design and construction services by friendly foreign countries and international organizations, on such terms and conditions as he may determine consistent with the requirements of this section. Notwithstanding any other provision of law, and subject to the regular notification requirements of the Committees on Appropriations, the authority of this section may be used to provide financing to Israel and Egypt for the procurement by leasing (including leasing with an option to purchase) of defense articles from United States commercial suppliers, not including Major Defense Equipment (other than helicopters and other types of aircraft having possible civilian application), if the President determines that there are compelling foreign policy or national security reasons for those

"(1) the value of such articles or services within a period not to exceed twelve years after the delivery of such articles or the rendering of such services; and

"(2) interest on the unpaid balance of that obligation for payment of the value of such articles or services, at a rate equivalent to the current average interest rate, as of the last day of the month preceding the financing of such procurement that the United States Government pays on outstanding marketable obligations of comparable maturity, unless the President certifies to Congress that the national interest requires a lesser rate of interest and states in the certification the lesser rate so required and the justification therefor."

Prior to that sec. 45(a)(2) of the FA Act of 1974 amended sec. 23, which formerly read as follows: "SEC. 23. CREDIT SALES.-The President is hereby authorized to finance procurements of defense articles and defense services by friendly countries and international organizations on terms of repayment to the United States Government of not less than the value thereof in the United States dollars within a period of not to exceed ten years after the delivery of the defense articles or the rendering of the defense services."

67 Sec. 101(b) of the International Security and Development Cooperation Act of 1985 (Public Law 99-83; 99 Stat. 193) provided an authorization for each of the fiscal years 1986 and 1987 of $5,371,000,000 to carry out sec. 23 and set a ceiling of $553,900,000 for each fiscal year of the amount that may be made available at concessional interest rates.

Congress did not enact an authorization for fiscal year 1988. Instead, the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988 (sec. 101(e) of the Continuing Appropriations for 1988, Public Law 100-202; 101 Stat. 1329-148) waived the requirement for authorizations and appropriated the following for "Foreign Military Credit Sales":

"For expenses necessary to enable the President to carry out the provisions of section 23 of the Arms Export Control Act, $4,049,000,000, of which not less than $1,800,000,000 shall be available only for Israel, not less than $1,300,000,000 shall be available only for Egypt, $260,000,000 only shall be available for Pakistan, not less than $12,000,000 shall be available only for Morocco, $334,000,000 only shall be available for Turkey, and not less than $313,000,000 shall be available only for Greece: Provided, That to the extent that the Government of Israel requests that funds be used for such purposes, credits made available for Israel under this heading shall, as agreed by Israel and the United States, be available for advanced fighter aircraft programs or for other advanced weapon systems, as follows: (1) up to $150,000,000 shall be available for research and development in the United States; and (2) not less than $400,000,000 shall be available for the procurement in Israel of defense articles and defense services, including research and development: Provided further, That Israel and Egypt shall be released from their contractual liability to repay the United States Government with respect to all credits provided under this heading, and Pakistan shall be released from such liability with respect to $30,000,000 of the credits provided under this heading, and Turkey shall be released from such liability with respect to $156,000,000 of the credits provided under this heading: Provided further, That during fiscal year 1988, gross obligations for the principal amount of direct loans, exclusive of loan guarantee defaults, shall not exceed $4,049,000,000: Provided further, That any funds made available under this heading, except as otherwise specified, may be made available at concessional rates of interest, notwithstanding section 31(b)(2) of the Arms Export Control Act: Provided further, That the concessional rate of interest on foreign military credit sales loans shall be not less than 5 percent per year: Provided further. That all country and funding level changes in requested concessional financing allocations shall be submitted through the regular notification procedures of the Committees on Appropriations: Provided further, That funds appropriated under this heading shall be expended at the minimum rate necessary to make timely payment for defense articles and services."

