Legislation on Foreign Relations Through ...

(7) Section 73(d) of such Act (22 U.S.C. 2797(d)) is amended by striking "and the Secretary of Commerce," and inserting ", the Secretary of Commerce, and the Director of the United States Arms Control and Disarmament Agency,".

(b) 1

101 AMENDMENT TO THE NUCLEAR NON-PROLIFERATION ACT.—

PART B-AMENDMENTS TO THE ARMS EXPORT CONTROL ACT 102

SEC. 731. LIMITATION ON AUTHORITY TO TRANSFER EXCESS DEFENSE ARTICLES.

(a) TRANSFERS TO COUNTRIES ON THE SOUTHERN AND SOUTHEASTERN FLANK OF NATO.-Section 516(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2321j(b)) is amended—

(1) by striking "and" at the end of paragraph (2);

(2) by striking the period at the end of paragraph (3) and inserting "; and"; and

(3) by adding at the end the following new paragraph:

"(4) the President first considers the effects of the transfer of the excess defense articles on the national technology and industrial base, particularly the extent, if any, to which the transfer reduces the opportunities of entities in the national technology and industrial base to sell new equipment to the country or countries to which the excess defense articles are transferred.".

(b) TRANSFERS TO COUNTRIES PARTICIPATING IN A COMPREHENSIVE NATIONAL ANTINARCOTICS PROGRAM.-Section 517(f) of the Foreign Assistance Act of 1961 (22 U.S.C. 2321k(f)) is amended

(1) by striking "and" at the end of paragraph (2);

(2) by striking the period at the end of paragraph (3) and inserting "; and"; and

(3) by adding at the end the following new paragraph:

(c) TRANSFERS TO COUNTRIES ELIGIBLE TO PARTICIPATE IN A FOREIGN MILITARY FINANCING PROGRAM.-Section 519(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2321m(b)) is amended—

(1) by striking "and" at the end of paragraph (3);

101 See Legislation on Foreign Relations Through 1993, vol. IV.

102 Part B consists entirely of amendments to the Foreign Assistance Act of 1961, the Arms Export Control Act (retained here until such amendments can be incorporated into Legislation on Foreign Relations, vol. I-A) and the Export Administration Act of 1979. Amendments to the Export Administration Act have been incorporated into that Act in Legislation on Foreign Rela tions Through 1993, vol. III.

(2) by striking the period at the end of paragraph (4) and inserting "; and"; and

(3) by adding at the end the following new paragraph: "(5) the President first considers the effects of the transfer of the excess defense articles on the national technology and industrial base, particularly the extent, if any, to which the transfer reduces the opportunities of entities in the national technology and industrial base to sell new equipment to the country or countries to which the excess defense articles are transferred.".

(d) SALES FROM STOCK UNDER ARMS EXPORT CONTROL ACT.-Section 21 of the Arms Export Control Act (22 U.S.C. 2761) is amended by adding at the end the following new subsection:

"(k) Before entering into the sale under this Act of defense articles that are excess to the stocks of the Department of Defense, the President shall first consider the effects of the sale of the articles on the national technology and industrial base, particularly the extent, if any, to which the sale reduces the opportunities of entities in the national technology and industrial base to sell new equipment to the country or countries to which the excess defense articles are sold.".

(e) LEASES UNDER ARMS EXPORT CONTROL ACT.-Section 61(a) of the Arms Export Control Act (22 U.S.C. 2796(a)) is amended(1) by striking "and" at the end of paragraph (2);

(2) by redesignating paragraph (3) as paragraph (4);

(3) by inserting after paragraph (2) the following new paragraph (3):

"(3) the President first considers the effects of the lease of the articles on the national technology and industrial base, particularly the extent, if any, to which the lease reduces the opportunities of entities in the national technology and industrial base to sell new equipment to the country or countries to which the articles are leased; and"; and

(4) in the matter following paragraph (4) (as redesignated by paragraph (2) of this subsection) by striking "paragraph (3)” each place it appears and inserting "paragraph (4)".

SEC. 732. REPORTS UNDER THE ARMS EXPORT CONTROL ACT.

(a) NUMBERED CERTIFICATIONS WITH RESPECT TO GOVERNMENT-TOGOVERNMENT SALES.-Section 36(b)(1) of the Arms Export Control Act (22 U.S.C. 2776(b)(1)) is amended

(1) by inserting after the second sentence the following new sentence: "Each such numbered certification shall contain an item indicating whether any offset agreement is proposed to be entered into in connection with such letter of offer to sell (if known on the date of transmittal of such certification)."; and (2) in subparagraph (C) by inserting "and a description from such contractor of any offset agreements proposed to be entered into in connection with such sale" after "sold".

(b) NUMBERED CERTIFICATIONS WITH RESPECT TO COMMERCIAL EXPORTS.-Section 36(c)(1) of the Arms Export Control Act (22 U.S.C. 2776(c)(1)) is amended

(1) by inserting after the first sentence the following new sentence: "Each such numbered certification shall also contain

an item indicating whether any offset agreement is proposed to be entered into in connection with such export (if known on the date of transmittal of such certification). and

(2) in the third sentence by inserting "and a description from the person who has submitted the license application of any offset agreement proposed to be entered into in connection with such export (if known on the date of transmittal of such statement)" after "Secretary of Defense".

