[Senate Report 106-351]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 696
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-351

======================================================================



 
                  THE SECURITY ASSISTANCE ACT OF 2000

                                _______
                                

                 July 20, 2000.--Ordered to be printed

                                _______
                                

          Mr. Helms, from the Committee on Foreign Relations,
                        submitted the following

                              R E P O R T

                         [To accompany S. 2901]

    The Committee on Foreign Relations, having had under 
consideration an original bill (S. 2901) to authorize 
appropriations for security assistance for fiscal year 2001, 
and for other purposes, reports favorably thereon and 
recommends that the bill do pass.

                                CONTENTS

                                                                   Page

  I. Committee Action.................................................1
 II. Section-by-Section Analysis......................................2
III. Cost Estimate...................................................19
 IV. Evaluation of Regulatory Impact.................................23
  V. Changes in Existing Law.........................................23

                          I. Committee Action

    On March 23, 2000 the Committee unanimously ordered 
reported S. 2382, the Technical Assistance, Trade Promotion and 
Anti-Corruption Act of 2000. S. 2382 was reported and placed on 
the Senate Legislative Calendar on April 7, 2000, and 
subsequently referred to the Committee on Banking, Housing, and 
Urban Affairs pursuant to paragraph 1(j)(10) of rule XXV of the 
Standing Rules of the Senate on April 11, 2000. Paragraph 
1(j)(10) of rule XXV of the Standing Rules of the Senate 
provides that, ``at the request of the Committee on Banking, 
Housing, and Urban Affairs, any proposed legislation relating 
to [the International Monetary Fund] reported by the Committee 
on Foreign Relations shall be referred to the Committee on 
Banking, Housing, and Urban Affairs.'' The Banking Committee 
has taken no action on S. 2382 as of the writing of this 
report.
    On Wednesday, June 28, 2000, the Committee on Foreign 
Relations considered and unanimously approved by voice vote an 
original bill based on Title VII of S. 2382, the Technical 
Assistance, Trade Promotion and Anti-Corruption Act of 2000.

                    II. Section-by-Section Analysis

    The Committee notes that, during the past 10 years, the 
pool of money available for security assistance to United 
States allies and partners has decreased dramatically. At the 
same time, the number of countries with which the United States 
needs to engage, whether to combat proliferation or terrorism 
or to bolster regional security, has steadily increased. For 
instance, three countries of the former Warsaw Pact are now 
NATO members and receive both Foreign Military Financing and 
International Military Education and Training from the United 
States. Other countries which were once part of the Soviet 
Union itself are now free and independent, and enjoy important 
security relationships with the United States. An even larger 
number of countries, now free from the Soviet orbit, are also 
free to pursue closer military relationships with the United 
States. Thus, for instance, this bill makes Mongolia eligible 
for Department of Defense expenditures relating to excess 
defense articles for the first time in history.
    The Committee is concerned that a steadily increasing 
number of countries are pursuing a relationship with the United 
States which is funded by a steadily decreasing amount of 
money. Additionally, 98 percent of the Foreign Military 
Financing (FMF) account is currently committed to just three 
countries as a result of various peace accord commitments. Even 
if the President's budget request is fully funded, only 
$183,200,000 in FMF would actually be available for the United 
States to build security ties to the rest of the world. This 
bill seeks to arrest and reverse this decline. Section 101 
authorizes an increase of $89,000,000 in grant Foreign Military 
Financing over the President's budget request, and will bring 
the total amount of truly ``discretionary'' FMF spending to 
$272,200,000. Even so, this will not return security assistance 
to 1990 spending levels.
    Similarly, Section 201 fully funds the International 
Military Education and Training program to maximum course 
capacity. Section 301 consolidates all nonproliferation 
funding, except for assistance to the International Atomic 
Energy Agency, under a single funding line. In so doing, it 
will protect nonproliferation assistance from numerous foreign 
aid restrictions that govern the current appropriations 
process. This bill fully funds the President's request and 
authorizes funding for one additional, Committee-mandated 
nonproliferation and export control initiative in Malta and 
funds the International Science and Technology Centers (ISTC) 
program at maximum capacity. This bill will strengthen the hand 
of the newly-created Nonproliferation Bureau of the Department 
of State in shaping a coherent U.S. nonproliferation and export 
control policy. Likewise, the President's antiterrorism funding 
request is fully authorized, and the Committee has applied 
additional resources to ensure that the fledgling Terrorist 
Interdiction Program is funded in fiscal year 2001 at the same 
level as in fiscal year 2000.
    In total, this bill authorizes $3,894,000,000 in security 
assistance funding. This is an increase of $119,000,000 over 
both fiscal year 2000 levels and the President's budget request 
for fiscal year 2001.

                TITLE I--MILITARY AND RELATED ASSISTANCE


             Subtitle A--Foreign Military Financing Program

Sec. 101. Authorization of Appropriations

    Section 101 authorizes $3,627,000,000 for fiscal year 2001 
for the Foreign Military Financing (FMF) Program. The 
administration request for fiscal year 2001 for FMF (grants and 
loans) is $3,538,200,000. The actual level of FMF funding for 
fiscal year 2000 is $3,420,000,000.

                      Subtitle B--Other Assistance

Sec. 111. Defense Drawdown Special Authorities

    Section 111 increases the special drawdown authorities of 
defense articles and services from defense stocks, and for 
military education and training, to assist foreign countries 
from $100 million to $150 million.
    Current law grants the President the authority to draw down 
from existing stocks within the Department of Defense to assist 
in emergencies or when he determines it is in the national 
interest. This section expands the authority by making 
nonproliferation and antiterrorism activities eligible for the 
special drawdown authorities relating to defense articles and 
services, and to military education and training, to assist 
foreign countries. The increase in financial authority is meant 
to allow for incorporation of nonproliferation and 
antiterrorism objectives without sacrificing the President's 
flexibility to respond to unforeseen emergencies and foreign 
policy objectives relating to combating international 
narcotics, international disaster assistance, and migration and 
refugee assistance.

Sec. 112. Increased Transport Authority

    Section 112 raises the space available weight limitation 
that is imposed on the transportation of excess defense 
articles (EDA) from 25,000 pounds to 50,000 pounds.
    Currently, a variety of limitations are imposed on the use 
of Department of Defense funds to transfer excess defense 
articles to foreign nations and international organizations. 
Moreover, even when such an expenditure is authorized, free 
transportation of EDA may only be provided on a space available 
basis if it is in the U.S. national interest to do so, the 
recipient nation is a developing nation which receives less 
than $10,000,000 in FMF and IMET, and the weight of the items 
to be transferred does not exceed 25,000 pounds.
    In limiting the weight of defense articles to no more than 
25,000 pounds, current law will preclude the transportation of 
a large number of United States Coast Guard ``self-righting'' 
patrol craft which have recently been declared excess but which 
weigh approximately 33,000 pounds. Over the next four years, 
more than 50 of these vessels will be eligible for transfer to 
foreign nations under the EDA program. However, the current 
weight limitation will preclude shipment of the vessels on a 
space available basis to foreign countries. This, in turn, will 
increase the cost of transfer of the defense article to would-
be recipients, and likely would cause many nations to decline 
U.S. offers of these vessels. As a result, the United States 
Coast Guard could incur unnecessary expenses due to delays in 
finding foreign recipients of the craft, and possibly be forced 
to demilitarize vessels for whom a foreign customer could not 
be secured. Raising the weight limit to 50,000 pounds will 
obviate this problem.

        TITLE II--INTERNATIONAL MILITARY EDUCATION AND TRAINING


Sec. 201. Authorization of Appropriations

    Section 201 authorizes $65,000,000 to carry out 
international military education and training (IMET) of 
military and related civilian personnel of foreign countries. 
The administration request for fiscal year 2001 for IMET is 
$55,000,000. The actual level of IMET funding for fiscal year 
2000 is $50,000,000. IMET is provided on a grant basis to 
students from allied and friendly nations, and is designed to 
expose foreign students to the U.S. professional military 
establishment and the American way of life, including the U.S. 
regard for democratic values, respect for individual and human 
rights and belief in the rule of law. Section 201 authorizes 
funding of the IMET program at its maximum capacity. Funding 
beyond this level cannot be absorbed due to limitations in 
number of courses and classes.

