[Senate Report 105-333]
[From the U.S. Government Publishing Office]
Calendar No. 576
105th Congress Report
SENATE
2d Session 105-333
_______________________________________________________________________
SECURITY ASSISTANCE ACT OF 1998
_______
September 14, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Helms, from the Committee on Foreign Relations, submitted the
following
R E P O R T
[To accompany S. 2463]
The Committee on Foreign Relations, having had under
consideration an original bill to amend the Foreign Assistance
Act of 1961 and the Arms Export Control Act to provide
authorities with respect to the transfer of excess defense
articles and the transfer of naval vessels and for other
purposes, reports favorably thereon and recommends that the
bill do pass.
CONTENTS
Page
Purposes of the Bill............................................. 1
Committee Action................................................. 2
Section-by-Section Analysis...................................... 2
Cost Estimate.................................................... 15
Evaluation of Regulatory Impact.................................. 16
Changes in Existing Law.......................................... 16
Purposes of the Bill
The purpose of title I of this bill 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 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.
Committee Action
On July 23, 1998, Chairman Jesse Helms, along with the
Ranking Democratic Member, Joseph R. Biden, Jr., introduced
this original bill in Committee. The Committee subsequently
debated the measure and ordered reported this bill unanimously
by voice vote.
Section-by-Section Analysis
Section 1--Short Title
This Act may be cited as the ``Security Assistance Act of
1998''.
Section 2--Table of Contents
This Act is organized into two titles:
Title I--Defense and Security Assistance.
Title II--Transfer of Naval Vessels to Certain Foreign
Countries
Title I--Defense and Security Assistance
Section 101--Excess Defense Articles for Central European Countries
The primary purpose of the Excess Defense Articles (EDA)
program has been to reduce excess or obsolete stocks of defense
articles by offering equipment to eligible friendly foreign
governments for enhancement of their defense capabilities.
These equipment transfers are an important element of United
States foreign policy.
Most Central European countries desperately seek U.S. EDA
to replace former Soviet equipment and reduce their dependency
upon Russia. Transfers of EDA also enhance their
interoperability with NATO forces. Unfortunately, most Central
European countries cannot afford the packing, crating,
handling, and transportation costs associated with an EDA
transfer. As a result, without the authority provided under
Section 101, the EDA program will be virtually unavailable to
the countries that need it most.
This type of authorization was provided for in Fiscal Years
1996 and 1997, thereby ensuring that EDA continued to be a
viable option for the Central European countries. Department of
Defense funds were authorized for the packing, crating,
handling, and transportation costs for countries eligible to
participate in the Partnership for Peace (PFP) program and to
receive assistance under the Support for East European
Democracy (SEED) Act of 1989. This provision will extend the
authority for Fiscal Years 1998, 1999 and 2000.
Section 102--Excess Defense Articles for Certain Independent States of
the Former Soviet Union
The President recently determined that the furnishing of
defense articles and services to a number of countries such as
Georgia, Kazakhstan, Kyrgyzstan, Moldova, Ukraine, and
Uzbekistan would strengthen the security of the United States.
This determination makes these countries eligible for grant
Excess Defense Articles (EDA), which will promote the
participation of these countries in the Partnership for Peace
program and further interoperability with U.S. and NATO forces.
The Committee expects that a number of militaries likely
will be interested in obtaining U.S. security assistance
through the EDA program. Units that could especially benefit
from EDA may include the Ukrainian-Polish peacekeeping
battalion, the Central Asian peacekeeping battalion (composed
of troops from Kazakstan, Kyrgyzstan, and Uzbekistan), and the
Ukrainian Stabilization Force (SFOR) unit, currently engaged in
peacekeeping activities in Bosnia.
However, given the weak nature of their national economies
and the difficulty in funding their military budgets, most of
these countries cannot afford the costs of packing, crating,
handling, and transportation, even if the EDA itself is
provided at no cost. Some costs could potentially be borne
through their Foreign Military Financing grants. But for most
of the independent states of the former Soviet Union, these
grants are not large enough to cover EDA-associated costs as
well as the cost of equipment purchased for interoperability
purposes.
Accordingly, the Administration is seeking authority to use
funds appropriated for the national defense of the United
States to pay for packing, crating, handling, and
transportation of excess defense articles to these countries.
The Committee recommends the provision of this authority.
However, the Department of Defense is not authorized under
Section 102 to expend any funds for the crating, packing,
handling, or transportation of excess defense articles to
either Russia or Turkmenistan. It is the view of the Committee
that, at this time, neither country is deserving of access to
excess U.S. defense equipment. Russia is a major military power
in its own right. The Committee opposes subsidization of the
Russian military with U.S. defense equipment and funds. The
Committee also opposes such subsidization of the Government of
Turkmenistan so long as that regime's gross human rights abuses
persist.
Further, the Committee is concerned with the potential
impact of Section 102 upon the Department of Defense.
Accordingly, no funds shall be expended for the crating,
packing, handling, or transportation of excess defense articles
under this section until the Committee is notified of the
amount proposed to be so expended.
Section 111--Continuation of Foreign Military Financed Training After
the Termination of Assistance
The Foreign Assistance Act of 1961 provides for the orderly
termination of assistance to a particular recipient upon action
by the President or the Congress. However, this pertains only
to training assistance provided under the Foreign Assistance
Act, such as International Military Education Training (IMET).
The Foreign Assistance Act does not currently provide for the
orderly termination of training supported with assistance made
available by other authorities, such as that funded by Foreign
Military Financing (which is authorized by the Arms Export
Control Act). Section 111 extends Section 617 of the Foreign
Assistance Act to cover Foreign Military-Financed training, as
well as other Foreign Military-Financed activities.
The second sentence is included for clarification. The
insertion of ``and the Arms Export Control Act'' and the
deletion of ``under this Act'' make it clear that the sentence
refers to both the Foreign Assistance Act of 1961 and the Arms
Export Control Act.
