section, and shall pay 
a registration fee which shall be prescribed by such 
regulations. Such regulations shall prohibit the return to the 
United States for sale in the United States (other than for the 
Armed Forces of the United States and its allies or for any 
State for local law enforcement agency) of any military 
firearms or ammunition of United States manufacture furnished 
to foreign governments by the United States under this Act or 
any other foreign assistance or sales program of the United 
States, whether or not enhanced in value or improved in 
condition in a foreign country. This prohibition shall not 
extend to similar firearms that have been so substantially 
transformed as to become, in effect, articles of foreign 
manufacture.
  (ii)(I) As prescribed in regulations issued under this 
section, every person (other than an officer or employee of the 
United States Government acting in official capacity) who 
engages in the business of brokering activities with respect to 
the manufacture, export, import, or transfer of any defense 
article or defense service designated by the President under 
subsection (a)(1), or in the business of brokering activities 
with respect to the manufacture, export, import, or transfer of 
any foreign defense article or defense service (as defined in 
subclause (IV)), shall register with the United States 
Government agency charged with the administration of this 
section, and shall pay a registration fee which shall be 
prescribed by such regulations.
  (II) Such brokering activities shall include the financing, 
transportation, freight forwarding, or taking of any other 
action that facilitates the manufacture, export, or import of a 
defense article or defense service.
  (III) No person may engage in the business of brokering 
activities described in subclause (I) without a license, issued 
in accordance with this Act, except that no license shall be 
required for such activities undertaken by or for an agency of 
the United States Government--
          (aa) for use by an agency of the United States 
        Government; or
          (bb) for carrying out any foreign assistance or sales 
        program authorized by law and subject to the control of 
        the President by other means.
  (IV) For purposes of this clause, the term ``foreign defense 
article or defense service'' includes any non-United States 
defense article or defense service of a nature described on the 
United States Munitions List regardless of whether such article 
or service is of United States origin or whether such article 
or service contains United States origin components.
          * * * * * * *

CHAPTER 3A--END-USE MONITORING OF DEFENSE ARTICLES AND DEFENSE SERVICES

SEC. 40A. END-USE MONITORING OF DEFENSE ARTICLES AND DEFENSE SERVICES.

  (a) Establishment of Monitoring Program.--
          (1) In general.--In order to improve accountability 
        with respect to defense articles and defense services 
        sold, leased, or exported under this Act or the Foreign 
        Assistance Act of 1961 (22 U.S.C. 2151 et seq.), the 
        President shall establish a program which provides for 
        the end-use monitoring of such articles and services.
          (2) Requirements of program.--To the extent 
        practicable, such program--
                  (A) shall provide for the end-use monitoring 
                of defense articles and defense services in 
                accordance with the standards that apply for 
                identifying high-risk exports for regular end-
                use verification developed under section 
                38(g)(7) of this Act (commonly referred to as 
                the ``Blue Lantern'' program); and
                  (B) shall be designed to provide reasonable 
                assurance that--
                          (i) the recipient is complying with 
                        the requirements imposed by the United 
                        States Government with respect to use, 
                        transfers, and security of defense 
                        articles and defense services; and
                          (ii) such articles and services are 
                        being used for the purposes for which 
                        they are provided.
  (b) Conduct of Program.--In carrying out the program 
established under subsection (a), the President shall ensure 
that the program--
          (1) provides for the end-use verification of defense 
        articles and defense services that incorporate 
        sensitive technology, defense articles and defense 
        services that are particularly vulnerable to diversion 
        or other misuse, or defense articles or defense 
        services whose diversion or other misuse could have 
        significant consequences; and
          (2) prevents the diversion (through reverse 
        engineering or other means) of technology incorporated 
        in defense articles.
  (c) Report to Congress.--Not later than 6 months after the 
date of the enactment of this section, and annually thereafter 
as a part of the annual congressional presentation documents 
submitted under section 634 of the Foreign Assistance Act of 
1961, the President shall transmit to the Congress a report 
describing the actions taken to implement this section, 
including a detailed accounting of the costs and number of 
personnel associated with the monitoring program.
  (d) Third Country Transfers.--For purposes of this section, 
defense articles and defense services sold, leased, or exported 
under this Act or the Foreign Assistance Act of 1961 (22 U.S.C. 
2151 et seq.) includes defense articles and defense services 
that are transferred to a third country or other third party.

   CHAPTER 4.--GENERAL, ADMINISTRATIVE, AND MISCELLANEOUS PROVISIONS

          * * * * * * *
  Sec. 47. Definitions.--For purposes of this Act, the term--
  (1)  * * *
          * * * * * * *
  (7) ``defense articles and defense services'' means, with 
respect to commercial exports subject to the provisions of 
section 38 of this Act, those items designated by the President 
pursuant to subsection (a)(1) of such section; [and]
  (8) ``design and construction services'' means, with respect 
to sales under section 29 of this Act, the design and 
construction of real property facilities, including necessary 
construction equipment and materials, engineering services, 
construction contract management services relating thereto, and 
technical advisory assistance in the operation and maintenance 
of real property facilities provided or performed by any 
department or agency of the Department of Defense or by a 
contractor pursuant to a contract with such department or 
agency[.]; and
  (9) ``significant military equipment'' means articles--
          (A) for which special export controls are warranted 
        because of the capacity of such articles for 
        substantial military utility or capability; and
          (B) identified on the United States Munitions List.

              CHAPTER 5--SPECIAL DEFENSE ACQUISITION FUND

  Sec. 51. Special Defense Acquisition Fund.--(a)(1)  * * *
          * * * * * * *
  (4)[(a)] The Fund shall also be used to acquire defense 
articles that are particularly suited for use for narcotics 
control purposes and are appropriate to the needs of recipient 
countries, such as small boats, planes (including helicopters), 
and communications equipment.
  [(b) Each report pursuant to section 53(a) shall designate 
the defense articles that have been acquired or are to be 
acquired pursuant to this paragraph and the defense articles 
acquired under this chapter that were transferred for use in 
narcotics control purposes.]
          * * * * * * *
  [Sec. 53. Annual Reports to Congress.--(a) Not later than 
December 31 of each year, the President shall submit to the 
Congress a comprehensive report on acquisitions of defense 
articles and defense services under this chapter. Each such 
report shall include--
          [(1) a description of each contract for the 
        acquisition of defense articles or defense services 
        under this chapter which was entered into during the 
        preceding fiscal year;
          [(2) a description of each contract for the 
        acquisition of defense articles or defense services 
        under this chapter which the President anticipates will 
        be entered into during the current fiscal year;
          [(3) a description of each defense article or defense 
        service acquired under this chapter which was 
        transferred to a foreign country or international 
        organization during the preceding fiscal year; and
          [(4) an evaluation of the impact of the utilization 
        of the authority of this chapter on United States 
        defense production and the readiness of the United 
        States Armed Forces.
  [(b) As part of the annual written report to the Congress 
required by section 2431(a) of title 10, United States Code, 
regarding procurement schedules for each weapon system for 
which funding authorization is required, the President shall 
provide a report estimating the likely procurements to be made 
through the Fund.]