FOREIGN MILITARY CREDIT SALES (RESCISSION)

"Of the funds made available in fiscal years 1985 and 1986 for expenses necessary to enable the President to carry out the provisions of section 23 of the Arms Export Control Act, $32,000,000 is rescinded."

The Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988, also contained provisions on Foreign Military Sales Debt Reform. See page 515 for text.

defense articles being provided by commerical lease rather than by government-to-government sale under this Act. 68

(b) The President shall require repayment in United States dollars within a period not to exceed twelve years 69 after the loan agreement with the country or international organization is signed on behalf of the United States Government, unless a longer period is specifically authorized by statute for that country or international organization.

(c)(1) The President shall charge interest under this section at such rate as he may determine, except that such rate may not be less than 5 percent per year.

(2) For purposes of financing provided under this section

(A) the term "concessional rate of interest" means any rate of interest which is less than market rates of interest; and

(B) the term "market rate of interest" means any rate of interest which is equal to or greater than the current average interest rate (as of the last day of the month preceding the financing of the procurement under this section) that the United States Government pays on outstanding marketable obligations of comparable maturity.

(d) References in any law to credits extended under this section shall be deemed to include reference to participations in credits.

Sec. 24. 70 Guaranties.—(a) The President may guarantee any individual, corporation, partnership, or other juridical entity doing business in the United States (excluding United States Government agencies other than the Federal Financing Bank) 71 against political and credit risks of nonpayment arising out of their financing of credit sales of defense articles, defense services, and design and construction services 57 to friendly countries and international organizations. Fees shall be charged for such guaranties.

(b) The President may sell to any individual, corporation, partnership, or other juridical entity (excluding United States Government agencies other than the Federal Financing Bank) 71 promissory notes issued by friendly countries and international organizations as evidence of their obligations to make repayments to the United States on account of credit sales financed under section 23, and may guarantee payment thereof.

(c) 72 Funds obligated under this section before the date of enactment of the International Security and Development Cooperation

68 The last sentence of subsec. (a) was added by sec. 572 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988 (Continuing Appropriations for 1988, Public Law 100-202, 101 Stat. 1329-176).

69 Sec. 208(a) of the International Security Assistance and Arms Export Control Act of 1976 (Public Law 94-329; 90 Stat. 739) originally substituted "twelve years' in lieu of "ten years". Sec. 208(b) of the same Act went on to say, "The amendment made by subsection (a) shall apply with respect to financing under agreements entered into on or after the date of enactment of this Act for the procurement of defense articles to be delivered, or defense services to be rendered, after such date".

70 22 U.S.C. 2764.

71 Sec. 45(a)(3) of the FA Act of 1974 substituted words "(excluding United States Government agencies other than the Federal Financing Bank)" in lieu of “(excluding United States Government agencies)".

72 Subsec. (c), as amended by the FA Act of 1973 and the FA Act of 1974, was further amended and restated by sec. 104(a) of the International Security and Development Cooperation Act of 1980 (Public Law 96-533; 94 Stat. 3132). It formerly read as follows:

"(c) Funds made available to carry out this Act shall be obligated in an amount equal to 10 per centum of the principal amount of contractual liability related to any guaranty issued under

Continued

Act of 1980 which constitute a single reserve for the payment of claims under guaranties issued under this section shall remain available for expenditure for the purposes of this section on and after that date. That single reserve may, on and after the date of enactment of the International Security and Development Cooperation Act of 1985, be referred to as the "Guaranty Reserve Fund." Funds provided for necessary expenses to carry out the provisions of section 23 of the Arms Export Control Act and of section 503 of the Foreign Assistance Act of 1961, as amended, may be used to pay claims on the Guaranty Reserve Fund to the extent that funds in the Guaranty Reserve Fund are inadequate for that purpose. 73

For purposes of any provision in this Act or any other Act relating to a prohibition or limitation on the availability of funds under this Act, whenever a guaranty is issued under this section, the principal amount of the loan so guaranteed shall be deemed to be funds made available for use under this Act. Any guaranties issued hereunder shall be backed by the full faith and credit of the United States.

this section, and all the funds so obligated shall constitute a single reserve for the payment of claims under such guaranties. Any funds so obligated which are deobligated from time to time during any current fiscal year as being in excess of the amount necessary to maintain a fractional reserve of 10 per centum in the principal amount of contractual liability under outstanding guaranties shall be transferred to the general fund of the Treasury. Any guaranties issued hereunder shall be backed by the full faith and credit of the United States."

