[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).

                                
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