     CHAPTER 6--LEASES OF DEFENSE ARTICLES AND LOAN AUTHORITY FOR 
             COOPERATIVE RESEARCH AND DEVELOPMENT PURPOSES 

  Sec. 61. Leasing Authority.--(a) The President may lease 
defense articles in the stocks of the Department of Defense to 
an eligible foreign country or international organization if--
          (1) he determines that there are compelling foreign 
        policy and national security reasons for providing such 
        articles on a lease basis rather than on a sales basis 
        under this Act;
          (2) he determines that the articles are not for the 
        time needed for public use;
          (3) the President first considers the effects of the 
        lease of the articles on the national technology and 
        industrial base, particularly the extent, if any, to 
        which the lease reduces the opportunities of entities 
        in the national technology and industrial base to sell 
        new equipment to the country or countries to which the 
        articles are leased; and
          (4) the country or international organization has 
        agreed to pay in United States dollars all costs 
        incurred by the United States Government in leasing 
        such articles, including reimbursement for depreciation 
        of such articles while leased, the costs of restoration 
        or replacement if the articles are damaged while 
        leased, [and the replacement cost (less any 
        depreciation in the value) of the articles if the 
        articles are lost or destroyed while leased.] and, if 
        the articles are lost or destroyed while leased--
                  (A) in the event the United States intends to 
                replace the articles lost or destroyed, the 
                replacement cost (less any depreciation in the 
                value) of the articles; or
                  (B) in the event the United States does not 
                intend to replace the articles lost or 
                destroyed, an amount not less than the actual 
                value (less any depreciation in the value) 
                specified in the lease agreement.
The requirement of paragraph (4) shall not apply to leases 
entered into for purposes of cooperative research or 
development, military exercises, or communications or 
electronics interface projects[, or to any defense article 
which has passed three-quarters of its normal service life]. 
The President may waive the requirement of paragraph (4) for 
reimbursement of depreciation for any defense article which has 
passed three-quarters of its normal service life if the 
President determines that to do so is important to the national 
security interest of the United States.
  The President may waive the requirement of paragraph (4) with 
respect to a lease which is made in exchange with the lessee 
for a lease on substantially reciprocal terms of defense 
articles for the Department of Defense, except that this waiver 
authority--
          (A) may be exercised only if the President submits to 
        the Committee on Foreign Affairs and the Committee on 
        Appropriations of the House of Representatives and the 
        Committee on Foreign Relations and the Committee on 
        Appropriations of the Senate, in accordance with the 
        regular notification procedures of those Committees, a 
        detailed notification for each lease with respect to 
        which the authority is exercised; and
          (B) may be exercised only during the fiscal year 1996 
        and only with respect to one country, unless the 
        Congress hereafter provides otherwise.
The preceding sentence does not constitute authorization of 
appropriations for payments by the United States for leased 
articles.
          * * * * * * *
  Sec. 62. Reports to the Congress.--(a) [Not less than 30 days 
before] Before entering into or renewing any agreement with a 
foreign country or international organization to lease any 
defense article under this chapter, or to loan any defense 
article under chapter 2 of part II of the Foreign Assistance 
Act of 1961, for a period of one year or longer, the President 
shall transmit to the Speaker of the House of Representatives, 
and to the chairman of the Committee on Foreign Relations of 
the Senate and the chairman of the Committee on Armed Services 
of the Senate, a written certification which specifies--
          (1)  * * *
          * * * * * * *
  (b) The President may waive the requirements of this section 
(and in the case of an agreement described in section 63, may 
waive the provisions of that section) if he [determines, and 
immediately reports to the Congress] states in his 
certification, that an emergency exists which requires that the 
lease or loan be entered into immediately in the national 
security interests of the United States. If the President 
states in his certification that such an emergency exists, he 
shall set forth in the certification a detailed justification 
for his determination, including a description of the emergency 
circumstances which necessitate that the lease be entered into 
immediately and a discussion of the national security interests 
involved.
  (c) The certification required by subsection (a) shall be 
transmitted--
          (1) not less than 15 calendar days before the 
        agreement is entered into or renewed in the case of an 
        agreement with the North Atlantic Treaty Organization, 
        any member country of that Organization or Australia, 
        Japan, or New Zealand; and
          (2) not less than 30 calendar days before the 
        agreement is entered into or renewed in the case of an 
        agreement with any other organization or country.
  Sec. 63. Legislative Review.--(a)[(1)] In the case of any 
agreement involving the lease under this chapter, or the loan 
under chapter 2 of part II of the Foreign Assistance Act of 
1961, to any foreign country or international organization for 
a period of one year or longer of any defense articles which 
are either (i) major defense equipment valued (in terms of its 
replacement cost less any depreciation in its value) at 
[$14,000,000] $25,000,000 or more, or (ii) defense articles 
valued (in terms of their replacement cost less any 
depreciation in their value) at [$50,000,000] $75,000,000 or 
more, the agreement may not be entered into or renewed if the 
Congress, within [30 calendar days after receiving the 
certification with respect to that proposed agreement pursuant 
to section 62(a),] the 15-day or 30-day period specified in 
section 62(c) (1) or (2), as the case may be, enacts a joint 
resolution prohibiting the proposed lease or loan.
  [(2) This section shall not apply with respect to a loan or 
lease to the North Atlantic Treaty Organization, any member 
country of that Organization, Japan, Australia, or New 
Zealand.]
          * * * * * * *
  Sec. 65. Loan of Materials, Supplies, and Equipment for 
Research and Development Purposes.--(a)  * * *
          * * * * * * *
  (d) For purposes of this section, the term ``NATO [or major 
non-NATO] ally'' means a member country of the North Atlantic 
Treaty Organization (other than the United States) [or a 
foreign country other than a member nation of NATO designated 
as a major non-NATO ally under section 2350a(i)(3) of title 10, 
United States Code].
          * * * * * * *
                              ----------                              


                     FOREIGN ASSISTANCE ACT OF 1961

          * * * * * * *

                                 PART I

          * * * * * * *

               Chapter 8--International Narcotics Control

SEC. 481. POLICY, GENERAL AUTHORITIES, COORDINATION, FOREIGN POLICE 
                    ACTIONS, DEFINITIONS, AND OTHER PROVISIONS.