Sec. 202. Additional Requirements Relating to International Military 
        Education and Training

    Section 202 amends Chapter 5 of part II of the Foreign 
Assistance Act of 1961, relating to International Military 
Education and Training (IMET), by adding two new requirements. 
First, selection of foreign personnel for the IMET program will 
be done in consultation with United States defense attaches, 
who are uniquely positioned to recommend candidates. The 
Committee is concerned to note that defense attaches are, on 
occasion, excluded from this process. By mandating 
consultation, the Committee intends to secure the complete 
involvement of defense attaches in nominating individuals for 
the IMET program. Naturally, selection of foreign personnel, 
and overall management of the IMET program remain the 
responsibility of the Department of State.
    Section 202 also requires that the Secretary of Defense 
develop and maintain a database containing records on each 
foreign military or defense ministry civilian participant in 
education and training activities conducted under this chapter 
after December 31, 2000. This record shall include the type of 
instruction received, the dates of such instruction, whether it 
was completed successfully, and, to the extent practicable, a 
record of the person's subsequent military or defense ministry 
career and current position and location. The Committee expects 
that the record of a person's subsequent career will include 
positions held, reports of exceptional successes or failures in 
those positions, and any credible reports of involvement in 
criminal activity or human rights abuses. The Committee 
believes that such a database will improve the effectiveness of 
foreign military education and training activities by enabling 
the Department of Defense to better determine: what follow-up 
training may be most appropriate for previously trained 
personnel; which courses are most effective in improving the 
performance of foreign military personnel; and where personnel 
are located in foreign defense establishments who, by virtue of 
their prior training, are most likely to understand U.S. modes 
of operation and share U.S. standards of military 
professionalism.

       TITLE III--NONPROLIFERATION AND EXPORT CONTROL ASSISTANCE


Sec. 301. Nonproliferation and Export Control Assistance

    Every major category of U.S. foreign assistance, except for 
nonproliferation and export control assistance, is governed 
under multiple sections, or entire chapters, of the Foreign 
Assistance Act of 1961 (FAA). The FAA contains chapters 
authorizing international narcotics control, military 
assistance, peacekeeping operations, antiterrorism assistance, 
IMET, development assistance, and funding for international 
organizations, to name a few.
    Although the President has declared a state of national 
emergency to combat the proliferation of weapons of mass 
destruction and associated delivery systems, the FAA does not 
contain a specific chapter to authorize and direct such a 
clearly important form of U.S. foreign aid. Funding for the 
nonproliferation and export control activities of the 
Department of State derives from a variety of disparate 
authorizations passed at various times. As a result, this 
category of funding does not enjoy the same status as other 
types of foreign assistance. Appropriation of funds for 
nonproliferation and export control activities is cobbled 
together annually by the Appropriations Committee under a 
catch-all account that also includes demining and contributions 
to certain international organizations. Thus the Department of 
State is invariably forced to make ``trade-offs'' between 
nonproliferation and export control funding and funding for 
other activities. Finally, other nonproliferation and export 
control funding is contained within the amounts appropriated 
for the ``newly independent'' states of the former Soviet 
Union, and is thus subject to restrictions if the President 
cannot certify that Russia is not proliferating technology to 
Iran (which he has, to date, been unable to do).
    By adding a new chapter to Part II of the FAA, the 
Committee intends U.S. nonproliferation and export control 
assistance to be given equal stature with other authorized 
activities. The Committee expects the Department of State, in 
the future, to consolidate all of its nonproliferation funding, 
except for funding for the International Atomic Energy Agency 
(which is governed by a separate authorization under the FAA), 
into a single, integrated request to be authorized under 
Chapter 9 of the FAA. The Committee further expects that the 
Nonproliferation Bureau of the Department of State will be 
given authority over the use of funds authorized by this 
chapter.
    The new chapter to the FAA incorporates existing 
authorities under Sections 503 and 504 of the FREEDOM Support 
Act (which are the principal extant authorities for 
nonproliferation and export control activities). The new 
sections 581 and 582 carry forward those authorities, but also 
emphasize the need for programs to bolster the indigenous 
capabilities of foreign countries to monitor and interdict 
proliferation shipments. Section 583 directs the President to 
ensure that sufficient funds are allocated to the transit 
interdiction effort. To this end, the section contains 
authority for the Secretary of State to establish a list of 
countries that should be given priority in U.S. transit 
interdiction funding. The Committee suggests that the initial 
designation of the transit country list include those countries 
mentioned in the fiscal year 1999 Congressional presentation 
document as ``key global transit points'' (e.g. the countries 
of Central Asia and the Caucasus), the Baltics, Central and 
Eastern Europe, Singapore, Hong Kong, Taiwan, Cyprus, Malta, 
Jordan, and the UAE).
    Section 584, which will be part of the new chapter of the 
FAA, makes clear that two of the same limitations which apply 
to antiterrorism assistance also apply to nonproliferation and 
export control assistance. Section 584 permits the use of 
unrelated accounts to furnish services and commodities 
consistent with, and in furtherance of, Chapter 9 of the FAA. 
However, it requires that the foreign nation receiving such 
services or commodities pay in advance for the item or service, 
and that the reimbursement be credited to the account from 
which the service or commodity is furnished or subsidized. 
Foreign Military Financing may not be used to make such 
payments. Section 584 also makes clear that Chapter 9 does not 
apply to information exchange activities conducted under other 
authorities of law.
    Section 585 authorizes $129,000,000 for activities 
conducted pursuant to Chapter 9 of the FAA. This amount 
captures several activities currently appropriated within the 
Nonproliferation, Anti-Terrorism, Demining, and Related 
Programs Account, and the FREEDOM Support Act Assistance for 
the New Independent States (NIS) of the Former Soviet Union. 
The covered programs, at the administration's requested levels 
of funding for FY2001, are: $15,000,000 for the 
Nonproliferation and Disarmament Fund; $14,000,000 for Export 
Control Assistance; $45,000,000 for the Science Centers; and 
$36,000,000 in NIS export control and border assistance 
funding. The administration request for fiscal year 2001 thus 
totals $110,000,000 for all Chapter 9 authorized activities.
    The Committee's increase of $19,000,000 above the 
administration's requested levels is intended to support two 
Committee initiatives contained in sections 303 and 304. 
Specifically, this increase supports funding of the 
International Science and Technology Centers at maximum 
capacity (which requires an additional $14,000,000); and 
establishment of a static cargo x-ray facility in Malta as the 
first of the transit interdiction programs to be managed under 
the new authorities of the FAA (a $5,000,000 program).

Sec. 302. Nonproliferation and Export Control Training in the United 
        States

    Section 302 authorizes the expenditure of $2,000,000 in 
nonproliferation and export control funding for the training 
and education of personnel from friendly countries in the 
United States. The Department of State already engages in a 
vigorous training program, and funds numerous activities which 
are implemented by Department of Commerce personnel. However, 
much of this training is conducted overseas. The Committee 
urges the Department of State to place emphasis on bringing a 
select group of officials from friendly governments back to the 
United States to engage in an intensive training program which 
draws upon the expertise of all relevant U.S. government 
agencies. This training should focus on those nonproliferation 
and export control activities which would most benefit from 
being conducted in the United States. Finally, the Committee is 
concerned with declining travel and training budgets of U.S. 
government agencies tasked with combating proliferation. The 
Committee hopes this trend will be arrested, but urges the 
Department of State, in the interim, to seek to offset the 
effects of this decline using the funds authorized under this 
section.

Sec. 303. Science and Technology Centers

    Section 303 authorizes $59,000,000 in nonproliferation and 
export control funding for the Department of State's 
international science and technology centers. The 
administration request for fiscal year 2001 is $45,000,000. The 
actual level of funding for fiscal year 2000 is $59,000,000. 
The Committee expects that this not only will fully fund all 
ongoing activities at these centers, but will allow a 
significant expansion in the number of research grants offered 
to Russian scientists formerly employed in the development of 
missiles and chemical and biological warfare programs.
    Section 303 also expresses the view of the Committee that 
frequent audits should be conducted of entities receiving ISTC 
funds. This will be necessary in light of the administration's 
interest in expanding the role of the ISTC to provide funds to 
redirect the expertise associated with the Soviet Union's 
biological warfare program. U.S. obligations under the Chemical 
and Biological Weapons Convention, as well as under domestic 
law (e.g., P.L. 106-113), prohibit the furnishing of assistance 
to offensive biological warfare programs. It thus is essential 
that the United States audit entities that receive assistance 
to ensure that the United States is not contributing, albeit 
unknowingly, to an offensive biological warfare program (or to 
entities that are proliferating technology to rogue states). 
Moreover, the obligation to conduct audits should be spread 
equitably throughout the United States Government.