Section 112--Sales of Excess Coast Guard Property
On occasion, the United States Coast Guard determines that
some of its smaller vessels are excess. These vessels are
suitable for various countries which may not possess a ``blue
water'' navy but are in need of equipment for coastal and
riverine defense, and for search-and-rescue operations.
Currently, Section 516(i) of the Foreign Assistance
Authorization Act of 1961 authorizes the grant transfer of
excess Coast Guard equipment to eligible foreign countries for
their defense capabilities. It does not authorize, however, the
sale of excess Coast Guard equipment. Section 112 amends the
Arms Export Control Act to authorize the United States
Government to provide excess Coast Guard equipment on a sales
basis, in addition to the extant grant authority. The sale of
excess Coast Guard equipment to foreign countries will generate
funds for the United States Treasury miscellaneous receipts
account. Once this authority is made available, the Committee
intends to urge the Administration to ensure that, in the
future, Coast Guard vessels are sold rather than given away.
Section 113--Notification of Upgrades to Direct Commercial Sales
Section 113 amends the Arms Export Control Act to ensure
that the Committee is notified of any upgrades or enhancements
to the technology or capability of a defense article or service
which already has been notified to the Committee pursuant to
Section 36(c) of the Arms Export Control Act (which relates to
commercial arms sales).
Section 114--Reporting of Offset Agreements
Section 114 expands the information provided to Congress in
notifications pursuant to sections 36(b) and 36(c) of the Arms
Export Control Act. Currently, when transmitting notices of
proposed letters of offer for government-to-government sales or
licenses for direct commercial arms sales and manufacturing
agreements, the Department of State indicates whether or not
the transaction includes an offset arrangement. On occasions
where the existence of an offset was affirmed, the State
Department has been unable to provide any information about the
nature or value of such offset, and has declined to request
this information directly from the applicant. Offsets, however,
can have significant implications for U.S. foreign policy as
well as for the domestic economy, making them legitimate
factors in Congressional consideration of an arms sale.
Therefore, the provision requires future certifications to
include a brief description of the offset arrangement,
including the dollar amount.
Section 115--Expanded Prohibition on Incentive Payments
Section 115 amends Section 39A of the Arms Export Control
Act (22 U.S.C. 2779a) to prohibit the use of incentive payments
in direct commercial sales licensed under the Act. This
provision reiterates the Committee's belief that the use of
incentive payments to induce a person to purchase goods or
services of the foreign country to satisfy an offset obligation
of a U.S. supplier is an unfair practice that puts United
States companies at a competitive disadvantage.
Section 39A, enacted as Section 733 of P.L. 103-226,
prohibits incentive payments or compensation paid by a U.S.
supplier of defense articles or services to any other U.S.
company or individual to induce that company or individual to
purchase or acquire goods or services provided by a foreign
entity in order to satisfy an ``offset'' agreement made with a
foreign country in connection with the sale of military
articles or services. ``Offsets'' are a range of industrial and
commercial compensations provided to foreign governments and
firms as inducements or conditions for the purchase of U.S.
military goods and services. The prohibition applies to those
instances where the defense contractor or subcontractor seeks
to make a payment to a third party to induce it to choose a
foreign company over an American competitor. This instance is
not clearly covered by either the federal Anti-Kickback Act, 41
U.S.C. 51, or the Foreign Corrupt Practices Act, 15 U.S. 78-
dd1.
A 1997 report by the General Accounting Office noted that
while Section 39A clearly applied to defense articles or
services ``sold under'' the AECA, it did not apply to
commercial sales, which are licensed under, but not sold under,
the AECA. Section 115 makes clear that Section 39A is intended
to cover both types of sales.
Section 115(b) amends the definition of a United States
person under Section 39A specifically to include foreign
subsidiaries of U.S. corporations.
The Committee notes that four years after the enactment of
Section 39A, the Department of State has not yet issued
implementing regulations. The 1997 GAO study noted that the
lack of regulations has resulted in three uncertainties with
respect to implementation of the provision: (1) the term
``incentive payments;'' (2) the terms ``owned'' and
``controlled'' within the definition of ``United States
person;'' and (3) the law's enforcement and penalty provision.
The Committee has included Section 115(b) in order to clarify
the definition of U.S. person. However, the Committee is
disappointed that the Department of State has failed to issue
regulations regarding the other two uncertainties, and urges
the Department to do so at the earliest possible time.
Section 121--Additions to United States War Reserve Stockpiles for
Allies
The War Reserve Stockpiles for Allies programs in both
Korea and Thailand directly support the United States strategy
of forward engagement in the Pacific theater. Both the Republic
of Korea and the Government of Thailand assume the cost of
storage, maintenance and security of these stockpiles, thereby
saving the United States significant operating expenses. These
stocks directly support U.S. plans for the defense of Korea.
They also help to ensure continued access to staging facilities
in Thailand (which have become all the more important with the
loss of base rights in the Philippines).
Stockpiles enable equipment and supplies to be pre-
positioned in key parts of the world to enhance U.S. and host
country defense readiness. While items in the stockpiles remain
the property of the United States Government, they can be made
available to host nation forces in accordance with section
514(a) of the FAA. Since 1972 the United States has maintained
a war stockpile in the republic of Korea, placing obsolete or
excess munitions in storage as military requirements
determined. The stockpile currently has 560,000 short tons of
equipment totaling $3 billion. The stockpile in Thailand, on
the other hand, has been maintained since 1987, and stores $70
million worth of excess military stocks.
Pursuant to Section 514 of the Foreign Assistance Act of
1961, the Department of Defense can only make additions to War
Reserve Stockpiles for Allies as specifically provided for in
legislation. For Fiscal Year 1998, the President requested
authority to make $40,000,000 in additions to stockpiles in
Korea and $20,000,000 for Thailand. For Fiscal Year 1999, the
President requested a significant increase in authority--
$320,000,000 for Korea and $20,000,000 for Thailand.