  (a) Policy and General Authorities.--
          (1) Statements of policy.--(A) * * *
          * * * * * * *
          (D) International criminal activities, particularly 
        international narcotics trafficking, money laundering, 
        and corruption, endanger political and economic 
        stability and democratic development, and assistance 
        for the prevention and suppression of international 
        criminal activities should be a priority for the United 
        States.
          [(D)] (E) The international community should provide 
        assistance, where appropriate, to those producer and 
        transit countries which require assistance in 
        discharging these primary obligations.
          [(E)] (F) The objective of the United States in 
        dealing with the problem of international money 
        laundering is to ensure that countries adopt 
        comprehensive domestic measures against money 
        laundering and cooperate with each other in narcotics 
        money laundering investigations, prosecutions, and 
        related forfeiture actions.
          [(F)] (G) Effective international cooperation is 
        necessary to control the illicit cultivation, 
        production, and smuggling of, trafficking in, and abuse 
        of narcotic and psychotropic drugs.
          * * * * * * *
  (4) Notwithstanding any other provision of law, the President 
is authorized to furnish assistance to any country or 
international organization, on such terms and conditions as he 
may determine, for the control of narcotic and psychotropic 
drugs and other controlled substances, or for other anticrime 
purposes.
          * * * * * * *
  Sec. 482. Authorization.--(a) * * *
          * * * * * * *
  (c) [Contribution by Recipient Country.--To] Contributions 
and Reimbursement.--(1) To ensure local commitment to the 
activities assisted under this chapter, a country receiving 
assistance under this chapter should bear an appropriate share 
of the costs of any narcotics control program, project, or 
activity for which such assistance is to be provided. A country 
may bear such costs on an ``in-kind'' basis.
  (2)(A) The President is authorized to accept contributions 
from foreign governments to carry out the purposes of this 
chapter. Such contributions shall be deposited as an offsetting 
collection to the applicable appropriation account and may be 
used under the same terms and conditions as funds appropriated 
pursuant to this chapter.
  (B) At the time of submission of the annual congressional 
presentation documents required by section 634(a), the 
President shall provide a detailed report on any contributions 
received in the preceding fiscal year, the amount of such 
contributions, and the purposes for which such contributions 
were used.
  (3) The President is authorized to provide assistance under 
this chapter on a reimbursable basis. Such reimbursements shall 
be deposited as an offsetting collection to the applicable 
appropriation and may be used under the same terms and 
conditions as funds appropriated pursuant to this chapter.
          * * * * * * *
  (f) Treatment of Funds.--Funds transferred to and 
consolidated with funds appropriated pursuant to this chapter 
may be made available on such terms and conditions as are 
applicable to funds appropriated pursuant to this chapter. 
Funds so transferred or consolidated shall be apportioned 
directly to the bureau within the Department of State 
responsible for administering this chapter.
  (g) Excess Property.--For purposes of this chapter, the 
Secretary of State may use the authority of section 608, 
without regard to the restrictions of such section, to receive 
nonlethal excess property from any agency of the United States 
Government for the purpose of providing such property to a 
foreign government under the same terms and conditions as funds 
authorized to be appropriated for the purposes of this chapter.
          * * * * * * *