Sec. 304. Trial Transit Program

    Section 304 authorizes $5,000,000 in nonproliferation and 
export control funding to establish a static cargo x-ray 
facility in Malta, provided that the Government of Malta first 
gives satisfactory assurances that Maltese customs officials 
will engage in random cargo inspections of container traffic 
passing through the Malta Freeport, and will utilize the x-ray 
facility to examine random shipping containers.
    Malta is the ideal location for a trial transit 
interdiction program. The country's location, along one of the 
busiest trade routes in the world, has made it a crucial 
shipping center. The Malta Freeport is ideally situated as a 
redistribution point, linking trade between Europe, Africa, the 
Middle East, and Asia. For instance, direct shipments from the 
Black Sea to Malta take less than 15 days. From various ports 
in Europe, Russia, and Asia, large cargo vessels offload their 
containers into the Freeport. The containers are then stored 
temporarily and are reloaded onto smaller ``feeder'' vessels 
which service ports in North Africa, including Libya.
    The Freeport went into operation in April, 1990. According 
to Maltese Freeport documents, that year alone, 231 vessels 
offloaded 94,500 containers. Since that time, the volume of 
activity at the port has steadily increased. In 1996, the 
number of ships calling at the Freeport reached 1,383. Nearly 
600,000 containers transited the facility that year. For 1999, 
according to a January 10, 2000 article in a Maltese daily 
newspaper, 1,464 container ships utilized the Freeport. At this 
time, estimates of container traffic are not available to the 
Committee, but presumably the number well exceeded half a 
million.
    The steadily rising level of container traffic in the 
Freeport is noteworthy. The volume can be expected to increase 
if plans to further expand the port's services are implemented, 
thereby making one of the world's largest deepwater ports all 
the more robust.
    The Malta Freeport Act, which establishes the Freeport as a 
legally separate entity from Malta proper, creates specific 
proliferation concerns. Currently the Freeport has its own 
Minister, and customs functions have been conferred upon the 
Freeport Authority which he oversees. Maltese Customs does not 
receive information on transshipments, and may not operate in 
the Freeport without permission. While the Freeport has never 
refused such a request, the fundamental lack of transparency, 
and the inability of Maltese customs to conduct random 
inspections, means that effective export enforcement is 
impossible at this time.
    The Committee is concerned with this situation since Malta 
is undeniably being used as a transit point by various entities 
engaged in weapons proliferation. For example, in one instance 
of excellent cooperation between the Freeport and Maltese 
Customs officials, a shipment of chemical warfare precursor 
chemicals was seized. Similarly, the United Kingdom recently 
uncovered a massive shipment of missile parts slated for air 
delivery to Libya via Malta. While this latter incident did not 
involve the Freeport, it nevertheless is further evidence that 
various countries are seeking to use Malta as a transit point 
for deliveries of dangerous commodities to North Africa.
    The Committee notes that Maltese-U.S. relations have 
steadily improved over the past several years. The Government 
of Malta has demonstrated a genuine commitment to 
nonproliferation and bolstering its export control capability. 
Therefore the Committee favors initiation of a trial transit 
program with Malta, provided that the Maltese Government takes 
the necessary steps to render this program viable (namely, by 
opening the Freeport to periodic, random inspections by Maltese 
Customs officials). The Committee hopes that this program, if 
successful, might serve as a model for programs in other 
designated transit countries.

Sec. 305. Exception to Authority to Conduct Inspections Under the 
        Chemical Weapons Convention Implementation Act of 1998

    The Chemical Weapons Convention, which was approved by the 
Senate in 1997, has an extensive inspection regime which allows 
potentially intrusive inspections of chemical companies in the 
United States. The Senate was concerned about the threat posed 
to business proprietary information during the course of an 
inspection. As a result, the Chemical Weapons Convention 
Implementation Act of 1998 imposes a requirement that a special 
agent of the Federal Bureau of Investigation (FBI) accompany 
every inspection conducted in the United States.
    However, there is minimal benefit to the FBI's monitoring 
of inspections at chemical destruction sites. Such inspections 
pose little risk to national security or trade secrets and--
because of their lengthy duration--a constant FBI presence 
would be expensive to maintain. This section gives the FBI an 
exemption from the requirement to be present at inspections of 
U.S. chemical destruction facilities.

                   TITLE IV--ANTITERRORISM ASSISTANCE


Sec. 401. Authorization of Appropriations

    Section 401 authorizes $73,000,000 in antiterrorism 
assistance for fiscal year 2001. The administration request for 
anti-terrorism assistance for fiscal year 2001 is $72,000,000 
(including the request for the Terrorist Interdiction Program 
(TIP)). The actual level of funding for fiscal year 2000, 
including the TIP, is $38,000,000.

            TITLE V--INTEGRATED SECURITY ASSISTANCE PLANNING


  Subtitle A--Establishment of a National Security Assistance Strategy

Sec. 501. National Security Assistance Strategy

    Section 501 requires the annual preparation of a National 
Security Assistance Strategy (NSAS) to be submitted in 
connection with the annual foreign operations budget request.
    The purpose of the NSAS is to establish a clear and 
coherent multi-year plan, on a country by country basis, 
regarding U.S. security assistance programs. The current 
process utilized by the United States Government is entirely 
insufficient and is run on an ad hoc basis. Seldom is a 
thoroughly researched, thoroughly justified proposal for 
security assistance put forward to the Committee. This, in 
turn, has encouraged parallel Congressional initiatives and 
earmarks which often are put forward with a comparable level of 
foresight and planning. As a result, it seems that the 
Political-Military Affairs Bureau of the Department of State 
does not currently possess sufficient control over the 
allocation of security assistance funds, despite its clear 
mandate to manage these programs (except for nonproliferation 
assistance).
    Currently there is no clearly articulated organizing 
principle for U.S. military assistance. Nor is there a coherent 
set of benchmarks, or measurements, against which the success 
of individual programs with various countries can be measured. 
As a result, military assistance funding proposals are often 
vague and seemingly unjustified. For instance, the most recent 
Congressional presentation documents justify the provision of 
FMF for Southeast Europe as ``contributing to regional 
stability in Southeast Europe by promoting military reform.'' 
No further elaboration is given. It is hardly surprising, in 
light of this sort of justification, that the administration's 
security assistance requests seldom are fully funded by 
Congress.
    The Committee expects the Department of State to transform 
fundamentally the way that the United States conceptualizes 
security assistance. Utilizing a model more akin to the 
Department of Defense's planning process, the Department of 
State is expected to pull together a comprehensive five year 
plan, which will evolve on an annual basis, setting forth a 
specific programmatic objective for each country and explaining 
how the requested funds will accomplish that objective. 
Additional, secondary objectives are to be added as necessary. 
The Committee believes that the plan for each country should be 
developed at the U.S. mission level, and should be coordinated 
by the Department of State with all relevant U.S. government 
agencies with a role in U.S. security assistance programs. The 
bottom-up document that results is then to be coordinated with 
the top-down policy guidance set forth in the National Security 
Strategy of the United States, and by the Secretary of State 
(in coordination with the Secretary of Defense and the Chairman 
of the Joint Chiefs of Staff).
    The Committee expects the resultant document to be a 
comprehensive National Security Assistance Strategy which 
provides a robust, detailed justification for security 
assistance funding that is requested. Rather than the current 
process, which yields unclear and unmeasurable objectives for 
U.S. security assistance programs, it is expected that the NSAS 
process will ensure that the type and amount of assistance 
given a country is determined programmatically. Progress can 
thus be measured by the administration and the Congress. In 
turn, the Committee anticipates that such an initiative, led by 
the Political-Military Affairs Bureau of the Department of 
State, will substantially improve Congressional understanding 
of the administration's initiatives and bolster Congressional 
support for the President's military assistance request.

Sec. 502. Security Assistance Surveys

    Section 502 authorizes the use of $2,000,000 in Foreign 
Military Financing to conduct security assistance surveys in 
foreign countries for the purpose of preparing the National 
Security Assistance Strategy required pursuant to Section 501.

             Subtitle B--Allocations for Certain Countries

Sec. 511. Security Assistance for New NATO Members

    Section 511 authorizes $35,000,000 in grant FMF and 
$7,000,000 in IMET funding for the three new NATO members (e.g. 
the Czech Republic, Hungary, and Poland). The administration 
request for fiscal year 2001 for these three countries is 
$30,300,000 in grant FMF and $5,100,000 in IMET funding. The 
actual level of grant FMF funding for the three for fiscal year 
2000 is $22,000,000. The actual level for IMET funding for 
fiscal year 2000 is $4,570,000.
    Section 511 also directs the President to give priority to 
supporting the objectives set forth by the Senate in its 
resolution of ratification for the protocols adding the three 
new NATO members. Specifically, the Committee expects the 
administration to ensure that FMF and IMET funding is used to 
support the ability of Poland, Hungary, and the Czech Republic 
to fulfill their collective defense requirements under Article 
V of the Washington Treaty. The Committee also expects the 
administration to use the additional funds provided to expand 
U.S. efforts to improve the ability of these countries to 
protect themselves from hostile foreign intelligence services.

