tion is retained, as the Congress is currently considering an amendment to section 402 of the act which would authorize a supplemental appropriation for supporting assistance.)

Second, it deletes the obsolete second sentence of section 402, which required that not less than $200 million of the supporting assistance funds made available in fiscal year 1965 be used in Vietnam.

Third, it adds an authorization of such amounts as may be necessary for each of the 5 fiscal years 1967 through 1971 for supporting assistance in Vietnam.

Fourth, it provides authority for the transfer of supporting assistance funds made available for use in Vietnam for administrative expenses incurred in connection with programs in Vietnam. The same authority has been requested with respect to the supporting assistance supplemental appropriation now under consideration by the Congress. Section 610(b) of the act does not now permit a transfer for this purpose. This flexible authority is needed because of the difficulty of estimating at this time the additional administrative expenses resulting from increased economic assistance programs in Vietnam. The provisions of section 610(a) of the act (percentage limitations on transfers and the requirement for a Presidential determination that a transfer is necessary for the purposes of the act) will be applicable to the transfer of funds from the supporting assistance account to the administrative expense account.

CHAPTER 5. CONTINGENCY FUND

Section 110(a). Authorization

This section amends section 451 (a) of the act, which relates to the authorization for the contingency fund, by providing for an authorization of $150 million for each of the 5 fiscal years 1967 through 1971. (The fiscal year 1966 authorization is retained, as the Congress is currently considering an amendment to sec. 451 (a) of the act which would authorize a supplemental appropriation for the contingency fund.)

Section 110(b). Southeast Asia authorization

This section deletes the obsolete second sentence of section 451(a) of the act, which authorized a separate contingency fund for use in southeast Asia in fiscal year 1966.

Section 110(c). Reports to the Congress

This section effects a technical change in section 451(b) of the act, which relates to reports to the Congress with respect to the contingency fund, by striking out the words "the first sentence of". This reflects the fact that after deletion of the second sentence of section 451 (a) by section 110(b) of the bill there will only be one sentence in section 451(a).

PART III

CHAPTER I. GENERAL PROVISIONS

Section 201 (a). Advance acquisition of property

This section amends section 608(a) of the act, which relates to advance acquisition of property, to permit personnel costs directly attributable to the excess property program authorized by section 608(a) to be charged to the excess property revolving fund.

Under the authority of Section 608(a) a revolving fund was established from which expenditures might be made, in advance of known program needs, for acquiring U.S. Government excess property.

Section 608(a) now permits the fund to be charged with accessorial costs (costs of acquisition, storage, renovation and rehabilitation, packing, crating, handling, transportation, and other related costs) of excess property. When such property is transferred to carry out authorized programs, the fund is reimbursed from the appropriate account. Reimbursement is in the form of an average service charge to cover the above accessorial costs. However, personnel costs which are directly attributable to the excess property program are not now charged to the fund. This amendment will put the fund on a more businesslike basis by permitting the fund to reflect more accurately all costs directly attributable to the excess property program. Section 201(b). Prohibitions against furnishing assistance

This section amends section 620(1) of the act by substituting for the existing mandatory prohibition against furnishing assistance a requirement that the President consider denying assistance to less developed countries which fail to agree by December 31, 1966, to institute a specific risk guarantee program.

The United States has now investment guaranty agreements with 71 less developed countries and areas. Although negotiations are underway to institute these programs in other countries, it is unlikely that agreement will be reached with all aid-recipient countries by the December 31, 1966, deadline. For example, in some aid-recipient countries where both expropriation and convertibility coverages are currently not available, the internal political situation makes it doubtful that agreement will be reached to institute the program by that date.

Important U.S. interests may nevertheless require that all assistance under the act not be terminated in every country with which investment guaranty agreements have not been concluded. This amendment will provide the President with the necessary flexibility to enable him to weigh overall U.S. foreign policy objectives in deciding whether assistance to any such country should be terminated.

CHAPTER 2. ADMINISTRATIVE PROVISIONS

Section 202(a). Coordination by the chief of the diplomatic mission This section amends section 622 (b) of the act, which relates to the coordination among representatives of the U.S. Government in each country by the chief of the diplomatic mission, by effecting a technical change to reflect the distinction between military assistance and military sales contained in the proposed Military Assistance and Sales Act of 1966, and by requiring that comments of the chief of the diplomatic mission accompany recommendations pertaining to the economic assistance and military assistance or sales programs. Section 202(b). Supervision by the Secretary of State

This section effects technical changes in section 622 (c) of the act, which relates to the supervision of assistance programs by the Secretary of State, to reflect the fact that separate legislative authority for the military assistance program is contained in the proposed

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Military Assistance and Sales Act of 1966 and to reflect the distinction between military assistance and military sales contained in that act. Section 202(c). Reports and information

This section amends section 634(d) of the act by adding a requirement that the President, in presenting requests to the Congress for appropriations for fiscal years 1968 through 1971 to carry out programs under the act, present to the Foreign Relations Committee of the Senate, upon the request of the chairman of that committee, and to the Speaker of the House of Representatives, upon his request, the programs proposed to be carried out under the act with the funds appropriated for the respective fiscal year.

This provision is designed to insure that the Committee on Foreign Relations of the Senate and the Committee on Foreign Affairs of the House of Representatives continue to have the opportunity to review the economic assistance program during those years when, as a result of the proposed 5-year authorization, no authorization would be sought from the Congress.