(c) DEFINITIONS.-Section 36 of the Arms Export Control Act (22 U.S.C. 2776) is amended by adding at the end the following: "(e) For purposes of this section

"(1) the term 'offset agreement' means an agreement, arrangement, or understanding between a United States supplier of defense articles or defense services and a foreign country under which the supplier agrees to purchase or acquire, or to promote the purchase or acquisition by other United States persons of, goods or services produced, manufactured, grown, or extracted, in whole or in part, in that foreign country in consideration for the purchase by the foreign country of defense articles or defense service from the supplier; and "(2) the term 'United States person' means—

“(A) an individual who is a national or permanent resident alien of the United States; and

"(B) any corporation, business association, partnership, trust, or other juridical entity

"(i) organized under the laws of the United States or any State, district, territory, or possession thereof; or "(ii) owned or controlled in fact by individuals described in subparagraph (A).”.

SEC. 733. PROHIBITION ON INCENTIVE PAYMENTS UNDER THE ARMS EXPORT CONTROL ACT.

The Arms Export Control Act (22 U.S.C. 2779) is amended by inserting after section 39 the following new section:

"SEC. 39A.103 PROHIBITION ON INCENTIVE PAYMENTS.

"(a) No United States supplier of defense articles or services sold under this Act, nor any employee, agent, or subcontractor thereof, shall, with respect to the sale of any such defense article or defense service to a foreign country, make any incentive payments for the purpose of satisfying, in whole or in part, any offset agreement with that country.

"(b) Any person who violates the provisions of this section shall be subject to the imposition of civil penalties as provided for in this section.

"(c) In the enforcement of this section, the President is authorized to exercise the same powers concerning violations and enforcement and imposition of civil penalties which are conferred upon departments, agencies and officials by subsections (c), (d), (e), and (f) of section 11 of the Export Administration Act of 1979 and section 12(a) of such Act, subject to the same terms and conditions as are applicable to such powers under that Act, except that notwithstanding section 11(c) of that Act, the civil penalty for each viola

103 22 U.S.C. 2779a.

tion of this section may not exceed $500,000 or five times the amount of the prohibited incentive payment, whichever is greater. "(d) For purposes of this section—

"(2) the term 'incentive payments' means direct monetary compensation made by a United States supplier of defense articles or defense services or by any employee, agent or subcontractor thereof to any other United States person to induce or persuade that United States person to purchase or acquire goods or services produced, manufactured, grown, or extracted, in whole or in part, in the foreign country which is purchasing those defense articles or services from the United States supplier; and

"(3) the term 'United States person' means

"A) an individual who is a national or permanent resident alien of the United States; and

"(B) any corporation, business association, partnership, trust, or other juridical entity

"(i) organized under the laws of the United States or any State, the District of Columbia, or any territory or possession of the United States; or

"(ii) owned or controlled in fact by individuals described in subparagraph (A).”.

SEC. 734. MISSILE TECHNOLOGY EXPORTS TO CERTAIN MIDDLE EASTERN AND ASIAN COUNTRIES.

(a) EXPORTS BY UNITED STATES PERSONS.-Section 72 of the Arms Export Control Act (22 U.S.C. 2797a) is amended

(1) by redesignating subsection (c) as subsection (d); and

(2) by inserting after subsection (b) the following:

"(c) PRESUMPTION.-In determining whether to apply sanctions under subsection (a) to a United States person involved in the export, transfer, or trade of an item on the MTCR Annex, it should be a rebuttable presumption that such item is designed for use in a missile listed in the MTCR Annex if the President determines that the final destination of the item is a country the government of which the Secretary of State has determined, for purposes of 6(j)(1)(A) of the Export Administration Act of 1979, has repeatedly provided support for acts of international terrorism.".

(b) EXPORTS BY FOREIGN PERSONS.-Section 73 of the Arms Export Control Act (22 U.S.C. 2797b) is amended

(1) by redesignating subsections (f) and (g) as subsections (g) and (h), respectively; and

(2) by inserting after subsection (e) the following:

"(f) PRESUMPTION.-In determining whether to apply sanctions. under subsection (a) to a foreign person involved in the export,

transfer, or trade of an item on the MTCR Annex, it should be a rebuttable presumption that such item is designed for use in a missile listed in the MTCR Annex if the President determines that the final destination of the item is a country the government of which the Secretary of State has determined, for purposes of 6(j)(1)(A) of the Export Administration Act of 1979, has repeatedly provided support for acts of international terrorism.".

SEC. 735. NOTIFICATION OF CONGRESS ON CERTAIN EVENTS INVOLVING THE MISSILE TECHNOLOGY CONTROL REGIME (MTCR). (a) SALE OF DEFENSE ARTICLES OR SERVICES.-Section 36(b)(1) of the Arms Export Control Act is amended by inserting after "sensitivity of such technology." the following new sentence: "In a case in which such articles or services listed on the Missile Technology Control Regime Annex are intended to support the design, development, or production of a Category I space launch vehicle system (as defined in section 74), such report shall include a description of the proposed export and rationale for approving such export, including the consistency of such export with United States missile nonproliferation policy.'

(b) EXPORT OF MAJOR DEFENSE EQUIPMENT.-Section 36(c)(1) of the Arms Export Control Act is amended by inserting after “in consultation with the Secretary of Defense." the following new sentence: "In a case in which such articles or services are listed on the Missile Technology Control Regime Annex and are intended to support the design, development, or production of a Category I space launch vehicle system (as defined in section 74), such report shall include a description of the proposed export and rationale for approving such export, including the consistency of such export with United States missile nonproliferation policy.".

(c) LICENSING.-Section 71 of the Arms Export Control Act is amended by inserting after subsection (c) the following new subsection:

"(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, 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.

(d) NOTIFICATION OF ADMITTANCE ON MTCR ADHERENTS.-The Arms Export Control Act is amended by inserting after section 73 the following new section:

"SEC. 73A.104 NOTIFICATION OF ADMITTANCE OF MTCR ADHERENTS.

"Following any action by the United States that results in a country becoming a MTCR adherent, the President shall transmit

104 22 U.S.C. 2797b-1.

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