Sec. 512. Increased Training Assistance for Greece and Turkey

    Section 512 authorizes $1,000,000 in IMET funding for 
Greece and $2,500,000 in IMET funding for Turkey for fiscal 
year 2001. The administration request for IMET for fiscal year 
2001 is $25,000 for Greece and $1,600,000 for Turkey. The 
actual level of IMET funding for Greece for fiscal year 2000 is 
$25,000. For Turkey, the actual level of IMET funding for 
fiscal year 2000 is $1,500,000.
    The Committee is encouraged by numerous indications of a 
warming in Greek-Turkish relations. This improvement has 
manifested itself in several ways, ranging from Greek agreement 
to Turkish candidacy for membership in the European Union to 
the large number of bilateral agreements that have recently 
been signed during reciprocal visits of foreign ministers 
(including agreements on transportation, tourism, cultural 
heritage, and customs issues). In the interest of bolstering 
this process the Committee authorizes a substantial increase in 
funds for International Military Education and Training (IMET).
    It is the Committee's expectation that the administration 
will use these additional funds to support the process of 
rapprochement between Greece and Turkey. Specifically, the 
Committee urges the administration to ensure that $1,000,000 of 
the additional resources, evenly divided between the two 
countries, is used for joint professional military education of 
Greek and Turkish officers. The Committee notes that this type 
of training will build personal relationships between the 
militaries of these two important NATO allies, and will 
reinforce the process that is already underway.

Sec. 513. Minimum Allocation for Egypt and Israel

    Section 513 authorizes $1,980,000,000 in grant FMF for 
Israel and $1,300,000 in grant FMF for Egypt for fiscal year 
2001. This corresponds to the administration request for fiscal 
year 2001. The actual level of grant FMF funding for fiscal 
year 2000 is $3,120,000 for Israel (including the Wye 
Supplemental) and $1,325,000 for Egypt (including the Wye 
Supplemental). In addition, this section directs that FMF funds 
for Israel for fiscal year 2001 be disbursed not later than 30 
days after enactment of this Act or on October 31, 2000, 
whichever is later. To the extent that Israel makes a request, 
FMF funds shall, as agreed by Israel and the United States, be 
available for advanced weapons systems. Not less than 26.3 
percent of such funds can be used for procurement in Israel of 
defense articles and defense services, including research and 
development. The Committee expects that Israel's annual aid 
package will be provided under the usual terms, including early 
disbursal of both the ESF and FMF, offshore procurement of at 
least 26.3% of its military aid, and that the aid be provided 
in the form of a grant.

Sec. 514. Security Assistance for Certain Countries

    Section 514 provides individual authorizations of grant FMF 
and IMET funding for ten countries. Specific authorizations are 
detailed on the following two charts:

                                        GRANT FOREIGN MILITARY FINANCING
----------------------------------------------------------------------------------------------------------------
                                                                              Administration
                        Country                            Authorized for      Request for     Actual for FY2000
                                                               FY2001             FY2001
----------------------------------------------------------------------------------------------------------------
Estonia................................................     \1\ $6,500,000         $6,350,000         $4,000,000
Latvia.................................................      \1\ 6,500,000          5,350,000          4,000,000
Lithuania..............................................      \1\ 7,500,000          6,500,000          4,400,000
Philippines............................................          5,000,000          2,000,000          1,000,000
Georgia................................................          5,000,000          4,500,000          3,000,000
Malta..................................................          1,000,000  .................  .................
Slovenia...............................................          4,000,000          3,500,000          2,000,000
Slovakia...............................................          8,400,000          8,400,000          2,600,000
Romania................................................         11,000,000         11,000,000          6,000,000
Bulgaria...............................................          8,500,000          8,500,000          4,800,000
----------------------------------------------------------------------------------------------------------------
\1\ Section 514 authorizes an aggregate total of $20,500,000 in grant FMF for the three Baltic countries, but
  does not provide individual authorizations within that total. Thus this is the recommended apportionment.



                                  INTERNATIONAL MILITARY EDUCATION AND TRAINING
----------------------------------------------------------------------------------------------------------------
                                                                              Administration
                        Country                            Authorized for      Request for     Actual for FY2000
                                                               FY2001             FY2001
----------------------------------------------------------------------------------------------------------------
Estonia................................................      \1\$1,250,000           $800,000           $700,000
Latvia.................................................      \1\ 1,250,000            750,000            700,000
Lithuania..............................................      \1\ 1,500,000            750,000            700,000
Philippines............................................          1,500,000          1,400,000          1,400,000
Georgia................................................          1,000,000            475,000            400,000
Malta..................................................          1,000,000            100,000            100,000
Slovenia...............................................          1,000,000            700,000            650,000
Slovakia...............................................          1,000,000            700,000            650,000
Romania................................................          1,500,000          1,300,000          1,100,000
Bulgaria...............................................          1,200,000          1,100,000          1,000,000
----------------------------------------------------------------------------------------------------------------
\1\ As in the case of FMF, Section 514 authorizes an aggregate total of $4,000,000 in IMET for the three Baltic
  countries, but does not provide individual authorizations within that total. Thus this is the recommended
  apportionment.


Sec. 515. Border Security and Territorial Independence

    Section 515 provides an integrated authorization of 
security assistance funds for the GUUAM countries (e.g. 
Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova) and 
Armenia. Specifically, Section 515 authorizes a package of 
$20,000,000 in grant FMF, $10,000,000 in nonproliferation and 
export control assistance, $5,000,000 in IMET funding, and 
$2,000,000 in antiterrorism assistance.
    These funds must be expended in accordance with the 
individual requirements of their respective accounts. Thus, for 
instance, the $20,000,000 in grant FMF may only be utilized for 
activities authorized in connection with the FMF program. 
Likewise, nonproliferation and export control funds must be 
spent on the objectives set forth under Chapter 9 of the 
Foreign Assistance Act of 1961. Similar restrictions apply to 
the other authorized forms of security assistance. Thus, as 
assistance to Azerbaijan under this section is still subject to 
section 907 of the FREEDOM Support Act, such assistance may be 
provided only for antiterrorism or nonproliferation and export 
control purposes.
    The funds authorized under Section 515, totaling 
$37,000,000, must be spent for the purpose of assisting the 
GUUAM countries and Armenia in strengthening control of their 
borders, and for the purpose of promoting the independence and 
territorial sovereignty of these countries. These funds also 
are specifically authorized, pursuant to Section 499C of the 
Foreign Assistance Act of 1961, for the purpose of enhancing 
the abilities of the national border guards, coast guard, and 
customs officials of the GUUAM countries and Armenia to secure 
their borders against narcotics trafficking, proliferation, and 
transnational organized crime. The Committee intends that funds 
authorized by this section be used in Uzbekistan solely for 
nonproliferation purposes.
    Finally, it bears emphasizing that the Committee strongly 
supports the cooperation on political, security, and economic 
matters promoted and facilitated through the GUUAM group. The 
United States should promote these endeavors as part of its 
strategy to help these states consolidate their independence 
and strengthen their sovereignty, to help resolve and prevent 
conflicts in their respective regions, and to promote democracy 
and human rights. In addition, the Committee strongly supports 
political, security, and economic cooperation between the 
United States and Armenia.

                       TITLE VI--OTHER PROVISIONS


Sec. 601. Utilization of Defense Articles and Services

    Section 601 amends Section 502 of the Foreign Assistance 
Act of 1961 to make clear that defense articles and services 
may be furnished by the United States to foreign nations for 
antiterrorism or nonproliferation purposes (in addition to 
other currently authorized purposes).

Sec. 602. Sense of the Senate Regarding Excess Defense Articles

    Section 602 calls on the President to sell more defense 
articles, rather than merely give them away, using the 
authority provided under Section 21 of the Arms Export Control 
Act. It urges the President to use the flexibility afforded by 
Section 47 of that Act to determine the ``market value'' of 
Excess Defense Articles and to sell such items at a price that 
can be negotiated. When the Department of Defense uses too 
rigid a definition of ``market value,'' and that price cannot 
be commanded, the item is instead transferred on a ``grant'' 
basis pursuant to Section 516 of the Foreign Assistance Act of 
1961, thereby forgoing revenues. This section encourages the 
Department of Defense to ascertain the ``market value'' on the 
basis of local market conditions rather than solely on the 
basis of a generic formula applied by the Department of Defense 
for accounting purposes.