The additional $320,000,000 authority for the Korean
program is requested for two reasons. First, the Department of
the Army must retrieve 207,000 rounds of 155 millimeter high
explosive shells to fill training shortfalls in the continental
United States. In exchange, the United States will replace
these rounds with a like number of incendiary shells. In Fiscal
Year 1997, the U.S. Army transferred 53,000 rounds of 155 mm
munitions. This transfer accounts for $137,000,000, or 43
percent, of the total authority requested. This proposed
transfer will save the United States Army $30,000,000 by
eliminating the need for new procurement of 155 mm training
rounds.
Second, the authorities provided under Section 121 are
requested in order that the United States might avoid the
maintenance, storage, transportation, and demilitarization
costs of excess munitions by transferring these items to Korea.
By agreement with the Government of Korea, United States
payment for the storage of assets designated as war reserve
stockpiles is required if the United States uses the munitions
or sells them to another country, although the assets remain
under U.S. title at all times.
After a recent review by U.S. Forces Korea of its munitions
assets, updated weapons systems, and the fire support plan, it
was determined that large amounts of excess and obsolete
munitions exist in the U.S. inventories in Korea. As a result
of this review, the Army seeks a significant increase in
authority to transfer to the Korean War Reserve Stockpile
munitions that are now considered obsolete or excess to the
requirements of U.S. Forces Korea. For instance, the M1 series
tanks in Korea have been upgraded to 120 mm guns, rendering the
105 mm tank rounds excess. The Army's 38 and 45 caliber pistols
have been replaced with 9 mm handguns, making their small arms
ammunition obsolete. Moreover, modern demolition initiators
have replaced blasting caps and time fuses for U.S. explosives.
The majority of the remaining munitions included in the
$320,000,000 authorization are already stored in Korea, with
the exception of 90,000 rounds for 4.2 inch mortars (which have
been replaced by the 120 mm) that are located in Japan and
which will be moved to Korea.
While excess and obsolete munitions could be disposed of
either through foreign military sales or demilitarization,
neither option is optimal. Foreign military sales to other
countries are limited due to the extra cost incurred by the
buyer to transport the munitions from the Korean peninsula.
Demilitarization is a very slow and expensive process. The cost
to the United States Army to retrograde to the United States
and demilitarize the munitions covered by Section 121 would
total roughly $20,000,000. Transfer of excess and obsolete
munitions to the Korean War Reserve Stockpile, however, will
result in the avoidance of those costs, increase storage space
for U.S. Forces Korea, and improve the war fighting readiness
for the Republic of Korea and the Combined Forces Command.
An additional $20,000,000 authorization is required for the
Thailand program in Fiscal Year 1999. This authorization is
required to fulfill expected U.S. obligations under the
Memorandum of Understanding establishing the Thai War Reserve
Stockpiles (WRS-T) program. While the Government of Thailand
originally requested only $10,000,000 in additions for FY99,
the recent economic crisis in Thailand resulted in the Chief of
the Joint U.S. Military Assistance Group being notified that
the Government of Thailand would only be able to pay in-country
for the transportation of half of the total amount of equipment
storage in the stockpile in Fiscal Year 1998 (e.g. only
$10,000,000 in stockpile additions). As a result, the
Government of Thailand has asked that an additional $10 million
of unused authority from the FY98 authorization be requested
for the FY99 WRS-T. The U.S. contribution will be matched
dollar-for-dollar by the Government of Thailand. This will meet
the United States goal of bringing the total value of U.S.
contributions since the establishment of the program in 1987 to
$100,000,000.
Section 122--Transfer of Certain Obsolete or Surplus Defense Articles
in the War Reserves Stockpile for Allies
Section 514 of the Foreign Assistance Act of 1961 provides
that defense articles included in Department of Defense War
Reserve Stocks be transferred to foreign governments only
through Foreign Military Sales. The value of the article is
then counted against military assistance appropriations
provided for the recipient country. Section 514 continues to
explain that, for these purposes, ``value'' is defined as the
acquisition cost of the articles plus packing, crating,
handling, and transportation costs.
The Department of Defense maintains a war reserve stockpile
in the Republic of Korea and the Kingdom of Thailand. These are
separate stockpiles of surplus U.S.-titled munitions and
equipment that are intended for transfer to the governments of
Korea and Thailand, respectively, in an emergency, subject to
reimbursement requirements. The two international agreements
which established these similar, but separate, programs require
the United States to replace munitions and equipment with items
of comparable value or reimburse the host government for all
back storage and related costs if the items are removed for the
benefit of any user other than Korea or Thailand.
Certain munitions and equipment in both stockpiles have
become obsolete or surplus to the U.S. These items include
tanks, trucks, artillery, mortars, general purpose bombs,
repair parts, ammunition, barrier material, and ancillary
equipment. Section 122 provides authority to the United States
Armed Forces to transfer these obsolete or surplus stocks out
of the stockpile before they become obsolete to Korea or
Thailand. If these items become obsolete before enactment of
this initiative, the U.S. will be required to expend millions
of dollars to demilitarize or destroy these items or to bring
them back to the continental United States.
The United States will negotiate comparable concessions
with both Korea and Thailand in the form of cash compensation,
services, waiver of charges otherwise payable by the U.S.
Government, and other items of value. During 1995 and 1996, the
U.S. Government traded $66,620,000 in obsolete and surplus
equipment to the Republic of Korea for a like sum in
concessions. These concessions included reclamation of
equipment that was deemed surplus or obsolete but for which a
need subsequently arose, minus the costs associated with
storing the items by the Republic of Korea. Additionally, the
Republic of Korea demilitarized equipment at no cost to the
United States and accepted older equipment such as the M48A5
tanks and the M110A2 Howitzer from the stockpiles which were
missing spares and no longer supportable.