73 Sec. 106 (b) and (c) of the International Security and Development Cooperation Act of 1985 (Public Law 99-83; 99 Stat. 196) amended subsec. (c) by deleting the following text:

"The President shall report promptly to the Congress whenever the payment of a claim under any such guaranty reduces the total amount of funds in the single reserve under this subsection to an amount less than $750,000,000, together with his recommendations for the authorization of appropriations of additional funds for such reserve."

It also added the text beginning with "That single reserve" in the first paragraph of subsec. (c) and continuing with a second paragraph as follows:

"Funds authorized to be appropriated by section 31(a) to carry out this Act which are allocated for credits at market rates of interest may be used to pay claims under such guarantees to the extent funds in the Guaranty Reserve Fund are inadequate for that purpose.'

Public Law 100-71, 101 Stat. 409 (Supplemental Appropriations Act, 1987) deleted the second paragraph and replaced it with the present language.

The Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988 (Public Law 100-202, 101 Stat. 1329-150) provides the following:

"There are hereby appropriated $532,000,000 to be made available to the Guaranty Reserve Fund for payment to the Federal Financing Bank subject to claims under guarantees issued under the Arms Export Control Act: Provided, That if during fiscal year 1989 the funds available in the Guaranty Reserve Fund (Fund) are insufficient to enable the Secretary of Defense (Secretary) to discharge his responsibilities, as guarantor of loans guaranteed pursuant to section 24 of the Arms Export Control Act (AECĂ) or pursuant to this Act, the Secretary shall issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary of the Treasury. Such notes or obligations may be redeemed by the Secretary from appropriations and other funds available, including repayments by the borrowers of amounts paid pursuant to guarantees issued under section 24 of the AECA. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury shall purchase any notes or other obligations issued hereunder and for that purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, and the purposes for which securities may be issued under the Second Liberty Bond Act are extended to include any purchase of such notes or obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this heading. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States."

Sec. 25. 74 Annual Estimate and Justification for Sales Program. (a) Except as provided in subsection (d) of this section, 75 no later than February 1 of each year, the President shall transmit to the Congress, as a part of the annual presentation materials for security assistance programs proposed for the next fiscal year, a report which sets forth

(1) an Arms Sales Proposal covering all sales and licensed commercial exports under this Act of major weapons or weapons-related defense equipment for $7,000,000 or more, or of any other weapons or weapons-related defense equipment for $25,000,000 or more, which are considered eligible for approval during the current calendar year, together with an indication of which sales and licensed commercial exports are deemed most likely actually to result in the issuance of a letter of offer or of an export license during such year;

(2) an estimate of the total amount of sales and licensed commercial exports expected to be made to each foreign nation from the United States;

(3) the United States national security considerations involved in expected sales or licensed commercial exports to each country, an analysis of the relationship between anticipated sales to each country and arms control efforts concerning such country and an analysis of the impact of such anticipated sales on the stability of the region that includes such country;

(4) an estimate with regard to the international volume of arms traffic to and from nations purchasing arms as set forth in paragraphs (1) and (2) of this subsection, together with best estimates of the sale and delivery of weapons and weapons-related defense equipment by all major arms suppliers to all major recipient countries during the preceding fiscal year;

(5)(A) 76 an estimate of the aggregate dollar value and quantity of defense articles and defense services, military education and training, grant military assistance, and credits and guarantees, to be furnished by the United States to each foreign country and international organization in the next fiscal year; and