Sec. 603. Sense of the Senate

    On May 24, 2000, the Secretary of State announced seventeen 
initiatives (collectively known as the Defense Trade Security 
Initiative, or DTSI) designed to reform the manner in which the 
United States regulates trade in weapons and sensitive 
technology. The Committee, which was not consulted in a timely 
fashion on the Defense Trade Security Initiative, nevertheless 
welcomes most of the proposed changes to the International 
Traffic in Arms Regulation (ITAR). These changes, ranging from 
greater flexibility in licensing of commercial arms sales to 
the establishment of a robust common database, are long 
overdue. Indeed, several of the initiatives mirror 
recommendations made by the Committee at various times. 
Accordingly, the Committee will support many of the seventeen 
measures, which will make U.S. defense companies more 
competitive in the global market.
    Under Article 1, Section 8, of the United States 
Constitution, the Congress possesses sole constitutional 
authority to ``regulate Commerce with foreign Nations.'' The 
President may only engage in such an exercise to the extent he 
has been authorized to do so by the Congress. Most of the 
seventeen DTSI measures, which clearly relate to the regulation 
of commerce, have been implicitly authorized in advance by 
Congress. The Arms Export Control Act (AECA) requires the 
President to administer export controls for certain commodities 
and also contains a measure of flexibility, allowing the 
President to alter export control requirements through 
regulatory changes. Indeed, numerous regulatory modifications 
have been made using this authority. Thus the constitutionality 
of a regulatory change to implement many of the proposed 
initiatives is well established.
    For several years, the United States has, under Section 
38(b)(2) of the AECA, permitted unlicensed trade in defense 
articles and defense services with Canada. This practice, 
popularly called the ``Canada exemption,'' has been supported 
by Congress in light of the unique defense trade relationship 
between the United States and Canada. In a June 28, 2000, 
letter to Chairman Helms, the Secretary of Defense stated an 
intent ``to negotiate a Canada-style exemption to the ITAR with 
the U[nited] K[ingdom] and Australia.''
    But the Congress has hardly encouraged broadening this 
exemption to other countries. On the contrary. On March 16, 
2000, in a letter to the Secretary of State, the Chairmen and 
ranking members of the Senate Committee on Foreign Relations 
and the House Committee on International Relations--the two 
Congressional Committees with sole jurisdiction over the AECA 
and regulation of defense trade--expressed concern about 
expanding the Canadian exemption:

          The existing Canadian exemption should not be viewed 
        as a useful model or precedent for exemptions for other 
        allies. It exempts defense articles and services that 
        will remain in Canada for its use, or be returned to 
        parent corporations in the U.S. for further export. It 
        is only justified because of the integration of our 
        defense industries (with most recipients of defense 
        articles and services in Canada being subsidiaries of 
        U.S. companies) and because our neighbor to the north 
        was historically expected to prompt fewer law 
        enforcement problems due to license free exports. Other 
        allies, on the other hand, need U.S. technologies to 
        incorporate into their defense items and for re-export.

    The Canada exemption is a unique one, based on an 
intertwined defense industrial base, a close law enforcement 
relationship, and geographical considerations. These same 
considerations do not apply to either the United Kingdom or 
Australia (to say nothing of other countries), despite the 
close military, intelligence, and law enforcement relationships 
that the U.S. government has with the governments in London and 
Canberra. For instance, defense commodities being shipped 
between the United States and Canada are far less susceptible 
to diversion than items shipped longer distances on cargo 
vessels which must make multiple port calls before arriving in 
the final port of destination. Moreover, unlike the case in 
Canada, many major U.K. defense companies are now jointly 
partnered with other European firms.
    For these reasons and others, the Secretary of State and 
the Attorney General raised serious questions about how a 
Canada-like exemption would affect U.S. export controls and law 
enforcement efforts. Their concerns turned, in short, on the 
fact that elimination of a licensing requirement for various 
weapons and defense commodities would remove an important law 
enforcement capability for the United States, placing 
heightened reliance upon the United Kingdom and Australia to 
stop diversions of U.S. equipment and to provide the type of 
evidence needed to prosecute violations of the AECA.
    In his June 28, 2000 letter, the Secretary of Defense 
assured the Chairman that the licensing exemption for certain 
countries would need to be accomplished through ``legally 
binding agreements to ensure their export control and 
technology security regimes are congruent to our own. In 
exchange for these ironclad arrangements, we are prepared to 
offer an exemption to the ITAR similar to that long-provided to 
Canada.''
    The Committee is pleased to note this emphasis on codifying 
any broad ITAR exemption in a legally-binding agreement. As the 
Department of State noted in connection with the START Treaty: 
``An undertaking or commitment that is understood to be legally 
binding carries with it both the obligation to comply with the 
undertaking and the right of each Party to enforce the 
obligation under international law.'' This right of enforcement 
is of singular importance in this case, because noncompliance 
with the undertaking presumably could result in the diversion 
of United States weaponry or technology.
    Disturbingly, the initiative to provide license-free trade 
to various countries would seem to depend upon the operation, 
albeit enhanced, of domestic export control laws in such 
countries. As such, the initiative is very much at risk of 
being codified in a format that is not legally binding. Care 
must be taken, therefore, to craft the obligations of both 
parties in a manner which preserves the legally-binding nature 
of the agreement.
    The Committee expects to exercise close oversight of any 
agreements reached with foreign nations that provide for 
unlicensed trade in defense articles and defense services. The 
Committee reserves judgment on whether any agreements 
contemplated with the United Kingdom or Australia in this area 
should be undertaken in an executive agreements or in a treaty 
subject to advice and consent of the Senate. The Committee 
expects, as stated in Section 603, that the Secretary of State 
will consult with the Committee as to whether the DTSI 
licensing exemption for various countries should be codified as 
a treaty. Were the Secretary of State to conclude bilateral 
treaties with the United Kingdom and Australia to achieve the 
objectives set forth under the DTSI initiative, the Committee 
would anticipate the earliest possible consideration of such 
important measures. Alternatively, the Committee has the option 
of amending Section 38(b)(2) of the AECA to limit the 
President's flexibility to approve unlicensed trade--with 
Canada or any other nation.

Sec. 604. Additions to United States War Reserve Stockpiles for Allies

    Pursuant to Section 514 of the Foreign Assistance Act of 
1961, as amended, the Department of Defense can make additions 
to the War Reserve Stockpiles for Allies stockpiles only as 
periodically provided for in legislation. For fiscal year 2000, 
the President requested authority to make additions to 
stockpiles in South Korea ($40,000,000) and Thailand 
($20,000,000). The Committee provided this authority under 
Section 1231 of the ``Admiral James W. Nance and Meg Donovan 
Foreign Relations Authorization Act, Fiscal Years 2000 and 
2001'' (P.L. 106-113).
    For fiscal year 2001 the Department of Defense has asked 
for an additional $50,000,000 authorization for the Korean 
program. Section 604 provides this authority for fiscal year 
2001.

Sec. 605. Transfer of Certain Obsolete or Surplus Defense Articles in 
        the War Reserve Stockpiles for Allies to Israel

    Periodically the Department of Defense requests 
authorization to transfer defense articles out of War Reserve 
Stockpiles to the host country in question. The defense 
articles are to be sold to the host nation. The Committee 
provided similar authority to make such transfers to South 
Korea and Thailand pursuant to Section 1232 of the ``Admiral 
James W. Nance and Meg Donovan Foreign Relations Authorization 
Act, Fiscal Years 2000 and 2001'' (P.L. 106-113).

Sec. 606. Stinger Missiles in the Persian Gulf Region

    Section 606 permits the replacement, on a one-for-one 
basis, of Stinger missiles possessed by Bahrain and Saudi 
Arabia that are nearing the scheduled expiration of their 
shelf-life.

Sec. 607. Excess Defense Articles for Mongolia

    The Committee supports the furnishing by grant of excess 
defense articles (EDA) and services to Mongolia. Unfortunately, 
given the weak nature of its national economy, which has led to 
difficulty in funding its military budget, Mongolia cannot 
afford the cost of packing, crating, handling, and 
transportation of EDA, even if the EDA itself is provided at no 
cost. Section 607 provides the Department of Defense with the 
authority to absorb the costs of transporting EDA to Mongolia, 
thereby allowing the receipt of much needed equipment. However, 
the Committee intends to continue the practice of requiring 
from the Department of Defense a detailed description of such 
costs in each proposed transfer. Were such costs to grow beyond 
a reasonable level, the Committee's continued support for such 
authorities would be jeopardized.