                                PART II

                           Chapter 1--Policy

          * * * * * * *
  [Sec. 502A. Excess Defense Articles.--Excess defense articles 
shall be provided whenever possible rather than providing such 
articles by the procurement of new items.]
          * * * * * * *
  Sec. 506. Special Authority.--(a)(1) If the President 
determines and reports to the Congress in accordance with 
section 652 of this Act that--
          (A) an unforeseen emergency exists which requires 
        immediate military assistance to a foreign country or 
        international organization; and
          (B) the emergency requirement cannot be met under the 
        authority of the Arms Export Control Act or any other 
        law except this section;
he may direct, for the purposes of this part, the drawdown of 
defense articles from the stocks of the Department of Defense, 
defense services of the Department of Defense, and military 
education and training, of an aggregate value of not to exceed 
[$75,000,000] $100,000,000 in any fiscal year.
          (2) (A) If the President determines and reports to 
        the Congress in accordance with section 652 of this Act 
        that it is in the national interest of the United 
        States to draw down [defense articles from the stocks 
        of the Department of Defense, defense services of the 
        Department of Defense, and military education and 
        training, he may direct--
                  [(i) the drawdown of such articles, services, 
                and the provision of such training for the 
                purposes and under the authorities of chapters 
                8 and 9 of part I, as the case may be; and
                  [(ii) the drawdown of defense services for 
                the purposes and under the authorities of the 
                Migration and Refugee Assistance Act of 1962.] 
                articles and services from the inventory and 
                resources of any agency of the United States 
                Government and military education and training 
                from the Department of Defense, the President 
                may direct the drawdown of such articles, 
                services, and military education and training--
                  (i) for the purposes and under the 
                authorities of--
                          (I) chapter 8 of part I (relating to 
                        international narcotics control 
                        assistance);
                          (II) chapter 9 of part I (relating to 
                        international disaster assistance); or
                          (III) the Migration and Refugee 
                        Assistance Act of 1962; or
                  (ii) for the purpose of providing such 
                articles, services, and military education and 
                training to Vietnam, Cambodia, and Laos as the 
                President determines are necessary--
                          (I) to support cooperative efforts to 
                        locate and repatriate members of the 
                        United States Armed Forces and 
                        civilians employed directly or 
                        indirectly by the United States 
                        Government who remain unaccounted for 
                        from the Vietnam War; and
                          (II) to ensure the safety of United 
                        States Government personnel engaged in 
                        such cooperative efforts and to support 
                        Department of Defense-sponsored 
                        humanitarian projects associated with 
                        such efforts.
          (B) An aggregate value of not to exceed [$75,000,000 
        in any fiscal year of defense articles, defense 
        services, and military education and training may be 
        provided pursuant to subparagraph (A) of this 
        paragraph.] $150,000,000 in any fiscal year of such 
        articles, services, and military education and training 
        may be provided pursuant to subparagraph (A) of this 
        paragraph--
                  (i) not more than $75,000,000 of which may be 
                provided from the drawdown from the inventory 
                and resources of the Department of Defense;
                  (ii) not more than $75,000,000 of which may 
                be provided pursuant to clause (i)(I) of such 
                subparagraph; and
                  (iii) not more than $15,000,000 of which may 
                be provided to Vietnam, Cambodia, and Laos 
                pursuant to clause (ii) of such subparagraph.
  (b)(1) The authority contained in this section shall be 
effective for any such emergency only upon prior notification 
to the Committee on Foreign Affairs of the House of 
Representatives, the Committee on Foreign Relations of the 
Senate, and the Committee on Appropriations of each House of 
Congress. In the case of drawdowns authorized by subclauses (I) 
and (III) of subsection (a)(2)(A)(i), notifications shall be 
provided to those committees at least 15 days in advance of the 
drawdowns in accordance with the procedures applicable to 
reprogramming notifications under section 634A.
          * * * * * * *
  Sec. 515. Overseas Management of Assistance and Sales 
Programs.--(a) In order to carry out his responsibilities for 
the management of international security assistance programs 
conducted under this chapter, chapter 5 of this part, and the 
Arms Export Control Act, the President may assign members of 
the Armed Forces of the United States to a foreign country to 
perform one or more of the following functions:
          (1)  * * *
          * * * * * * *
          (6) promoting rationalization, standardization, 
        interoperability, and other defense cooperation 
        measures [among members of the North Atlantic Treaty 
        Organization and with the Armed Forces of Japan, 
        Australia, and New Zealand]; and
          * * * * * * *
  [Sec. 516. Modernization of Defense Capabilities of Countries 
of NATO's Southern Flank.--(a) Authority To Transfer Excess 
Defense Articles.--Notwithstanding any other provision of law 
and subject to subsection (b), the President may transfer (1) 
to those member countries of the North Atlantic Treaty 
Organization (NATO) on the southern flank of NATO which are 
eligible for United States security assistance and which are 
integrated into NATO's military structure, (2) to major non-
NATO allies on the southern and southeastern flank of NATO 
which are eligible for United States security assistance, and 
(3) to those countries which, as of October 1, 1990, 
contributed armed forces to deter Iraqi aggression in the 
Arabian Gulf, and which either received Foreign Military 
Financing (FMF) assistance in fiscal year 1990 or are in the 
Near East Region and received Foreign Military Financing (FMF) 
assistance in fiscal year 1991 or fiscal year 1992, such excess 
defense articles as the President determines necessary to help 
modernize the defense capabilities of such countries. Such 
excess defense articles may be transferred without cost to the 
recipient countries. Transfers to recipient countries under 
this subsection shall be consistent with the policy framework 
for the Eastern Mediterranean region established in section 
620C of this Act.
  [(b) Limitations on Transfers.--The President may transfer 
excess defense articles under this section only if--
          [(1) the equipment is drawn from existing stocks of 
        the Department of Defense;
          [(2) no funds available to the Department of Defense 
        for the procurement of defense equipment are expended 
        in connection with the transfer;
          [(3) the President determines that the transfer of 
        the excess defense articles will not have an adverse 
        impact on the military readiness of the United States; 
        and
          [(4) the President first considers the effects of the 
        transfer of the excess defense articles on the national 
        technology and industrial base, particularly the 
        extent, if any, to which the transfer reduces the 
        opportunities of entities in the national technology 
        and industrial base to sell new equipment to the 
        country or countries to which the excess defense 
        articles are transferred.
  [(c) Notification to Committees of Congress.--The President 
may not transfer excess defense articles under this section 
until 30 days after he has notified the Committees on Armed 
Services and Foreign Relations of the Senate and the Committees 
on Armed Services and Foreign Affairs of the House of 
Representatives of the proposed transfer. This notification 
shall include a certification of the need for the transfer and 
an assessment of the impact of the transfer on the military 
readiness of the United States.
  [(d) Waiver or Requirement for Reimbursement of DOD 
Expenses.--Section 632(d) shall not apply with respect to 
transfers of excess defense articles under this section.
  [(e) Definition.--As used in subsection (a), the term 
``member countries of the North Atlantic Treaty Organization 
(NATO) on the southern flank of NATO'' means Greece, Italy, 
Portugal, Spain, and Turkey.
  [(f) Duration of Authority.--The authority of this section 
shall be effective during fiscal years 1992 through 1996.
  [(g) Prohibition on Certain Transfers of Vessels on Grant 
Basis.--(1) The President may not transfer on a grant basis 
under this section a vessel that is in excess of 3,000 tons or 
that is less than 20 years of age.
  [(2) If the President determines that it is in the national 
security interests of the United States to transfer a 
particular vessel on a grant basis under this section, the 
President may request that Congress enact legislation exempting 
the transfer from the prohibition in paragraph (1).
  [Sec. 517. Modernization of Counternarcotics Capabilities of 
Certain Countries.--(a) Authority to Transfer Excess Defense 
Articles.--Subject to the limitations in this section, the 
President may transfer to a country--
          [(1) which is a major illicit drug producing country 
        or a major drug-transit country in Latin America and 
        the Caribbean,
          [(2) which has a democratic government,
          [(3) whose armed forces do not engage in a consistent 
        pattern of gross violations of internationally 
        recognized human rights (as defined in section 
        502B(d)(1)); and
          [(4) the President first considers the effects of the 
        transfer of the excess defense articles on the national 
        technology and industrial base, particularly the 
        extent, if any, to which the transfer reduces the 
        opportunities of entities in the national technology 
        and industrial base to sell new equipment to the 
        country or countries to which the excess defense 
        articles are transferred.
such excess defense articles as may be necessary to carry out 
subsection (b).
  [(b) Purpose.--Excess defense articles may be transferred 
under subsection (a) only for the purpose of encouraging the 
military forces and local law enforcement agencies of an 
eligible country in Latin America and the Caribbean to 
participate cooperatively in a comprehensive national 
antinarcotics program, conceived and developed by the 
government of that country, by conducting activities within 
that country and on the high seas to prevent the production, 
processing, trafficking, transportation, and consumption of 
illicit narcotic or psychotropic drugs or other controlled 
substances.
  [(c) Uses of Excess Defense Articles.--Excess defense 
articles may be furnished to a country under subsection (a) 
only if that country ensures that those excess defense articles 
will be used primarily in support of antinarcotics activities.
  [(d) Role of the Secretary of State.--The Secretary of State 
shall determine the eligibility of countries to receive excess 
defense articles under subsection (a). In accordance with 
section 481(b) of this Act, the Secretary shall ensure that the 
transfer of excess defense articles under subsection (a) is 
coordinated with other antinarcotics enforcement programs 
assisted by the United States Government.
  [(e) Dollar Limitation.--The aggregate value of excess 
defense articles transferred to a country under subsection (a) 
in any fiscal year may not exceed $10,000,000.
  [(f) Conditions on Transfers.--The President may transfer 
excess defense articles under this section only if--
          [(1) they are drawn from existing stocks of the 
        Department of Defense;
          [(2) funds available to the Department of Defense for 
        the procurement of defense equipment are not expended 
        in connection with the transfer; and
          [(3) the President determines that the transfer of 
        the excess defense articles will not have an adverse 
        impact on the military readiness of the United States.
          [(4) the President first considers the effects of the 
        transfer of the excess defense articles on the national 
        technology and industrial base, particularly the 
        extent, if any, to which the transfer reduces the 
        opportunities of entities in the national technology 
        and industrial base to sell new equipment to the 
        country or countries to which the excess defense 
        articles are transferred.
  [(g) Terms of Transfers.--Excess defense articles may be 
transferred under this section without cost to the recipient 
country.
  [(h) Waiver of Requirement for Reimbursement of DOD 
Expenses.--Section 632(d) does not apply with respect to 
transfers of excess defense articles under this section.
  [(i) Notification to Congress.--
          [(1) Advance notice.--The President may not transfer 
        excess defense articles under this section until 15 
        days after the President has provided notice of the 
        proposed transfer to the committees specified in 
        paragraph (2). This notification shall include--
                  [(A) a certification of the need for the 
                transfer;
                  [(B) an assessment of the impact of the 
                transfer on the military readiness of the 
                United States; and
                  [(C) a statement of the value of the excess 
                defense articles to be transferred.
          [(2) Committees to be notified.--Notice shall be 
        provided pursuant to paragraph (1) to the Committee on 
        Armed Services, the Committee on Foreign Affairs, and 
        the Committee on Appropriations of the House of 
        Representatives and the Committee on Armed Services, 
        the Committee on Foreign Relations, and the Committee 
        on Appropriations of the Senate.
  [(j) Limitation on Use of Other Authorities to Transfer 
Excess Defense Articles.--The transfer authority provided in 
sections 518 and 519 may not be exercised with respect to any 
major illicit drug producing country or major drug-transit 
country in Latin America or the Caribbean.
  [(k) Excess Coast Guard Property.--As used in this section, 
the term ``excess defense articles'' shall be deemed to include 
excess property of the Coast Guard, and the term ``Department 
of Defense'' shall be deemed, with respect to such excess 
property, to include the Coast Guard.
  [Sec. 518. Natural Resources and Wildlife Management.--
  [(a) Authority to Transfer Nonlethal Excess Defense Articles 
and Small Arms.--Subject to the limitations in this section, 
the President may transfer nonlethal excess defense articles 
and small arms to friendly countries and to international 
organizations and private and voluntary organizations for the 
purposes contained in section 119 of this Act.
  [(b) Limitation on Transfers.--Transfers under this section 
shall be subject to the limitations contained in section 
516(b).
  [(c) Transportation.--The Department is authorized to 
transport nonlethal excess defense articles and small arms made 
available pursuant to this section without charge on a space 
available basis.
  [(d) Waiver of Requirements for Reimbursement of DOD 
Expenses.--Section 632(d) shall not apply with respect to 
transfers of nonlethal excess defense articles and small arms 
under this section or the transportation of such articles as 
authorized by subsection (c).
  [(e) Notification to Committees of Congress.--The President 
may not transfer nonlethal excess defense articles and small 
arms under this section until 30 days after he has notified the 
Committees on Appropriations of the proposed transfer. This 
notification shall include a certification of the need for the 
transfer and an assessment of the impact of the transfer on the 
military readiness of the United States. Transfers under this 
section shall also be subject to the notification requirements 
of section 516(c) of this Act.
  [Sec. 519. Additional Authorities Relating to Modernization 
of Military Capabilities.--(a) Authority to Transfer Excess 
Defense Articles.--Notwithstanding any other provision of law 
(except title V of the National Security Act of 1947) and 
subject to subsection (b), the President may transfer to 
countries for whom a foreign military financing program was 
justified for the fiscal year in which the transfer is 
authorized, such nonlethal excess defense articles as the 
President determines necessary to help modernize the defense 
capabilities of such countries, in accordance with the 
provisions of this section.
  [(b) Limitations on Transfers.--The President may transfer 
nonlethal excess defense articles under this section only if--
          [(1) the equipment is drawn from existing stocks of 
        the Department of Defense;
          [(2) no funds available to the Department of Defense 
        for the procurement of defense equipment are expended 
        in connection with the transfer;
          [(3) the President determines that the transfer of 
        the nonlethal excess defense articles will not have an 
        adverse impact on the military readiness of the United 
        States; and
          [(4) the President determines that transferring the 
        articles under the authority of this section is 
        preferable to selling them, after taking into account 
        the potential proceeds from, and likelihood of, such 
        sales, and the comparative foreign policy benefits that 
        may accrue to the United States as the result of either 
        a transfer or sale; and
          [(5) the President first considers the effects of the 
        transfer of the excess defense articles on the national 
        technology and industrial base, particularly the 
        extent, if any, to which the transfer reduces the 
        opportunities of entities in the national technology 
        and industrial base to sell new equipment to the 
        country or countries to which the excess defense 
        articles are transferred.
  [(c) Notification to Congress.--The President shall notify 
the Committees on Appropriations, Armed Services, and Foreign 
Relations of the Senate, and the Committees on Appropriations, 
Armed Services, and Foreign Affairs of the House of 
Representatives fifteen days before transferring nonlethal 
excess defense articles under subsection (a), in accordance 
with the regular notification procedures of those committees.
  [(d) Waiver of Requirement for Reimbursement of DOD 
Expenses.--Section 632(d) shall not apply with respect to 
transfers of nonlethal excess defense articles under this 
section.
  [(e) Annual Report.--Commencing in 1991, not later than 
December 15 of each year, the President shall transmit to the 
committees described in subsection (c) a report with respect to 
the previous fiscal year which contains--
          [(1) a list of the countries to which the President 
        has furnished nonlethal excess defense articles under 
        the authority of this section; and
          [(2) the value of the excess nonlethal defense 
        articles that were furnished to each such country.
  [(f) Transportation and Related Costs.--(1) Except as 
provided in paragraph (2), funds available to the Department of 
Defense shall not be expended for crating, packing, handling 
and transportation of nonlethal excess defense articles 
transferred under the authority of this section.
  [(2) Notwithstanding section 632(d) or any other provision of 
law, the President may direct the crating, packing, handling 
and transport of nonlethal excess defense articles without 
charge to a country if--
          [(A) that country has an agreement providing the 
        United States with base rights in that country;
          [(B) that country is eligible for assistance from the 
        International Development Association; and
          [(C) the nonlethal excess defense articles are being 
        provided to that country under the authority of this 
        section.