Section 122 provides for fair market value compensation to
the United States for surplus and obsolete munitions. It also
will relieve the U.S. Government of financial indebtedness for
back storage costs and other stockpile maintenance costs, and
save millions in cost avoidance to demilitarize, destroy, or
retrograde the munitions and equipment back to the U.S.
However, the Committee expects to be kept fully appraised of
all negotiations by the Department of Defense with both the
Republic of Korea and the Government of Thailand regarding
concessions for excess or obsolete equipment and will expect a
far more comprehensive accounting of such concessions than was
given in 1995.
Section 131--Foreign Military Training
Section 131 amends the Foreign Assistance Act of 1961 to
prohibit any kind of United States military training for
countries that are ineligible to receive International Military
Education and Training (IMET), unless (1) there is prior
Congressional notification, (2) the country is a NATO or major
non-NATO ally, (3) the country has been designated ineligible
to receive IMET on a grant basis due to the strength of its
economy, (4) the training is for an operation to save the lives
and property of United States citizens, or (5) the training is
for an intelligence operation.
The Committee has included this requirement in light of
recent press reports that U.S. special forces trained security
forces in Indonesia and Pakistan at a time when international
military education and training was prohibited for those
countries. The Committee believes those training exercises
violated the spirit of the law and the intent of Congress,
whatever their legal justification or substantive merits.
The Committee is further concerned that the Joint Combined
Exchange Training program may be functioning, in effect, as a
foreign military assistance program without proper U.S. foreign
policy coordination. Under current law, special operations
commanders may authorize JCET expenses only if the primary
purpose of the activity is to train U.S. forces. According to
press reports, however, the activities often provide little
benefit for U.S. forces and exert a major foreign policy
impact. One former commander was quoted as saying that JCETs
``may be the most direct and most involved, tangible, physical
part of U.S. foreign policy in certain countries.'' For this
reason, the Committee has included the requirement for a one-
time report by the Secretary of State detailing the steps that
have been taken to ensure that all U.S. foreign military
education and training activities are being conducted in
accordance with the foreign policy objectives of the United
States.
Section 132--Annual Military Assistance Reports
Section 132 expands and clarifies the information relating
to military assistance and military exports that the President
is required to transmit to Congress each February 1, pursuant
to section 655 of the Foreign Assistance Act of 1961.
Currently, this report includes information about the
International Military Education and Training (IMET) program,
but not about other military education and training activities
that the United States conducts with foreign countries. The
Committee intends that future reports include information about
activities under Title 10 of the U.S. Code, such as the
Military-to-Military Contacts Program (MMCP) and the Joint
Combined Exchange Training (JCET) program. This provision is
not intended, however, to cover joint military exercises or
NATO operations.
The provision makes two additional changes to the section
655 report. First, it requires separate identification of
defense articles furnished with the financial assistance of the
U.S. government, such as Foreign Military Financing loans and
U.S. Government-backed loan guarantees. These items are
currently grouped together with commercial sales. Second, the
provision requires that the report cover articles and services
actually delivered to each country, as well as those authorized
or licensed for prospective sale.
Finally, the Committee notes its deep concern about the
late submission of reports under section 655. The report due
February 1, 1997, was not completed until September 15 of that
year, and the report due February 1, 1998, was submitted on
July 16. No adequate explanation has been provided for these
delays, and the Committee strongly urges that future reports be
issued in a timely fashion.
Title II--Transfer of Naval Vessels to Certain Foreign Countries
Section 201--Authority to transfer certain naval vessels
Section 201 authorizes the President to make available
eleven naval vessels to the Governments of Argentina, Brazil,
Mexico, Taiwan, Portugal, Philippines, Chile, and Venezuela.
Two vessels will be given as grants. The nine others (one of
which will be provided on a lease-sale basis) will be sold,
generating $105,500,000 for the United States Treasury.
Section 201(a) authorizes the grant transfer to Argentina
of a 27 year-old ``NEWPORT'' class tank landing ship (LST
1179). The vessel cost the United States Government $53,051,000
and has six years remaining in its service life. The Argentine
Navy's request for an LST dates back to 1992, when the United
States offered the USS LA MOURE COUNTY to Argentina and then
subsequently withdrew the offer due to a change in the LPD 17
funding plans. An offer of the USS SCHENECTADY was substituted,
but the Argentine Navy declined because the ship was too
expensive to reactivate.
The offer of an LST to Argentina at this time would
reinforce the close relationship which has evolved over the
past several years. An LST would provide the Argentine Navy
with the amphibious lift capability for its Marines to support
the integration of a reinforced infantry battalion in future
coalition operations with the United States.
Section 201(b)(1) authorizes the sale to Brazil of the
PEORIA tank landing ship (LST 1183). The Committee understands
that the vessel will be sold for $2,650,000. The 27 year old
ship, which has a six-year service life remaining, cost
$19,903,000 originally.
The Brazilian Navy (BN) will use this second ``NEWPORT''
class LST to replace its aging LST ``DUQUE DE CAXIAS'' (ex-USS
GRANT, LST-1174), which has been converted to a transport ship
(LKA) due to its inability to continue to operate as an LST.
Brazil will use this new LST to fulfill its requirements during
international peacekeeping operations.
Sec. 201(b)(2) authorizes the transfer to Brazil on a
lease-sale basis the Jumboized Fleet Oiler MERRIMACK (AO 179).
This vessel originally cost $102,240,000, and has not yet
served even half of its service life with the United States
Navy; if notifications for the transfer are completed by
November 1998--as the Committee intends--the vessel will be
sold for $70,140,000.
The Brazilian Navy is currently attempting to expand the
capabilities of its aircraft carrier to include fixed wing
attack aviation (A-4 Skyhawks). If successful, this will
require substantial underway refueling capabilities that can be
provided by a CIMARRON-class Fleet Oiler.