Sec. 608. Space Cooperation with Russian Persons

    Section 608 amends the Arms Export Control Act, provides 
for increased reporting and certification to Congress, and 
expands the ability of the President to regulate missile-
related cooperation by providing him with the discretionary 
authority to terminate contracts in the event that he 
determines that a violation of the MTCR sanctions law (Section 
13(a)(1) of the Arms Export Control Act) has occurred.
    Currently, Chapter 7 of the Arms Export Control Act imposes 
mandatory sanctions on proliferating entities. However, those 
sanctions apply only to prospective licenses and contracts. The 
authority does not exist, within Chapter 7, to terminate an 
existing license in the event that an individual has been 
discovered to have proliferated missile technology subsequent 
to the granting of the license. This deficiency became apparent 
in discussions with the administration regarding the proposed 
co-production arrangement between Lockheed Martin and a Russian 
rocket-engine firm, NPO Energomash. Concerns had arisen 
regarding Energomash due to reports that UNSCOM had determined 
that the Russian firm may have been seeking to violate the U.N. 
sanctions and embargo on Iraq and work with the Iraqi missile 
program. Similarly, press accounts and testimony before 
Congress have suggested that Energomash-designed engines are 
present in Iran, although those engines could have come from a 
multiplicity of sources.
    Despite these concerns, the Administration elected to 
proceed with Congressional notification of the co-production 
arrangement, as it will help ensure U.S. military satellite 
launch capabilities. In responding to Committee inquiries 
regarding the Administration response should the aforementioned 
transfers be shown to have occurred (thus subjecting Energomash 
to MTCR sanctions), the Assistant Secretary of State for 
Political-Military Affairs noted that the provisions of Section 
42 of the AECA (which is a general authority to suspend, 
terminate, or amend U.S. Government authorization for defense 
transfers) would need to be employed in this case since no 
specific retroactive termination authority exists within the 
actual sanctions law. Section 608 provides that missing 
authority to the President, should he choose to utilize it. It 
is important to underscore that this authority is completely 
discretionary.
    Section 608 also requires the President to make an annual 
certification to the Committee that various Russian space and 
missile entities doing business with the United States are not 
suspected of contributing to Iran's MTCR-class ballistic 
missile program at any time since January 1, 2000. These 
certifications must be made annually for the first five years 
of a license between a U.S. firm and a Russian entity. However, 
there is no penalty in the event that a certification cannot be 
made (presumably because suspicion has arisen). The MTCR 
sanctions law only operates in the event that the President 
makes a formal determination that a transfer, or a conspiracy 
to transfer, occurred. In short, the certification required 
under Section 608 does not go beyond the annual report that the 
President is required to submit to Congress under the Iran 
Nonproliferation Act of 2000. It is nevertheless useful because 
it will ensure that the Department of State continues to focus 
on Russian entities doing business with the United States. This 
provision is also intended to encourage U.S. companies working 
with Russian space entities to maintain pressure on their 
counterparts not to proliferate technology to Iran.
    Finally, Section 608 rectifies an unintended reporting 
loophole in the Arms Export Control Act that resulted from 
amendments to integrate the Arms Control and Disarmament Agency 
within the Department of State and a subsequent decision by the 
Department of State on licensing technical exchanges and 
brokering services under Section 36 of the AECA. Specifically, 
for MTCR-related transfers governed under Section 36(b) and (c) 
which fall below the Congressional notification threshold, the 
administration currently must nevertheless submit a report to 
the Committee explaining the consistency of such a transfer 
with U.S. MTCR policy. However, MTCR-related licenses covered 
by Section 36(d) which fall below the notification threshold 
are not captured fully by this reporting requirement. Section 
608 rectifies this problem, and ensures that MTCR-related 
transfers of both Category I and Category II components and 
systems are covered under the reporting requirement.

Sec. 609. Assistance for Israel

    Section 609 sets into place the phase out of annual U.S. 
Economic Support Funds to Israel. Beginning in FY 1999, the 
United States and Israel agreed to a plan whereby Israel's 
annual economic assistance would be reduced in equal increments 
of 10 percent (equivalent to $120,000,000 per annum), resulting 
in the ultimate phase out of the ESF program. In order to 
ensure Israel's continued security in the face of the loss of 
annual economic support, Israel requested and the United States 
agreed to, an annual increase in Foreign Military Finance equal 
to half the reduced ESF amount (or $60,000,000).
    By FY 2008, the authorities of this section will result in 
an aggregate annual reduction in authorized foreign assistance 
of $600,000,000. Calculations made in this section are not 
intended to factor in rescissions or supplemental 
appropriations, and are intended to work from the original 
baseline figure from FY 1999 of $1.2 billion in ESF.

                 TITLE VII--TRANSFERS OF NAVAL VESSELS


Sec. 701. Authority to Transfer Naval Vessels to Certain Foreign 
        Countries

    Section 701 provides authority to the President to transfer 
twelve naval vessels to Brazil, Chile, Greece, and Turkey. 
These naval vessels either displace in excess of 3,000 tons, or 
are less than 20 years of age. Therefore statutory approval for 
the transfers is required under 10 U.S.C. 7307(a).
    The two PERRY class frigates proposed for transfer to 
Turkey under lease/sale authority were approved by Congress to 
be transferred to Turkey by sale in the fiscal year 2000 ship 
transfer legislation. Because of Turkish financial 
uncertainties caused by recent natural disasters, however, this 
proposal, which is in addition to the sale authority previously 
granted, is needed to give Turkey some flexibility in 
determining the most appropriate means to acquire the ships. 
Two KNOX class frigates are proposed in this section to be 
transferred to Greece on a grant basis.

Sec. 702. Inapplicability of Aggregate Annual Limitation on Value of 
        Transferred Excess Defense Articles

    Section 702 ensures that the value of naval vessels 
authorized for transfer by grant by this Act will not be 
included in determining the aggregate value of transferred 
excess defense articles.

Sec. 703. Costs of Transfers

    Section 703 provides that all costs are to be borne by the 
foreign recipients, including fleet turnover costs, 
maintenance, repairs, and training.

Sec. 704. Conditions Relating to Combined Lease-Sale Transfers

    Section 704 authorizes the transfer of high value ships on 
a combined lease-sale basis under Section 61 and 21 of the Arms 
Export Control Act (22 U.S.C. 2796 and 2761 respectively).

Sec. 705. Funding of Certain Costs of Transfers

    Section 705 provides authorization for the appropriation of 
funds that may be necessary for the costs of the combined 
lease-sale transfers in order to satisfy the requirements of 2 
U.S.C. 661c. These funds are authorized to be appropriated into 
the Defense Vessels Transfer Program Account, which was 
established in the fiscal year 1999 ship transfer legislation.

Sec. 706. Expiration of Authority

    Section 706 provides that the transfers authorized by this 
Act must be executed within two years of the date of enactment. 
This allows a reasonable opportunity for agreement on terms and 
for execution of the transfer.

                         TITLE VIII--DEFINITION


Sec. 801. Definition

    This section defines, for the purpose of this title, 
appropriate committees of Congress, as the Foreign Relations 
Committee and the Armed Services Committee of the Senate and 
the International Relations Committee and the Armed Services 
Committee of the House of Representatives.

                           III. Cost Estimate

    In accordance with rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the Committee provides the 
following estimate of the cost of this legislation prepared by 
the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 29, 2000.
Hon. Jesse Helms, Chairman,
U.S. Senate Committee on Foreign Relations,
Washington, DC.

    Dear Mr. Chairman:
    The Congressional Budget Office has prepared the enclosed 
cost estimate for a bill to authorize appropriations to carry 
out security assistance for fiscal year 2001, and for other 
purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehill.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

Summary
    The bill would authorize $3.9 billion for foreign military 
financing (FMF) and other security assistance programs in 2001. 
It would authorize the transfer of 12 naval vessels to foreign& 
countries and otherwise address foreign policy. Assuming 
appropriation of the authorized amounts, CBO estimates that 
implementing the bill would cost about $3.9 billion over the 
2001-2005 period. Because it would not affect direct spending 
or receipts, the bill would not be subject to pay-as-you-go 
procedures.
    The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
Estimated Cost to the Federal Government
    The estimated budgetary impact of the bill is shown in 
Table 1. The costs of this legislation fall within budget 
functions 150 (international affairs) and 050 (national 
defense).
Basis of Estimate
    The bill would affect spending subject to appropriation in 
two ways. In most instances, the bill would authorize program 
levels for 2001, and those amounts are shown in Table 2. In 
other instances, the bill would provide changes in areas where 
no program level authorization currently exists. While section 
10 of Public Law 91-672 requires that appropriations for 
foreign assistance be authorized by law, that provision is 
routinely waived by foreign operations appropriation acts. 
Changes in authorizations are shown in Table 3 relative to the 
funding level for 2000.
    For this estimate, CBO assumes that the authorized amounts 
will be appropriated by October 1, 2000. We also assume that 
outlays will follow historical patterns for the affected 
programs except for funds for Israel (as described below).
            Authorization of Program Levels
    The bill would authorize appropriations for program levels 
in several areas.
    Foreign Military Financing. The bill would authorize the 
appropriation of $3,627 million for FMF in 2001. Within that 
amount, the bill would earmark $1,980 million for Israel and 
require the disbursement of the funds within 30 days of their 
appropriation or October 31, 2000, whichever is later. 
Requiring early disbursement would shift outlays of $550 
million into 2001 from 2002.
    Other Programs. The bill would authorize appropriations of 
$202 million for nonproliferation and antiterrorism assistance 
and $65 million for international military education and 
training.