[SEC. 520. TRANSFERS OF EXCESS DEFENSE ARTICLES FOR INTERNATIONAL 
                    PEACEKEEPING OPERATIONS.

  [(a) General Authority.--The President may transfer to 
international and regional organizations of which the United 
States is a member such excess defense articles as the 
President determines necessary to support international 
peacekeeping operations and other activities and operations to 
maintain and restore international peace and security. Such 
transfers shall be on such terms and conditions as the 
President may determine, consistent with this section.
  [(b) Conditionality of Authority.--
          [(1) In general.--The authority of subsection (a) may 
        not be exercised with respect to an international or 
        regional organization until the United States has 
        entered into a written agreement with that organization 
        providing that the value of any excess defense articles 
        transferred under this section shall be credited 
        against United States assessed contributions to that 
        organization. For purposes of this paragraph, the term 
        ``value'' means such amount as may be agreed upon by 
        the United States and the recipient organization, 
        except that such amount may not be less than the value 
        (as defined in section 644(m)(1) of this Act) of the 
        articles transferred.
          [(2) Crediting of transfers.--(A) The credit provided 
        for pursuant to paragraph (1) shall be counted against 
        United States assessed contributions to the recipient 
        organization that are payable from the ``Contribution 
        to International Peacekeeping Activities'' account of 
        the Department of State, except to the extent such 
        credit is counted, in accordance with subparagraph (B), 
        against an assessed contribution payable from an 
        account established within the Department of Defense.
          [(B) If--
                  [(i) an account is established within the 
                Department of Defense for payment of a portion 
                of United States assessed contributions for 
                United Nations operations,
                  [(ii) excess defense articles are transferred 
                under this section for a United Nations 
                operation, and
                  [(iii) the United States assessed 
                contribution for that operation is payable from 
                that account,
        the credit for those excess defense articles shall be 
        counted against the assessed contribution payable from 
        that account, but only to the extent that the value of 
        the excess defense articles so transferred for that 
        operation during a fiscal year does not exceed the 
        total United States assessed contribution payable for 
        that operation from that account during that fiscal 
        year.
  [(c) Limitations on Transfers.--The President may transfer 
excess defense articles under this section only if--
          [(1) they are drawn from existing stocks of the 
        Department of Defense (or the Coast Guard);
          [(2) funds available to the Department of Defense (or 
        the Coast Guard) for the procurement of defense 
        equipment are not expended in connection with the 
        transfer;
          [(3) the transfer of the excess defense articles will 
        not have an adverse impact on the military readiness of 
        the United States; and
          [(4) the President has established procedures and 
        requirements, comparable to those applicable under 
        section 505 of this Act, to ensure that such excess 
        defense articles will be used only for purposes that 
        have been agreed to by the United States.
  [(d) Notification to Congress.--
          [(1) In general.--The President shall notify the 
        designated congressional committees regarding any 
        transfer of excess defense articles under this section 
        in accordance with paragraph (2). This notification 
        shall include--
                  [(A) a discussion of the need for the 
                transfer;
                  [(B) an assessment of the impact of the 
                transfer on the military readiness of the 
                United States; and
                  [(C) a statement of--
                          [(i) the acquisition cost and the 
                        value (as defined in section 644(m)(1) 
                        of this Act) of the excess defense 
                        articles to be transferred, and
                          [(ii) the aggregate acquisition cost 
                        and the aggregate value (as so defined) 
                        of all excess defense articles for 
                        which notification has been provided 
                        under this subsection during that 
                        fiscal year with respect to transfers 
                        to the same organization under this 
                        section.
          [(2) Timing of notice.--(A) The President shall 
        notify the designated congressional committees pursuant 
        to paragraph (1) at least 15 days before the excess 
        defense articles are transferred under this section, 
        except as provided in subparagraph (B).
          [(B) If the President determines that an unforeseen 
        emergency requires the immediate transfer of excess 
        defense articles under this section, the President--
                  [(i) may waive the requirement of 
                subparagraph (A) that notice be provided at 
                least 15 days in advance of the transfer; and
                  [(ii) shall promptly notify the designated 
                congressional committees of such waiver and 
                transfer.
          [(3) Designated committees.--As used in this 
        subsection, the term ``designated congressional 
        committees'' means the Committee on Foreign Affairs, 
        the Committee on Armed Services, and the Committee on 
        Appropriations of the House of Representatives and the 
        Committee on Foreign Relations, the Committee on Armed 
        Services, and the Committee on Appropriations of the 
        Senate.
  [(e) Transportation and Related Costs.--
          [(1) In general.--Except as provided in paragraph 
        (2), funds available to the Department of Defense shall 
        not be expended for crating, packing, handling, and 
        transporting excess defense articles transferred under 
        the authority of this section.
          [(2) Exception.--Notwithstanding any other provision 
        of law, the President may direct the crating, packing, 
        handling, and transporting of excess defense articles 
        without charge to an international or regional 
        organization if the President determines that waiving 
        such costs advances the foreign policy interests of the 
        United States.
  [(f) Waiver of Requirement for Reimbursement of DOD 
Expenses.--Section 632(d) shall not apply with respect to 
transfers of excess defense articles under this section and to 
any costs of crating, packing, handling, and transporting 
incurred under subsection (e)(2).]