The BN considers itself a ``blue water'' navy and, as such,
has embarked on an ambitious fleet modernization plan to
maintain its South American naval superiority. Brazil routinely
participates in multinational and joint exercises with the
United States, including the yearly UNITAS exercise. In the
spirit of cooperation and to further the favorable climate of
U.S.-Brazilian foreign relations, the Committee views an offer
of an AO to Brazil as justified.
Section 201(c)(1) authorizes the sale to Mexico of the
Auxiliary Repair Dry Dock SAN ONOFRE (ARD 30). This 53 year-old
vessel has outlived its service life with the U.S. Navy, and
will be sold for $1,160,000.
The Secretary of the Mexican Navy requested, by name, the
SAN ONOFRE for use in performing repairs for his aging fleet of
ships. The Mexican Navy recently accepted from the U.S. Navy
two KNOX-class frigates and may accept a third KNOX frigate as
a logistics asset. Under special arrangements made with the
Government of Mexico, the KNOX's will be reactivated in Mexico.
The Mexican Government may use the SAN ONOFRE in the future to
undertake repairs and maintenance on these vessels.
Section 201(c)(2) authorizes the sale to Mexico of the Fast
Frigate PHARRIS (FF 1055). This 28 year-old vessel has 18 years
of service life remaining, and will be sold for $3,410,000.
This ship is offered to Mexico for either reactivation or
use as a second logistics asset for the two FFs it will
reactivate. There are no other countries interested in the
PHARRIS. Should Mexico decline this offer, the PHARRIS, as well
as all other remaining FFs in the Inactive Fleet, will be
scrapped.
Section 201(d)(1) authorizes the sale to Taiwan of the
Medium Auxiliary Floating Dry Dock COMPETENT (AFDM 6). This 53
year-old vessel is 24 years past its original design service
life. It will be sold to Taiwan for $1,920,000. The Taiwanese
Navy has a need for a medium floating dry dock in order to
perform repairs on all of its naval vessels.
Section 201(d)(2) authorizes the sale to Taiwan of the Dock
Landing Ship PENSACOLA (LSD 38). This 26 year-old vessel has
seven years remaining in its service life, and will be sold for
$12,130,000.
The addition of an LSD to the Taiwanese Navy will
significantly boost both its amphibious capability and its
Naval stature. The Taiwanese Navy has been requesting a ship of
this type for several years, but until now, none has been
available for transfer.
This ship will have no effect on U.S.-PRC relations as it
does not add new offensive capabilities to the Taiwanese Navy.
Taiwan poses no amphibious threat to China.
Section 201(e) authorizes the grant transfer to Portugal of
the Ocean Surveillance Ship ASSURANCE (T-AGOS 5). This 12 year-
old vessel has over half of its service life remaining (16
years) and originally cost the United States $24,472,000.
Portugal accepted its first T-AGOS, the ex-AUDACIOUS, in
March of 1997. The government immediately forwarded its request
for a second ship of this class when available. The addition of
this second T-AGOS for Portugal will continue to boost its
ocean surveillance capability.
The Committee agrees to this grant transfer in support of
the U.S.-Portugal ``Lajes Agreement.'' Signed on November 21,
1995, this Agreement calls for the United States to make its
best effort to provide $173 million in Excess Defense Article
support to the Government of Portugal over the life of the
Agreement. As a grant transfer, the value of this ship--which
should be over $10,000,000--will be applied as a credit to the
U.S. obligation under this Agreement.
Section 201(f) authorizes the sale to the Philippines of
the Ocean Surveillance Ship TRIUMPH (T-AGOS 4). This 12 year-
old vessel has over half of its service life remaining (16
years) and originally cost the United States $25,493,000. The
Government of the Philippines is expected to pay $11,370,000
for the vessel. However, the transfer of the vessel will be
completed without a towed sonar array.
Section 201(g) authorizes the sale to Chile of the Medium
Auxiliary Floating Dry Dock WATERFORD (ARD 5). This 53 year-old
vessel has exceeded its original design service life by 26
years, and will be sold for $1,220,000. The Chilean Navy has a
need for a medium floating dry dock in order to perform repairs
on its NEWPORT-class LST as well as other medium sized and
smaller ships.
Section 201(h) authorizes the sale to Venezuela of a Medium
Auxiliary Floating Dry Dock, AFDM 2. This 53 year-old vessel
has exceeded its original design service life by 25 years, and
will be sold for $1,500,000.
The Venezuelan Navy has been in need of a dry dock for many
years to repair its small coastal patrol craft. The Venezuelan
request for such a vessel was first registered with the United
States Navy in October 1995. Recent Venezuelan contributions to
the U.S. national interest include their continuing
contributions to the counternarcotics effort along their
Caribbean coastline, as well as filling the U.S. crude oil
requirements during Operation Desert Storm when shortages
occurred. Further, the Venezuelan Navy is a yearly participant
with the U.S. Navy during each UNITAS exercise. Accordingly,
the Committee recommends sale of this vessel.
Section 202--Authority to transfer naval vessels to the eastern
Mediterranean region
Section 202 authorizes the transfer of twelve vessels to
Greece and Turkey. The amount that will be generated by the
four sales and the four lease-sales will total $593,870,000.
Section 202(a) requires the President to certify, prior to
the provision of a vessel to either Greece or Turkey, that the
proposed transfer is consistent with the United States' stated
objective of ensuring a peaceful, stable atmosphere in the
eastern Mediterranean region.
Section 202(b)(1) authorizes the lease-sale transfer to
Greece of four Guided Missile Destroyers: the KIDD (DDG 993),
CALLAGHAN (DDG 994), SCOTT (DDG 995), and CHANDLER (DDG 996).