                                      Table 1.--Estimated Budgetary Effects
                   [By Fiscal Year, in Millions of Dollars--Spending Subject to Appropriation]
----------------------------------------------------------------------------------------------------------------
                                                              2000     2001     2002     2003     2004     2005
----------------------------------------------------------------------------------------------------------------
Spending Under Current Law for Security Assistance
 Programs:
  Budget Authority \1\....................................    4,987        0        0        0        0        0
  Estimated Outlays.......................................    3,309    2,525    1,201      279       17        6
Proposed Changes:
  Estimated Authorization Level...........................        0    3,925        0        0        0        0
  Estimated Outlays.......................................        0    2,192      784      859       32        7
Spending Under the Bill for Security Assistance Programs:
  Estimated Authorization Level \1\.......................    4,987    3,925        0        0        0        0
  Estimated Outlays.......................................    3,309    4,717    1,985    1,138       49       13
----------------------------------------------------------------------------------------------------------------
\1\ The 2000 level is the amount appropriated for that year.

    Naval Vessel Transaction Fund. The bill would authorize the 
transfer of 12 naval vessels to foreign countries. The bill 
would authorize the sale of four vessels by installments to be 
paid over a number of years. The other eight would be given 
away.
    CBO estimates the transfers would not affect outlays 
because we do not expect any of the four authorized sales to 
take place and because there would be no forgone receipts from 
giving away the other eight vessels. If the government did sell 
the four ships in installments of more than 90 days, such sales 
would meet the definition of direct loans subject to the 
requirements of the Federal Credit Reform Act of 1990 and would 
require an appropriation for the cost of the subsidy, which the 
bill would authorize in such sums as would be necessary. CBO 
estimates that the subsidy authorization would amount to about 
$31 million based on information from the Department of Defense 
(DoD) and military attaches that the asking price for the four 
ships would be approximately $170 million dollars. Because CBO 
expects that the countries would prefer that their ships be 
produced locally, we expect that the sales of those four ships 
and consequent outlays and offsetting receipts would not occur. 
That is, we estimate no outlays from the $31 million 
authorization and no collections of sales receipts.

                                   Table 2.--Authorizations of Program Levels
                                    [By Fiscal Year, in Millions of Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                       2001     2002     2003     2004     2005
----------------------------------------------------------------------------------------------------------------
Foreign Military Financing:
  Authorization Level..............................................    3,627        0        0        0        0
  Estimated Outlays................................................    2,030      716      835       27        7
Nonproliferation and Antiterrorism Assistance:
  Authorization Level..............................................      202        0        0        0        0
  Estimated Outlays................................................      131       44       20        4        0
International Military Education and Training:
  Authorization Level..............................................       65        0        0        0        0
  Estimated Outlays................................................       31       24        4        1        0
Naval Vessel Transaction Fund:
  Estimated Authorization Level....................................       31        0        0        0        0
  Estimated Outlays................................................        0        0        0        0        0
Total:
  Estimated Authorization Level....................................    3,925        0        0        0        0
  Estimated Outlays................................................    2,192      784      859       32        7
----------------------------------------------------------------------------------------------------------------

            Changes in Authorizations of Appropriations
    In addition to authorizing program levels, the bill 
contains provisions that would lead to changes in future 
spending, assuming appropriations consistent with this bill, 
but for which no amounts are authorized or earmarked. In Table 
3, those implicit changes to future funding levels are shown 
relative to the funding level for 2000. Because these changes 
relate to programs not currently authorized and not authorized 
in this bill, the net change in outlays shown in Table 3--
totaling -$672 million over the 2001-2005 period--are not 
included in either Table 1 or Table 2.
    Future Funding for Israel. The bill contains provisions 
that would combine to lower future aid to Israel. One provision 
would gradually eliminate grants to Israel from the economic 
support fund by reducing the authorization of future 
appropriations by $120 million a year through 2008. (In 2001, 
the reduction would amount to $11 million less or $109 million 
because of the across-the-board cut required by Public Law 106-
113.) Another provision would authorize that future FMF funding 
for Israel be increased by $60 million each year over the same 
period.
    Special Drawdown Authority. The bill would raise by $50 
million per year the limit on the President's authority to draw 
upon the resources of DoD for various needs, including 
international emergencies. It would add antiterrorism and 
nonproliferation assistance to the purposes for which the 
special authority could be used. Other provisions of the bill 
would authorize the use of DoD's resources to transport excess 
defense articles to Mongolia and would double the tonnage limit 
on excess defense articles that DoD may ship on a space 
available basis. Assuming the appropriation of the necessary 
funds, CBO estimates that the provisions would increase 
spending by $233 million over the next five years.

     Table 3.--Changes in Authorizations of Appropriations as Compared to the 2000 Levels of Appropriations
                                    [By Fiscal Year, in Millions of Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                       2001     2002     2003     2004     2005
----------------------------------------------------------------------------------------------------------------
Future Funding for Israel Economic Support Fund:
  Estimated Authorization Level....................................     -109     -229     -349     -469     -589
  Estimated Outlays................................................     -109     -229     -349     -469     -589
Foreign Military Financing:
  Estimated Authorization Level....................................  \1\ (60      120      180      240      300
                                                                           )
  Estimated Outlays................................................  \1\ (60      120      180      240      300
                                                                           )
Special Drawdown Authority:
  Estimated Authorization Level....................................       50       50       50       50       50
  Estimated Outlays................................................       38       47       49       49       50
Total Changes from 2000:
  Estimated Authorization Level....................................      -59      -59     -119     -179     -239
  Estimated Outlays................................................      -71      -62     -120     -180     -239
----------------------------------------------------------------------------------------------------------------
\1\ The amount for 2001 is included in the authorized amounts shown in Table 2 and is not added into the total
  for this table.

Pay-As-You-Go Considerations
    None.
Previous CBO Estimate
    On April 6, 2000, CBO transmitted a cost estimate for S. 
2382, the Technical Assistance, Trade Promotion, and Anti-
Corruption Act of 2000. This bill is substantially the same as 
title VII of that bill. This bill, however, does not contain a 
section on export controls as in S. 2382, which would impose 
private-sector mandates and would have revenue effects. The two 
bills have different sections dealing with excess defense 
articles and transfer of obsolete articles in the war reserve 
stockpile for Israel, and those provisions in this bill would 
not affect direct spending. Finally, this bill would authorize 
the transfer of fewer naval vessels.
Intergovernmental and Private-Sector Impact
    The bill contains no intergovernmental or private-sector 
mandates as defined in UMRA and would not affect the budgets of 
state, local, or tribal governments.
Estimate Prepared By
    Federal costs: Joseph C. Whitehill. Impact on state, local, 
and tribal governments: Leo Lex. Impact on the private sector: 
Jean Wooster.
Estimate Approved By
    Peter H. Fontaine, Deputy Assistant Director for Budget 
Analysis.

                  IV. 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.

                       V. Changes in Existing Law

    In compliance with paragraph 12 rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman):

Foreign Assistance Act of 1961

           *       *       *       *       *       *       *


    Sec. 502. Utilization of Defense Articles and Services.--
Defense articles and defense services to any country shall be 
furnished solely for internal security (including for 
antiterrorism and nonproliferation purposes), for legitimate 
self-defense, to permit the recipient country to participate in 
regional or collective arrangements or measures consistent with 
the Charter of the United Nations, or otherwise to permit the 
recipient country to participate in collective measures 
requested by the United Nations for the purpose of maintaining 
or restoring international peace and security, or for the 
purpose of assisting foreign military forces in less developed 
friendly countries (or the voluntary efforts of personnel of 
the Armed Forces of the United States in such countries) to 
construct public works and to engage in other activities 
helpful to the economic and social development of such friendly 
countries. It is the sense of the Congress that such foreign 
military forces should not be maintained or established solely 
for civic action activities and that such civic action 
activities not significantly detract from the capability of the 
military forces to perform their military missions and be 
coordinated with and form part of the total economic and social 
development effort.