SEC. 516. AUTHORITY TO TRANSFER EXCESS DEFENSE ARTICLES.

  (a) Authorization.--The President is authorized to transfer 
excess defense articles under this section to countries for 
which receipt of such articles was justified pursuant to the 
annual congressional presentation documents for military 
assistance programs, or for programs under chapter 8 of part I 
of this Act, submitted under section 634 of this Act, or for 
which receipt of such articles was separately justified to the 
Congress, for the fiscal year in which the transfer is 
authorized.
  (b) Limitations on Transfers.--The President may transfer 
excess defense articles under this section only if--
          (1) such articles are drawn from existing stocks of 
        the Department of Defense;
          (2) funds available to the Department of Defense for 
        the procurement of defense equipment are not expended 
        in connection with the transfer;
          (3) the transfer of such articles will not have an 
        adverse impact on the military readiness of the United 
        States;
          (4) with respect to a proposed transfer of such 
        articles on a grant basis, such a transfer is 
        preferable to a transfer on a sales basis, after taking 
        into account the potential proceeds from, and 
        likelihood of, such sales, and the comparative foreign 
        policy benefits that may accrue to the United States as 
        the result of a transfer on either a grant or sales 
        basis;
          (5) the President determines that the transfer of 
        such articles will not have an adverse impact on the 
        national technology and industrial base and, 
        particularly, will not reduce the opportunities of 
        entities in the national technology and industrial base 
        to sell new or used equipment to the countries to which 
        such articles are transferred; and
          (6) the transfer of such articles is consistent with 
        the policy framework for the Eastern Mediterranean 
        established under section 620C of this Act.
  (c) Terms of Transfers.--
          (1) No cost to recipient country.--Excess defense 
        articles may be transferred under this section without 
        cost to the recipient country.
          (2) Priority.--Notwithstanding any other provision of 
        law, the delivery of excess defense articles under this 
        section to member countries of the North Atlantic 
        Treaty Organization (NATO) on the southern and 
        southeastern flank of NATO and to major non-NATO allies 
        on such southern and southeastern flank shall be given 
        priority to the maximum extent feasible over the 
        delivery of such excess defense articles to other 
        countries.
  (d) Waiver of Requirement for Reimbursement of Department of 
Defense Expenses.--Section 632(d) shall not apply with respect 
to transfers of excess defense articles (including 
transportation and related costs) under this section.
  (e) Transportation and Related Costs.--
          (1) In general.--Except as provided in paragraph (2), 
        funds available to the Department of Defense may not be 
        expended for crating, packing, handling, and 
        transportation of excess defense articles transferred 
        under the authority of this section.
          (2) Exception.--The President may provide for the 
        transportation of excess defense articles without 
        charge to a country for the costs of such 
        transportation if--
                  (A) it is determined that it is in the 
                national interest of the United States to do 
                so;
                  (B) the recipient is a developing country 
                receiving less than $10,000,000 of assistance 
                under chapter 5 of part II of this Act 
                (relating to international military education 
                and training) or section 23 of the Arms Export 
                Control Act (22 U.S.C. 2763; relating to the 
                Foreign Military Financing program) in the 
                fiscal year in which the transportation is 
                provided;
                  (C) the total weight of the transfer does not 
                exceed 25,000 pounds; and
                  (D) such transportation is accomplished on a 
                space available basis.
  (f) Advance Notification to Congress for Transfer of Certain 
Excess Defense Articles.--
          (1) In general.--The President may not transfer 
        excess defense articles that are significant military 
        equipment (as defined in section 47(9) of the Arms 
        Export Control Act) or excess defense articles valued 
        (in terms of original acquisition cost) at $7,000,000 
        or more, under this section or under the Arms Export 
        Control Act (22 U.S.C. 2751 et seq.) until 15 days 
        after the date on which the President has provided 
        notice of the proposed transfer to the congressional 
        committees specified in section 634A(a) in accordance 
        with procedures applicable to reprogramming 
        notifications under that section.
          (2) Contents.--Such notification shall include--
                  (A) a statement outlining the purposes for 
                which the article is being provided to the 
                country, including whether such article has 
                been previously provided to such country;
                  (B) an assessment of the impact of the 
                transfer on the military readiness of the 
                United States;
                  (C) an assessment of the impact of the 
                transfer on the national technology and 
                industrial base and, particularly, the impact 
                on opportunities of entities in the national 
                technology and industrial base to sell new or 
                used equipment to the countries to which such 
                articles are to be transferred; and
                  (D) a statement describing the current value 
                of such article and the value of such article 
                at acquisition.
  (g) Aggregate Annual Limitation.--
          (1) In general.--The aggregate value of excess 
        defense articles transferred to countries under this 
        section in any fiscal year may not exceed $350,000,000.
          (2) Effective date.--The limitation contained in 
        paragraph (1) shall apply only with respect to fiscal 
        years beginning after fiscal year 1996.
  (h) Congressional Presentation Documents.--Documents 
described in subsection (a) justifying the transfer of excess 
defense articles shall include an explanation of the general 
purposes of providing excess defense articles as well as a 
table which provides an aggregate annual total of transfers of 
excess defense articles in the preceding year by country in 
terms of offers and actual deliveries and in terms of 
acquisition cost and current value. Such table shall indicate 
whether such excess defense articles were provided on a grant 
or sale basis.
  (i) Excess Coast Guard Property.--For purposes of this 
section, the term ``excess defense articles'' shall be deemed 
to include excess property of the Coast Guard, and the term 
``Department of Defense'' shall be deemed, with respect to such 
excess property, to include the Coast Guard.