These vessels range between 15 and 16 years in age, and have a
remaining service life of 23 years. The original acquisition
value of these four vessels totals $1,241,644,000. Greece will
purchase these vessels for $474,410,000, (over the life of the
leases). This assumes that DDG 995 is transferred in ``hot''
condition with Congressional notification no later than
November 1998.
Greece is in the midst of a force modernization program to
which KIDD-class DDGs would be a major addition. The Greek Navy
has recently purchased MEKO-class and KORTENAER-class FFGs and
has expressed a strong interest in obtaining Flight III and IV
PERRY-class FFGs from the United States. In addition, the
Hellenic Navy has stated a plan to decommission its older ex-
USN KNOX and ADAMS-class FFs and DDGs, as well as six corvettes
in order to afford and man these larger warships. Greece has
also tied these acquisitions to the purchase of four new
construction corvettes from Ingalls Shipbuilding.
KIDD-class DDGs would provide a formidable capability to
the Hellenic Navy because of their recent combat direction
system threat upgrades and other state-of-the-art systems.
Although these vessels are manpower intensive, Greece is
willing to make this trade-off in return for the additional
combat capabilities a DDG would provide. KIDD-class DDGs will
also provide the Hellenic Navy increased capabilities in
supporting U.S.-led operations in the Mediterranean region.
However, this transfer will present the Hellenic Navy with the
problem of possessing fewer assets to cover the same geographic
region.
Section 202(b)(2) authorizes the grant transfer to Greece
of the Fast Frigate HEPBURN (FF 1055). This 28 year-old vessel
has no remaining service life and will be provided free of
charge as a logistics asset to the Hellenic Navy. Greece will
use the vessel to provide spare parts for its two operational
KNOX FFs. The original acquisition cost of this vessel was
$26,589,000.
Section 202(b)(3) authorizes the sale to Greece of the
Medium Auxiliary Repair Dry Dock ALAMOGORDO (ARDM 2). This 53
year-old vessel is 24 years past its original service life.
Acquired originally for $3,032,000, the vessel will be sold to
Greece for $1,250,000.
The U.S. Navy has an agreement with Greece for use of their
Souda Bay Naval Station to support United States Navy assets
and commitments in that region of the world. Allowing the
Hellenic Navy to purchase a dry dock from the United States
will increase the Hellenic Navy's ability to maintain itself by
allowing significant ship maintenance to be performed under
their own control and supervision. This also will increase U.S.
Navy voyage repair alternatives.
Section 202(c)(1) authorizes the sale to Turkey of three
Guided Missile Frigates: DUNCAN (FFG 10), TISDALE (FFG 27), and
REID (FFG 30). These vessels vary in age from 15 to 16 years,
and originally cost the United States $446,551,000. Turkey will
purchase these frigates for $118,210,000, assuming that
Congressional notifications are completed by September, 1998.
Delay will preclude the transfer of FFG 30 in ``hot'' ship
condition and will cost the United States $16,791,000.
Following the Madrid Accord between Greece and Turkey,
Congress authorized the transfer of three PERRY class FFGs to
Turkey, part of the longer-term Turkish Naval strategy of
standardizing propulsion systems. Both the TISDALE and REID
will be transferred as operational assets for reactivation. The
DUNCAN will be transferred as a logistics asset.
Section 202(c)(2) authorizes the grant transfer to Turkey
of three Fast Frigates: W.S. SIMMS (FF 1059), PAUL (FF 1080),
and MILLER (FF 1091). These 27 year-old vessels, which
originally cost $75,503,000, have outlived their service life.
Turkey has requested the KNOX-Class FFs as logistic (parts)
assets to support their fleet of eight operational former USN
FFs. Transfer of these KNOX-class frigates will enhance
Turkey's ability to continue to support these efforts with
their operating FFs and add a needed capability to the navy of
a vital NATO ally.
Section 202(d) ensures that offers of naval vessels are
made contemporaneously to both Greece and Turkey.
Section 203--Inapplicability of aggregate annual limitation to the
transfer of certain excess defense articles
Section 203 makes clear that the value of naval vessels
authorized to be transferred under sections 201 and 202 of this
Act will not be included in the aggregate value of excess
defense articles transferred to countries under section 516 of
the Foreign Assistance Act of 1961 (U.S.C. 2321j) in any fiscal
year.
Section 204--Cost of transfers
Any United States expense in connection with a transfer
authorized by this Act will be charged to the recipient.
Section 205--Combined lease-sales.
Sections 201 and 202 of this bill authorize the President
to transfer certain ships on a combined lease-sale basis.
Section 205 authorizes the President to, in effect, arrange a
``lease with an option to buy.'' The United States is
authorized to negotiate the transfer of a vessel under the
terms of a lease, with lease payments suspended for the term of
the lease. Simultaneously, a foreign military sales agreement
for the transfer of title to the lease vessel can be entered
into. However, the purchasing country shall not receive the
title to the vessel until the purchase price of the vessel has
been paid in full. When the title is delivered, the lease will
be terminated.
However, if the purchasing country fails to make full
payment of the purchase price, the sales agreement immediately
will be terminated, the suspension of lease payments vacated,
and the United States shall keep all funds that have been
received under the sales agreement to date. This may include up
to the amount of lease payments due and payable under the lease
and all other costs required by the lease to be paid to date.
No interest is payable to the recipient by the United States on
any amounts paid to the United States by the recipient under
the sales agreement but not retained by the United States under
the lease.
Section 206--Conversion of Certain Previous Leases
Section 206 authorizes the conversion of leases associated
with twenty-five vessels either to a sale or to a grant. All
currently are in the possession of the country made eligible to
permanently acquire the vessel in question. The leases are near
expiration and Section 206 authorizes the President to transfer
title of the vessel to the designated country by sale or grant.
The United States Navy has determined that these vessels are
not essential to the defense of the United States and may be
offered for transfer.