           *       *       *       *       *       *       *

    Sec. 506. Special Authority.--(a)(1) If the President 
determines and reports to the Congress in accordance with 
section 652 of this Act that--
          (A) an unforeseen emergency exists which requires 
        immediate military assistance to a foreign country or 
        international organization; and
          (B) the emergency requirement cannot be met under the 
        authority of the Arms Export Control Act or any other 
        law except this section;
he may direct, for the purposes of this part, the drawdown of 
defense articles from the stocks of the Department of Defense, 
defense services of the Department of Defense, and military 
education and training, of an aggregate value of not to exceed 
[$100,000,000] $150,000,000 in any fiscal year.
    (2)(A) If the President determines and reports to the 
Congress in accordance with section 652 of this Act that it is 
in the national interest of the United States to draw down 
articles and services from the inventory and resources of any 
agency of the United States Government and military education 
and training from the Department of Defense, the President may 
direct the drawdown of such articles, services, and military 
education and training--
          (i) for the purposes and under the authorities of--
                  (I) chapter 8 of part I (relating to 
                international narcotics control assistance);
                  (II) chapter 9 of part I (relating to 
                international disaster assistance); [or]
                  [(III) the Migration and Refugee Assistance 
                Act of 1962; or]
                  (III) chapter 8 of part II (relating to 
                antiterrorism assistance);
                  (IV) chapter 9 of part II (relating to 
                nonproliferation assistance); or
                  (V) the Migration and Refugee Assistance Act 
                of 1962; or

           *       *       *       *       *       *       *

    Sec. 514. Stockpiling of Defense Articles for Foreign 
Countries.--(a) * * *
    (b)(1) * * *
    [(2)(A) The value of such additions to stockpiles of 
defense articles in foreign countries shall not exceed 
$60,000,000 for fiscal year 2000.
    [(B) Of the amount specified in subparagraph (A), 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 $50,000,000 for 
fiscal year 2001.
    (B) Of the amount specified in subparagraph (A) for fiscal 
year 2001, not more than $50,000,000 may be made available for 
stockpiles in the Republic of Korea.

           *       *       *       *       *       *       *

    Sec. 516. Authority of Transfer Excess Defense Articles.--
(a) * * *

           *       *       *       *       *       *       *

    (e) Transportation and Related Costs.--(1) * * *
          (2) Exception.--The President may provide for the 
        transpostation of excess defense articles without 
        charge to a country for the costs of such 
        transportation if--
                  (A) * * *
                  (B) * * *
                  (C) the total weight of the transfer does not 
                exceed [25,000] 50,000 pounds; and

           *       *       *       *       *       *       *


SEC. 547. CONSULTATION REQUIREMENT.

  The selection of foreign personnel for training under this 
chapter shall be made in consultation with the United States 
defense attache to the relevant country.

SEC. 548. RECORDS REGARDING FOREIGN PARTICIPANTS.

  In order to contribute most effectively to the development of 
military professionalism in foreign countries, the Secretary of 
Defense shall develop and maintain a database containing 
records on each foreign military or defense ministry civilian 
participant in education and training activities conducted 
under this chapter after December 31, 2000. This record shall 
include the type of instruction received, the dates of such 
instruction, whether such instruction was completed 
successfully, and, to the extent practicable, a record of the 
person's subsequent military or defense ministry career and 
current position and location.

           *       *       *       *       *       *       *

    Sec. 574. Authorizations of Appropriations.--(a) There are 
authorized to be appropriated to the President to carry out 
this chapter [$9,840,000 for the fiscal year 1986 and 
$14,680,000 for the fiscal year 1987] $73,000,000 for the 
fiscal year 2001.

           *       *       *       *       *       *       *


       CHAPTER 9--NONPROLIFERATION AND EXPORT CONTROL ASSISTANCE

SEC. 581. GENERAL AUTHORITY.

  Notwithstanding any other provision of law that restricts 
assistance to foreign countries (other than sections 502B and 
620A of this Act), the President is authorized to furnish, on 
such terms and conditions as the President may determine, 
assistance to foreign countries in order to enhance the ability 
of such countries to halt the proliferation of nuclear, 
chemical, and biological weapons, and advanced conventional 
weaponry. Such assistance may include training services and the 
provision of equipment and other commodities related to the 
detection, deterrence, monitoring, interdiction, and prevention 
or countering of proliferation, the establishment of effective 
nonproliferation laws and regulations, and the apprehension of 
those individuals involved in acts of proliferation of such 
weapons.

SEC. 582. PURPOSES.

  Activities conducted under this chapter shall be designed--
          (1) to enhance the nonproliferation and export 
        control capabilities of friendly countries by providing 
        training and equipment to detect, deter, monitor, 
        interdict, and counter proliferation;
          (2) to strengthen the bilateral ties of the United 
        States with friendly governments by offering concrete 
        assistance in this area of vital national security 
        interest; and
          (3) to accomplish the activities and objectives set 
        forth in sections 503 and 504 of the FREEDOM Support 
        Act (Public Law 502-511).

SEC. 583. TRANSIT INTERDICTION.

  (a) Allocation of Funds.--In providing assistance under this 
chapter, the President should ensure that not less than one-
quarter of the total of such assistance is expended for the 
purpose of enhancing the capabilities of friendly countries to 
detect and interdict proliferation-related shipments of cargo 
that originate from, and are destined for, other countries.
  (b) Priority to Certain Countries.--Priority shall be given 
in the apportionment of the assistance described under 
subsection (a) to any friendly country that has been determined 
by the Secretary of State to be a country frequently transited 
by proliferation-related shipments of cargo.

SEC. 584. LIMITATIONS.

  The limitations contained in section 573 (a) and (d) of this 
Act shall apply to this chapter.

SEC. 585. AUTHORIZATION OF APPROPRIATIONS.

  (a) Authorization of Appropriations.--There is authorized to 
be appropriated to the President to carry out this chapter 
$129,000,000 for the fiscal year 2001.
  (b) Availability of Funds.--Funds made available under 
subsection (a) may be used notwithstanding any other provision 
of law and shall remain available until expended.

           *       *       *       *       *       *       *


Chemical Weapons Convention Implementation Act of 1998

           *       *       *       *       *       *       *


    Sec. 303. Authority to Conduct Inspections.
    (a) Prohibition.--No inspection of a plant, plant site, or 
other facility or location in the United States shall take 
place under the Convention without the authorization of the 
United States National Authority in accordance with the 
requirements of this title.
    (b) Authority.--
          (1) Technical secretariat inspection teams.--Any duly 
        designated member of an inspection team of the 
        Technical Secretariat may inspect any plant, plant 
        site, or other facility or location in the United 
        States subject to inspection pursuant to the 
        Convention.
          (2) United States government representatives.--The 
        United States National Authority shall coordinate the 
        designation of employees of the Federal Government to 
        accompany members of an inspection team of the 
        Technical Secretariat and, in doing so, shall ensure 
        that--
                  (A) a special agent of the Federal Bureau of 
                Investigation, as designated by the Federal 
                Bureau of Investigation, accompanies each 
                inspection team visit pursuant to paragraph 
                (1);
                  (B) no employee of the Environmental 
                Protection Agency or the Occupational Safety 
                and Health Administration accompanies any 
                inspection team visit conducted pursuant to 
                paragraph (1); and
                  (C) the number of duly designated 
                representatives shall be kept to the minimum 
                necessary.

           *       *       *       *       *       *       *

    (c) Exception.--The requirement under subsection (b)(2)(A) 
shall not apply to inspections of United States chemical 
weapons destruction facilities (as used within the meaning of 
part IV(C)(13) of the Verification Annex to the Convention).

The Arms Control Export Act

           *       *       *       *       *       *       *



   CHAPTER 7--CONTROL OF MISSILES AND MISSILE EQUIPMENT OR TECHNOLOGY

    Sec. 71. Licensing.--
    (a) Establishment of List of Controlled Items.-- * * *
    (d) Exports to Space Launch Vehicle Programs.--[Within 15 
days after the issuance of a license for the export of items 
valued at less than $14,000,000 that are controlled under this 
Act pursuant to United States obligations under the Missile 
Technology Control Regime and intended to support the design, 
development, or production of a space launch vehicle system 
listed in Category I of the MTCR Annex,] Within 15 days after 
the issuance of a license (including any brokering license) for 
the export of items valued at less than $50,000,000 that are 
controlled under this Act pursuant to United States obligations 
under the Missile Technology Control Regime or are goods or 
services that are intended to support the design, utilization, 
development, or production of a space launch vehicle system 
listed in Category I or II of the MTCR Annex, the Secretary 
shall transmit to the Congress a report describing the licensed 
export and rationale for approving such export, including the 
consistency of such export with United States missile 
nonproliferation policy. The requirement contained in the 
preceding sentence shall not apply to licenses for exports to 
countries that were members of the MTCR as of April 17, 1987.

           *       *       *       *       *       *       *


                                    

      
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