SEC. 517. DESIGNATION OF MAJOR NON-NATO ALLIES.

  (a) Notice to Congress.--The President shall notify the 
Congress in writing at least 30 days before--
          (1) designating a country as a major non-NATO ally 
        for purposes of this Act and the Arms Export Control 
        Act (22 U.S.C. 2751 et seq.); or
          (2) terminating such a designation.
  (b) Initial Designations.--Australia, Egypt, Israel, Japan, 
the Republic of Korea, and New Zealand shall be deemed to have 
been so designated by the President as of the effective date of 
this section, and the President is not required to notify the 
Congress of such designation of those countries.
          * * * * * * *

        Chapter 5--International Military Education and Training

  Sec. 541. General Authority.--The President is authorized to 
furnish, on such terms and conditions consistent with this Act 
as the President may determine (but whenever feasible on a 
reimbursable basis), military education and training to 
military and related civilian personnel of foreign countries. 
Such civilian personnel shall include foreign governmental 
personnel of ministries other than ministries of defense, and 
may also include legislators and individuals who are not 
members of the government, if the military education and 
training would (i) contribute to responsible defense resource 
management, (ii) foster greater respect for and understanding 
of the principle of civilian control of the military, (iii) 
contribute to cooperation between military and law enforcement 
personnel with respect to counternarcotics law enforcement 
efforts, or (iv) improve military justice systems and 
procedures in accordance with internationally recognized human 
rights. Such training and education may be provided through--
          (1) attendance at military educational and training 
        facilities in the United States (other than Service 
        academies) and abroad;
          * * * * * * *
  Sec. 544. Exchange Training.--[In carrying out this chapter] 
(a) In carrying out this chapter, the President is authorized 
to provide for attendance of foreign military personnel at 
professional military education institutions in the United 
States (other than service academies) without charge, and 
without charge to funds available to carry out this chapter 
(notwithstanding section 632(d) of this Act), if such 
attendance is pursuant to an agreement providing for the 
exchange of students on a one-for-one, reciprocal basis each 
fiscal year between those United States professional military 
education institutions and comparable institutions of foreign 
countries and international organizations.
  (b) The President may provide for the attendance of foreign 
military and civilian defense personnel at flight training 
schools and programs (including test pilot schools) in the 
United States without charge, and without charge to funds 
available to carry out this chapter (notwithstanding section 
632(d) of this Act), if such attendance is pursuant to an 
agreement providing for the exchange of students on a one-for-
one basis each fiscal year between those United States flight 
training schools and programs (including test pilot schools) 
and comparable flight training schools and programs of foreign 
countries.
          * * * * * * *

SEC. 546. PROHIBITION ON GRANT ASSISTANCE FOR CERTAIN HIGH INCOME 
                    FOREIGN COUNTRIES.

  (a) In General.--None of the funds made available for a 
fiscal year for assistance under this chapter may be made 
available for assistance on a grant basis for any of the high-
income foreign countries described in subsection (b) for 
military education and training of military and related 
civilian personnel of such country.
  (b) High-Income Foreign Countries Described.--The high-income 
foreign countries described in this subsection are Austria, 
Finland, the Republic of Korea, Singapore, and Spain.
          * * * * * * *