Section 207--Authority to consent to third party transfer of ex-U.S.S.
Bowman County to USS LST Ship Memorial, Inc.
Section 207 enables a nonprofit veterans association to
return to the United States from Greece a World War II Tank
Landing Ship--the ex-U.S.S. Bowman County. This vessel will
have its guns demilitarized prior to re-transfer and will be
transformed into a movable museum that will dock at
predetermined locations to teach children, and adults, about
the crucial role played by tank landing ships and their crews
during the Second World War. The Committee considers this a
fitting a war memorial as it will be owned and operated by a
group of its own veterans who are willing to dedicate their
time to educating the citizens of the United States.
The Committee notes that there is no more courageous and
distinguished a group of men than those who manned the Tank
Landing Ships and fought during the numerous amphibious
assaults in both the Pacific and Europe. During the course of
the war in Europe, veterans who served aboard LSTs stormed the
beaches in Sicily, Italy, Normandy, and southern France. In the
Southwest Pacific theater, General Douglas MacArthur employed
LSTs in his ``island hopping campaigns'' and in the invasion of
the Philippines. In the Central Pacific, Admiral Chester Nimitz
used them at Iwo Jima and Okinawa.
In these assaults, the veterans to whom this amendment pays
tribute took heavy casualties from withering, point-blank
cannon fire. A total of 39 LSTs--and many crewmen and
soldiers--were lost during the war. And yet the soldiers who
were carried by these ships, and the sailors who manned these
vessels, fought on--establishing foothold after foothold and
enabling the United States to roll back and defeat the Axis
Powers. It is to their heroism, in large part, that the
Committee believes the United States owes many of the great
victories of the Second World War.
Section 208--Expiration of authorities
Section 207 establishes that the authorities granted under
sections 201, 202 and 206 of this act will expire two years
after the enactment of this Act.
Cost Estimate
Rule XXVI, paragraph 11(a) of the Standing Rules of the
Senate requires that Committee reports on bills or joint
resolutions contain a cost estimate for such legislation. The
Committee on Foreign Relations reported this legislation on
July 23, providing the Congressional Budget Office more than
six weeks to provide this cost estimate. To date, the Committee
has not received the Congressional Budget Office cost estimate.
Evaluation of Regulatory Impact
In accordance with Rule XXVI, paragraph 11(b) of the
Standing Rules of the Senate, the Committee has concluded that
there is no regulatory impact from this legislation.
Changes in Existing Law
In compliance with paragraph 12 of Rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
this bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
Miscellaneous Authorization--Fiscal Years 1996 and 1997
* * * * * * *
TITLE I--DEFENSE AND SECURITY ASSISTANCE
CHAPTER 1--MILITARY AND RELATED ASSISTANCE
* * * * * * *
SEC. 105. EXCESS DEFENSE ARTICLES FOR CERTAIN EUROPEAN COUNTRIES.
Notwithstanding section 516(e) of the Foreign Assistance
Act of 1961, as added by this Act, during each of the fiscal
years [1996 and 1997] 1998, 1999, and 2000, funds available to
the Department of Defense may be expended for crating, packing,
handling, and transportation of excess defense articles
transferred under the authority of section 516 of such act to
countries that are eligible to participate in the Partnership
for Peace and that are eligible for assistance under the
Support for East European Democracy (SEED) Act of 1989.
* * * * * * *
Foreign Assistance Act of 1961
* * * * * * *
PART III
Chapter 1--General Provisions
* * * * * * *
Sec. 514. Stockpiling of Defense Articles for Foreign
Countries.--(a) No defense article in the inventory of the
Department of Defense which is set aside, reserved, or in any
way earmarked or intended for future use by any foreign country
may be made available to or for use by any foreign country
unless such transfer is authorized under this Act or the Arms
Export Control Act, or any subsequent corresponding
legislation, and the value of such transfer is charged against
funds authorized under such legislation or against the
limitations specified in such legislation, as appropriate, for
the fiscal period in which such defense article is transferred.
For purposes of this subsection, ``value'' means the
acquisition cost plus crating, packing, handling, and
transportation costs incurred in carrying out this section.
(b)(1)The value of defense articles to be set aside,
earmarked, reserved, or intended for use as war reserve stocks
for allied or other foreign countries (other than for purposes
of the North Atlantic Treaty Organization or in the
implementation of agreements with Israel) in stockpiles located
in foreign countries may not exceed in any fiscal year an
amount that is specified in security assistance authorizing
legislation for that fiscal year.
[(2)(A) The value of such additions to stockpiles of
defense articles in foreign countries shall not exceed
$50,000,000 for each of the fiscal years 1996 and 1997 and
$60,000,000 for fiscal year 1998.
[(B) Of the amount specified in subparagraph (A) for each
of the fiscal years 1996 and 1997, not more than $40,000,000
may be made available for stockpiles in the Republic of Korea
and not more than $10,000,000 may be made available for
stockpiles in Thailand. Of the amount specified in subparagraph
(A) for fiscal year 1998, not more than $40,000,000 may be made
available for stockpiles in the Republic of Korea and not more
than $20,000,000 may be made available for stockpiles in
Thailand.]
(2)(A) The value of such additions to stockpiles of defense
articles in foreign countries shall not exceed $340,000,000 for
fiscal year 1999.
(B) Of the amount specified in subparagraph (A) for fiscal
year 1999, not more than $320,000,000 may be made available for
stockpiles in the Republic of Korea and not more than
$20,000,000 may be made available for stockpiles in Thailand.
* * * * * * *
Chapter 5--International Military Education and Training
* * * * * * *
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.
SEC. 547. OTHER FOREIGN MILITARY TRAINING.