Section 202(d). Commitment authority

This section amends section 635(h) of the act by specifically excluding Alliance for Progress development loans from the provision that contracts or agreements which entail commitments for the expenditure of funds may not extend for more than 5 years. When originally enacted, this provision applied only to technical assistance funds, not to development loans. When title VI of the act, Alliance for Progress, was enacted in 1962, section 635(h) was amended to include the Alliance title among those to which the provision applies. However, the amendment failed to distinguish between Alliance grant programs and Alliance development lending operations. This amendment will correct that oversight.

Section 202(e). Administrative expenses

This section amends section 637 (a) of the act, which relates to administrative expenses, by substituting for the obsolete fiscal year 1966 authorization an authorization of such amounts as may be necessary for each of the fiscal years 1967 through 1971.

Section 202(f). Definitions

This section deletes section 644(1) of the act, which relates to surplus agricultural commodities. This amendment reflects the elimination of the concept of "surplus" agricultural commodities from the food aid program.

SECTION-BY-SECTION ANALYSIS OF H.R. 12450

INTRODUCTION

The proposed legislation to promote the foreign policy, security, and general welfare of the United States by assisting peoples of the world in their efforts toward internal and external security (the "bill"), which supersedes existing legislation relating to military assistance and related activities, is divided into five chapters. Chapter 1 sets forth the objectives of the bill and defines the terms used in the bill. Chapter 2 contains the substantive provisions of the military assistance program. Chapter 3 sets forth the substantive provisions of the sales program, which comprises cash sales, credit sales, barter transactions, and leases. Chapter 4 relates to fiscal provisions. Chapter 5 contains the general, administrative, and miscellaneous provisions applicable to the grant aid and sales programs.

CHAPTER 1. FOREIGN POLICY OBJECTIVES, COORDINATION, AND

DEFINITIONS

Section 1. Foreign policy objectives

In this section, the Congress reaffirms the policy of the United States to achieve international peace and security through the United Nations. The threat to world peace posed by communism is recognized, and Congress restates its belief that the security of the United States will be promoted by improving the ability of friendly countries and international organizations to deter or if necessary defeat aggression. It is, therefore, the policy of the United States to assist, upon the principles of effective self help and mutual aid, friendly countries in their individual and collective self defense efforts by making it possible for them to acquire defense articles and defense services. Section 2. Coordination with foreign policy

This section is taken from section 622 of the Foreign Assistance Act of 1961, as amended.

Subsection (a) provides that nothing in this bill shall be construed to infringe upon the powers of the Secretary of State.

Subsection (b) requires the President to prescribe regulations which will assure coordination among the representatives of the U.S. Government in each country under the leadership of the Chief of the U.S. diplomatic mission.

Subsection (c) makes the Secretary of State responsible, under the President's direction, for the continuous supervision and general direction of programs authorized by this bill and their integration with programs of economic assistance.

Section 3. Definitions

This section, which is taken from section 644 of the Foreign Assistance Act of 1961, as amended, defines ten terms used throughout the bill. The definition of "defense article" specifically provides that

that term shall not mean merchant vessels or source material, byproduct material, special nuclear material, or atomic weapons as defined by the Atomic Energy Act. Similarly, the definition of "defense information" specifically provides that that term does not include Restricted Data as defined by the Atomic Energy Act and Formerly Restricted Data.

10 U.S.C. 7307 which relates to disposal of certain Navy vessels is not affected by the definition of "defense article" and remains fully in force.

CHAPTER 2. MILITARY ASSISTANCE

Title I. Scope of assistance authorized

Section 11. General authority

This section, which is taken from section 503 of the Foreign Assist ance Act of 1961, as amended, places in the President general authority to furnish military assistance. The main elements of the authority

are:

(1) Assistance may be furnished on such terms and conditions as the President may determine.

(2) Assistance may be furnished to any country, subject to the general conditions of eligibility established by section 13, or to international organizations, the assistance of which the President finds will strengthen the security of the United States and promote world peace.

(3) Assistance may be provided by acquiring defense articles or defense services from any source and providing them by grant, loan, or any other means to any country or international organization described in paragraph (b) above.

(4) Financial contributions to infrastructure programs may be

made.

(5) Financial assistance may be furnished for expenses incident to U.S. participation in regional or collective defense organizations, such as the North Atlantic Treaty Organization and the Southeast Asia Treaty Organization, including contributions to bilateral or multilateral projects for research and development or production.

(6) The general authority to furnish services of Department of Defense personnel, including members of the Armed Forces of the United States, is limited to the performance of duties of a noncombatant nature, including military training or advice.

Section 12. Purposes

This section, which is taken from section 505(a) of the Foreign Assistance Act of 1961, as amended, specifies that assistance under this chapter shall be furnished only for internal security, for legitimate self-defense, for participation in regional or collective security arrangements consistent with the United Nations Charter, or for participation in collective measures sponsored by the United Nations for the purpose of maintaining or restoring international peace and stability or for civic action.

Section 13. General conditions of eligibility

Section 13, which is taken from section 506 of the Foreign Assistance Act of 1961, as amended, provides that before becoming eligible to receive defense articles on a grant basis, a country must agree that it will not, without the consent of the President: (1) permit any use