                  Chapter 8--Antiterrorism Assistance

  Sec. 571. General Authority.--[Subject to the provisions of 
this chapter] Notwithstanding any other provision of law that 
restricts assistance to foreign countries (other than sections 
502B and 620A of this Act), the President is authorized to 
furnish, on such terms and conditions as the President may 
determine, assistance to foreign countries in order to enhance 
the ability of their law enforcement personnel to deter 
terrorists and terrorist groups from engaging in international 
terrorist acts such as bombing, kidnaping, assassination, 
hostage taking, and hijacking. Such assistance may include 
training services and the provision of equipment and other 
commodities related to bomb detection and disposal, management 
of hostage situations, physical security, and other matters 
relating to the detection, deterrence, and prevention of acts 
of terrorism, the resolution of terrorist incidents, and the 
apprehension of those involved in such acts.
          * * * * * * *
  Sec. 573. [Specific Authorities and] Limitations.--[(a) 
Notwithstanding section 660 of this Act, services and 
commodities may be granted for the purposes of this chapter to 
eligible foreign countries, subject to reimbursement of the 
value thereof (within the meaning of section 644(m)) pursuant 
to section 632 of this Act from funds available to carry out 
this chapter.
  [(b)] (a) Whenever the President determines it to be 
consistent with and in furtherance of the purposes of this 
chapter, and on such terms and conditions consistent with this 
Act as he may determine, any agency of the United States 
Government is authorized to furnish services and commodities, 
without charge to funds available to carry out this chapter, to 
an eligible foreign country, subject to payment in advance of 
the value thereof (within the meaning of section 644(m)) in 
United States dollars by the foreign country. Credits and the 
proceeds of guaranteed loans made available to such countries 
pursuant to the Arms Export Control Act shall not be used for 
such payments. Collections under this chapter shall be credited 
to the currently applicable appropriation, account, or fund of 
the agency providing such services and commodities and shall be 
available for the purposes for which such appropriation, 
account, or fund is authorized to be used.
  [(c)] (b) The Assistant Secretary of State for Democracy, 
Human Rights, and Labor shall be consulted in the development 
and implementation of the antiterrorism assistance program 
under this chapter, including determinations of the foreign 
countries that will be furnished assistance under this chapter 
and determinations of the nature of assistance to be furnished 
to each such country.
  [(d)] (c)[(1) Training services (including short term 
refresher training) provided pursuant to this chapter may be 
conducted outside the United States only if--
          [(A) the training to be conducted outside the United 
        States will be provided during a period of not more 
        than 30 days;
          [(B) such training relates to--
                  [(i) aviation security;
                  [(ii) crisis management;
                  [(iii) document screening techniques;
                  [(iv) facility security;
                  [(v) maritime security;
                  [(vi) VIP protection; or
                  [(vii) the handling of detector dogs, except 
                that only short term refresher training may be 
                provided under this clause; and
          [(C) at least 15 days before such training is to 
        begin, the Committee on Foreign Affairs of the House of 
        Representatives and the Committee on Foreign Relations 
        of the Senate are notified in accordance with the 
        procedures applicable to reprogramming notifications.
  [(2) Personnel of the United States Government authorized to 
advise eligible foreign countries on antiterrorism matters 
shall carry out their responsibilities, to the maximum extent 
possible, within the United States. Such personnel may provide 
advice outside the United States on antiterrorism matters to 
eligible foreign countries for periods not to exceed 30 
consecutive calendar days.
  [(3)] (1)(A) Except as provided in subparagraph (B), 
employees of the Department of State shall not engage in the 
training of law enforcement personnel or the provision of 
services under this chapter.
  (B) Subparagraph (A) does not apply to training (including 
short term refresher training) or services provided to law 
enforcement personnel by employees of the Bureau of Diplomatic 
Security with regard to crisis management, facility security, 
or VIP protection.
  [(4)(A) Articles on the United States Munitions List may be 
made available under this chapter only if--
          [(i) they are small arms in category I (relating to 
        firearms), ammunition in category III (relating to 
        ammunition) for small arms in category I, articles in 
        category IV(c) or VI(c) (relating to detection and 
        handling of explosive devices), articles in category X 
        (relating to protective personnel equipment), or 
        articles in paragraph (b), (c), or (d) of category XIII 
        (relating to speech privacy devices, underwater 
        breathing apparatus and armor plating), and they are 
        directly related to antiterrorism training under this 
        chapter;
          [(ii) the recipient country is not prohibited by law 
        from receiving assistance under one or more of the 
        following provisions: chapter 2 of this part (relating 
        to grant military assistance), chapter 5 of this part 
        (relating to international military education and 
        training), or the Arms Export Control Act (relating to 
        foreign military sales financing); and
          [(iii) at least 15 days before the articles are made 
        available to the foreign country, the President 
        notifies the Committee on Foreign Affairs of the House 
        of Representatives and Committee on Foreign Relations 
        of the Senate of the proposed transfer, in accordance 
        with the procedures applicable to reprogramming 
        notifications pursuant to section 634A of this Act.
  [(B) The value (in terms of original acquisition cost) of all 
equipment and commodities provided under subsection (a) in any 
fiscal year may not exceed 25 percent of the funds made 
available to carry out this chapter for that fiscal year.
  [(C) No shock batons or similar devices may be provided under 
this chapter.]
  (2)(A) Except as provided in subparagraph (B), funds made 
available to carry out this chapter shall not be made available 
for the procurement of weapons and ammunition.
  (B) Subparagraph (A) shall not apply to small arms and 
ammunition in categories I and III of the United States 
Munitions List that are integrally and directly related to 
antiterrorism training provided under this chapter if, at least 
15 days before obligating those funds, the President notifies 
the appropriate congressional committees specified in section 
634A of this Act in accordance with the procedures applicable 
to reprogramming notifications under such section.
  (C) The value (in terms of original acquisition cost) of all 
equipment and commodities provided under this chapter in any 
fiscal year may not exceed 25 percent of the funds made 
available to carry out this chapter for that fiscal year.
  [(5)] (3) Assistance under this chapter shall not include 
provision of services, equipment, personnel, or facilities 
involved in the collection of intelligence as defined in 
Executive Order 12333 of December 4, 1981, other than limited 
training in the organization of intelligence for antiterrorism 
purposes.
  [(e)] (d) This chapter does not apply to information exchange 
activities conducted by agencies of the United States 
Government under other authority for such purposes.
  [(f)] (e) Funds made available to carry out this chapter may 
not be used for personnel compensation or benefits.
  [Sec. 574. Reports to Congress.--(a)(1) Not less than thirty 
days before providing assistance to a foreign country under 
this chapter, the President shall transmit to the Speaker of 
the House of Representatives and the chairman of the Committee 
on Foreign Relations of the Senate a written notification which 
specifies--
          [(A) the country to which such assistance is to be 
        provided;
          [(B) the type and value of the assistance to be 
        provided;
          [(C) the terms and duration of assistance; and
          [(D) an explanation of how the proposed assistance 
        will further the objectives of this chapter to assist 
        eligible foreign countries in deterring terrorism.
  [(2) The chairman of either the Committee on Foreign Affairs 
of the House of Representatives or the Committee on Foreign 
Relations of the Senate may request, as deemed necessary, a 
current report on the state of observance of and respect for 
internationally recognized human rights in the country to which 
assistance is to be provided. In the event that a report is 
requested, no assistance under subsection (a) shall be provided 
to the country specified prior to transmittal of the report to 
the requesting committee.
  [(b) The annual congressional presentation materials shall 
include--
          [(1) a list of the countries which received 
        assistance under this chapter for the preceding fiscal 
        year, a list of the countries which are programmed to 
        receive assistance under this chapter for the current 
        fiscal year, and a list of the countries which are 
        proposed as recipients of assistance under this chapter 
        for the next fiscal year; and
          [(2) with respect to each country listed pursuant to 
        paragraph (1) and for each such fiscal year, a 
        description of the assistance under this chapter 
        furnished, programed, or proposed, including--
                  [(A) the place where training or other 
                services under this chapter were or will be 
                furnished, the duration of such training or 
                other services, and the number of personnel 
                from that country which were or will receive 
                training under this chapter;
                  [(B) the types of equipment or other 
                commodities which were or will be furnished 
                under this chapter; and
                  [(C) whether the assistance was furnished on 
                a grant basis, on an advance payment basis, or 
                on some other basis.
Each report shall also describe the ways in which the provision 
of such assistance has furthered the objective of enhancing the 
ability of foreign law enforcement authorities to deter acts of 
terrorism.]
  Sec. [575.] 574. Authorizations of Appropriations.--(a) There 
are authorized to be appropriated to the President to carry out 
this chapter $9,840,000 for the fiscal year 1986 and 
$14,680,000 for the fiscal year 1987.
  (b) Amounts appropriated under this section are authorized to 
remain available until expended.
  Sec. [576.] 575. Administrative Authorities.--Except where 
expressly provided to the contrary, any reference in any law to 
part I of this Act shall be deemed to include reference to this 
chapter and any reference in any law to part II of this Act 
shall be deemed to exclude reference to this chapter.
          * * * * * * *

                                PART III

                     Chapter 1--General Provisions

          * * * * * * *

SEC. 620H. DEPLETED URANIUM AMMUNITION.

  (a) Prohibition.--Except as provided in subsection (b), none 
of the funds made available to carry out this Act or any other 
Act may be made available to facilitate in any way the sale of 
M-833 antitank shells or any comparable antitank shells 
containing a depleted uranium penetrating component to any 
country other than--
          (1) a country that is a member of the North Atlantic 
        Treaty Organization;
          (2) a country that has been designated as a major 
        non-NATO ally (as defined in section 644(q)); or
          (3) Taiwan.
  (b) Exception.--The prohibition contained in subsection (a) 
shall not apply with respect to the use of funds to facilitate 
the sale of antitank shells to a country if the President 
determines that to do so is in the national security interest 
of the United States.
          * * * * * * *

                  Chapter 3--Miscellaneous Provisions

  Sec. 644. Definitions.--As used in this Act--
  (a)  * * *
          * * * * * * *
  (q) ``Major non-NATO ally'' means a country which is 
designated in accordance with section 517 as a major non-NATO 
ally for purposes of this Act and the Arms Export Control Act 
(22 U.S.C. 2751 et seq.).
          * * * * * * *
  Sec. 652. Limitation Upon Exercise of Special Authorities.--
The President shall not exercise any special authority granted 
to him under section 506(a), 552(c)(2), or 610(a) of this Act 
unless the President, [prior to the date] before he intends to 
exercise any such authority, notifies the Speaker of the House 
of Representatives and the Committee on Foreign Relations of 
the Senate in writing of each such intended exercise, the 
section of this Act under which such authority is to be 
exercised, and the justification for, and the extent of, the 
exercise of such authority.
          * * * * * * *