Notwithstanding any other provision of law, the armed
forces or other security forces of a foreign country that is
ineligible for assistance under this chapter, or for which
assistance under this chapter is restricted, may not receive
United States Military training under any other provision of
law, unless--
(1) the committees specified in section 634A(a) are
notified at least 15 days in advance of the first provision of
training to the forces of the country in a fiscal year in
accordance with the procedures applicable to reprogramming
notifications under that section;
(2) the foreign country is a NATO or major non-NATO ally
(as defined in section 644(q));
(3) the foreign country is a country described in section
546(b);
(4) the training is related to an operation undertaken to
save the lives or property of United States citizens; or
(5) the training is reportable under title V of the
National Security Act of 1947.
Chapter 6--Peacekeeping Operations
* * * * * * *
Sec. 617. Termination of Assistance.--Assistance under any
provision of this Act may, unless sooner terminated by the
President, be terminated by concurrent resolution. Funds made
available under this Act and the Arms Export Control Act shall
remain available for a period not to exceed eight months from
the date of termination of assistance [under this Act] for the
necessary expenses of winding up programs related thereto. In
order to ensure the effectiveness of assistance under this Act
and under the Arms Export Control Act, such expenses for
orderly termination of programs may include the obligation and
expenditure of funds to complete the training or studies
outside their countries of origin of students whose course of
study or training program began before assistance was
terminated.
* * * * * * *
SEC. 655. ANNUAL MILITARY ASSISTANCE REPORT.
(a) Report Required.--Not later than February 1 of each
year, the President shall transmit to the Congress an annual
report for the fiscal year ending the previous September 30.
[(b) Information Relating to Military Assistance and
Military Exports.--Each such report shall show the aggregate
dollar value and quantity of defense articles (including excess
defense articles), defense services, and international military
education and training authorized by the United States,
excluding that which is pursuant to activities reportable under
title V of the National Security Act of 1947, to each foreign
country and international organization. The report shall
specify, by category, whether such defense articles--
[(1) were furnished by grant under chapter 2 or
chapter 5 of part II of this Act or under any other
authority of law or by sale under chapter 2 of the Arms
Export Control Act; or
[(2) were licensed for export under section 38 of the
Arms Export Control Act.]
(b) Information Relating to Military Assistance and
Military Exports._Each such report shall show the aggregate
dollar value and quantity of defense articles (including excess
defense articles), defense services, and foreign military
education and training activities authorized by the United
States and of such articles, services, and activities provided
by the United States, excluding any activity that is reportable
under title V of the National Security Act of 1947, to each
foreign country and international organization. The report
shall specify, by category--
(1) in the case of defense articles, whether such
articles--
(A) were furnished by grant under chapter 2
or chapter 5 of part II of this Act or under
any other authority of law or by sale under
chapter 2 of the Arms Export Control Act;
(B) were furnished with the financial
assistance of the United States Government,
including through loans and guarantees; or
(C) were licensed for export under section 38
of the Arms Export Control Act; and
(2) in the case of foreign military education and
training activities, the provision of law pursuant to
which such activities were conducted.
* * * * * * *
The Arms Export Control Act
* * * * * * *
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 and the Coast Guard to any eligible
country or international organization if such country or
international organization agrees to pay in United States
dollars--
* * * * * * *
Chapter 3--MILITARY EXPORT CONTROLS
* * * * * * *
Sec. 36. Reports on Commercial and Governmental Military
Exports; Congressional Action.--(a) 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 not more than sixty days after the end of each quarter
an unclassified report (except that any material which was
transmitted in classified form under subsection (b)(1) or
(c)(1) of this section may be contained in a classified
addendum to such report, and any letter of offer referred to in
paragraph (1) of this subsection may be listed in such addendum
unless such letter of offer has been the subject of an
unclassified certification pursuant to subsection (b)(1) of
this section, and any information provided under paragraph (11)
of this subsection may also be provided in a classified
addendum) containing--
* * * * * * *
(b)(1) In the case of any letter of offer to sell any
defense articles or services under this Act for $50,000,000 or
more, any design and construction services for $200,000,000 or
more, or any major defense equipment for $14,000,000 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)]
and, if so, a description of the offset agreement, including
the dollar amount of the agreement. 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--
* * * * * * *
(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 or
more or of defense articles or defense services sold under a
contract in the amount of $50,000,000 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)] and, if so, a
description of the offset agreement, including the dollar
amount of the agreement. 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 and a description from the person who has submitted the
license application of any offset agreement proposed to be
entered into in connection with such export (if known on the
date of transmittal of such statement). In a case in which such
articles or services are listed on the Missle Technology
Control Regime Annex and 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.
* * * * * * *
(B) For the purpose of expediting the consideration and
enactment of joint resolutions under this subsection, 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.
(4) The provisions of subsection (b)(5) shall apply to any
equipment, article, or service for which a numbered
certification has been transmitted to Congress pursuant to
paragraph (1) in the same manner and to the same extent as that
subsection applies to any equipment, article, or service for
which a numbered certification has been transmitted to Congress
pursuant to subsection (B)(1). For purposes of such
application, any reference in subsection (b)(5) to ``a letter
of offer'' or ``an offer'' shall be deemed to be a reference to
``a contract''.
* * * * * * *
SEC. 39A. PROHIBITION ON INCENTIVE PAYMENTS
(a) No United States supplier of defense articles or
services sold or licensed under this Act, nor any employee,
agent, or subcontractor thereof, shall, with respect to the
sale or export of any such defense article or defense service
to a foreign country, make any incentive payments for the
purpose of satisfying, in whole or in part, any offset
agreement with that country.
* * * * * * *
(3) the term ``United States person'' means--
(A) an individual who is a national or
permanent resident alien of the United States;
and
(B) any corporation, business association,
partnership, trust, or other juridical entity--
(i) organized under the laws of the
United States or any State, the
District of Columbia, or any territory
or possession of the United States; or
(ii) owned or controlled in fact by
individuals described in subparagraph
(A) or by an entity described in clause
(i).