(B) 76 for each country that is proposed to be furnished credits or guaranties under this Act in the next fiscal year and that has been approved for cash flow financing (as defined in

74 22 U.S.C. 2765. Sec. 25, as added by sec. 209(a) of Public Law 94-329 (90 Stat. 739) and amended by sec. 18 of Public Law 95-384 (92 Stat. 740), secs. 13 and 14 of Public Law 96-92 (93 Stat. 706), and by secs. 104 and 107 of Public Law 96-533 (94 Stat. 3183), was amended and restated by sec. 732 of the International Security and Development Cooperation Act of 1981 (Public Law 97-113; 95 Stat. 1557). The previous text of sec. 25 required information similar to that specified in new paragraphs (1) through (4), (7), and (8). Much of the remaining information now required by sec. 25, was formerly required by other statutes as follows: par. (6)-sec. 43(c) of the Arms Export Control Act; par. (9)-sec. 668 of the Foreign Assistance Act of 1961; par. (10)— sec. 714 of the International Security and Development Cooperation Act of 1980; and par. (11)— sec. 634(a)4) of the Foreign Assistance Act of 1961.

75 Subsec. (d) and the reference to it at the beginning of subsec. (a) were added by secs. 113 (1) and (2) of the International Security and Development Cooperation Act of 1985 (Public Law 9983; 99 Stat. 198).

16 Subpar. (B) and the designation for subpara. (A) were added by sec. 112(a) of the International Security and Development Cooperation Act of 1985 (Public Law 99-83; 99 Stat. 198).

subsection (d) 77 of this section) in excess of $100,000,000 as of October 1 of the current fiscal year

(i) the amount of such approved cash flow financing,

(ii) a description of administrative ceilings and controls applied, and

(iii) a description of the financial resources otherwise available to such country to pay such approved cash flow financing;

(6) an analysis and description of the services performed during the preceding fiscal year by officers and employees of the United States Government carrying out functions on a fulltime basis under this Act for which reimbursement is provided under section 43(b) or section 21(a) of this Act, including the number of personnel involved in performing such services;

(7) the total amount of funds in the reserve under section 24(c) at the end of the fiscal year immediately preceding the fiscal year in which a report under this section is made, together with an assessment of the adequacy of such total amount of funds as a reserve for the payment of claims under guaranties issued pursuant to section 24 in view of the current debt servicing capacity of borrowing countries, as reported to the Congress pursuant to section 634(a)(5) of the Foreign Assistance Act of 1961;

(8) a list of all countries with respect to which findings made by the President pursuant to section 3(a)(1) of this Act are in effect on the date of such transmission;

(9) the progress made under the program of the Republic of Korea to modernize its armed forces, the role of the United States in mutual security efforts in the Republic of Korea and the military balance between the People's Republic of Korea and the Republic of Korea;

(10) the amount and nature of Soviet military assistance to the armed forces of Cuba during the preceding fiscal year and the military capabilities of those armed forces;

(11) the status of each loan and each contract of guaranty or insurance theretofore made under the Foreign Assistance Act of 1961, predecessor Acts, or any Act authorizing international security assistance, with respect to which there remains outstanding any unpaid obligation or potential liability; the status of each extension of credit for the procurement of defense articles or defense services, and of each contract of guaranty in connection with any such procurement, theretofore made under the Arms Export Control Act with respect to which there remains outstanding any unpaid obligation or potential liability; and

(12) such other information as the President may deem necessary.

(b) Not later than thirty days following the receipt of a request made by the Committee on Foreign Relations of the Senate or the Committee on Foreign Affairs of the House of Representatives for

77 Subsec. (d), which probably should read subsec. (e), was added to the end of sec. 25 by sec. 112(b) of the International Security and Development Cooperation Act of 1985 (Public Law 9983; 99 Stat. 198). It should probably end with a period instead of a semicolon.