B-146820, APR 30, 1974

B-146820, APR 30, 1974

USE OF LOCAL CURRENCIES GENERATED UNDER PUB. L. 480 SALES AGREEMENTS FOR PROCUREMENT OF MILITARY EQUIPMENT, FACILITIES, OR SERVICES FOR THE GOVERNMENT OF VIETNAM MUST BE TERMINATED AS OF JULY 1, 1974, IN VIEW OF ENACTMENT OF SECTION 40 OF THE FOREIGN ASSISTANCE ACT OF 1973, PUB. L. 93- 189, 87 STAT. 714, ON DECEMBER 17, 1973, UNLESS BOTH THE GENERAL AGREEMENT AND THE SPECIFIC OBLIGATING AGREEMENT WERE EXECUTED PRIOR TO THE DATE OF ENACTMENT, IN WHICH CASE THE AGREEMENT MAY BE IMPLEMENTED THROUGH CALENDAR YEAR 1974.

TO AGENCY FOR INTERNATIONAL DEVELOPMENT:

THIS DECISION TO THE SECRETARY OF STATE IS IN RESPONSE TO A REQUEST FROM THE GENERAL COUNSEL, AGENCY FOR INTERNATIONAL DEVELOPMENT (AID) FOR AN OPINION AS TO THE APPROPRIATE TERMINATION DATE FOR USE OF LOCAL CURRENCIES GENERATED UNDER SALES AGREEMENTS WITH THE GOVERNMENT OF VIETNAM FOR "COMMON DEFENSE" PURPOSES, IN VIEW OF A RECENT AMENDMENT AFFECTING THE AUTHORIZATION FOR SUCH USE.

SECTION 104(C) OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED (HEREAFTER CITED AS PUB. L. 480), 7 U.S.C. 1704(C), 68 STAT. 454, ENACTED JULY 10, 1954, PROVIDES, IN PERTINENT PART:

"NOTWITHSTANDING ANY OTHER PROVISION OF LAW, THE PRESIDENT MAY USE OR ENTER INTO AGREEMENTS WITH FOREIGN COUNTRIES OR INTERNATIONAL ORGANIZATIONS TO USE THE FOREIGN CURRENCIES, INCLUDING PRINCIPAL AND INTEREST FROM LOAN REPAYMENTS, WHICH ACCRUE IN CONNECTION WITH SALES FOR FOREIGN CURRENCIES UNDER THIS SUBCHAPTER FOR ONE OR MORE OF THE FOLLOWING PURPOSES:

"(C) TO PROCURE EQUIPMENT, MATERIALS, FACILITIES, AND SERVICES FOR THE COMMON DEFENSE INCLUDING INTERNAL SECURITY; ***."

(SIMILAR AUTHORITY WITH RESPECT TO THE FOREIGN CURRENCIES ACCRUING FROM SALES OF SURPLUS AGRICULTURAL COMMODITIES PRODUCED IN THE UNITED STATES IS CONTAINED IN SECTION 402 OF THE MUTUAL SECURITY ACT OF 1954, AS AMENDED, 22 U.S.C. 1922, 68 STAT. 843, AUGUST 26, 1954.)

PURSUANT TO THIS AUTHORITY, THE DEPARTMENT OF STATE, ON BEHALF OF THE UNITED STATES, ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF VIETNAM ON FEBRUARY 23, 1973, TO ESTABLISH THE GENERAL TERMS AND CONDITIONS FOR USE OF PUB. L. 480-GENERATED LOCAL FUNDS (PIASTERS). ACCORDING TO THE DOCUMENT SUBMITTED TO US BY THE GENERAL COUNSEL OF AID, ALL SUCH PIASTERS (WITH THE EXCEPTION OF AMOUNTS RESERVED FOR UNITED STATES USE IN A SEPARATE AGREEMENT) ARE TO BE RESERVED EXCLUSIVELY FOR MILITARY BUDGET SUPPORT (MBS). THE AGREEMENT, WHICH IS IN THE FORM OF A LETTER SIGNED BY APPROPRIATE OFFICIALS OF THE UNITED STATES AND VIETNAM, PROVIDES THAT IT WILL CONTINUE IN EFFECT FROM YEAR TO YEAR WITH THE SAME TERMS, SUBJECT TO ANNUAL SUPPLEMENTAL AGREEMENTS SPECIFYING THE AMOUNT OF PIASTERS ALLOCATED AND SUBJECT TO THE RIGHT OF EITHER NATION TO PROPOSE AMENDMENTS IN OCTOBER FOR THE ENSUING YEAR. IF NO AGREEMENT IS REACHED ON PROPOSED AMENDMENTS BY THE END OF THE CALENDAR YEAR, THE AGREEMENT IS CONSIDERED TERMINATED AT THAT TIME. IF NO AMENDMENTS ARE PROPOSED, THE AGREEMENT IS APPARENTLY CONSIDERED TO BE AUTOMATICALLY READOPTED FOR THE ENSUING YEAR. WE DEDUCE THIS FROM THE FACT THAT NO SUBSEQUENT DOCUMENT FOR CALENDAR YEAR 1974 WAS SUBMITTED TO US AND FROM THE STATEMENT OF THE GENERAL COUNSEL THAT "THE LETTER AGREEMENT OF 1973 *** IS THEREFORE STILL IN EFFECT ***."

SECTION 104(C) AGREEMENTS FOR COMMON DEFENSE PURPOSES WERE THE ONLY AGREEMENTS FOR USE OF FOREIGN CURRENCIES UNDER PUB. L. 480 WHICH WERE NOT SUBJECT TO A 30-DAY PERIOD OF REVIEW BY THE SENATE COMMITTEE ON AGRICULTURE AND FORESTRY AND THE HOUSE COMMITTEE ON AGRICULTURE (OR A PERIOD OF 60 DAYS IF TRANSMITTED TO THESE COMMITTEES WHILE THE CONGRESS WAS NOT IN SESSION) PRIOR TO BECOMING EFFECTIVE. (SEE PARAGRAPH (3) OF THE FIRST PROVISO OF SECTION 104 OF PUB. L. 480, SUPRA.) THIS POLICY CAME UNDER DISCUSSION DURING THE FIRST SESSION OF THE 93D CONGRESS, AS AMENDMENTS TO THE FOREIGN ASSISTANCE ACT OF 1961. 81 STAT. 445, 22 U.S.C. 2151, WERE BEING DEBATED, WITH PARTICULAR REFERENCE TO THE EXTENT OF MILITARY, AS OPPOSED TO ECONOMIC, EDUCATIONAL, AND CULTURAL ASSISTANCE TO FOREIGN NATIONS. THE GENERAL ACCOUNTING OFFICE (GAO) IN TESTIMONY BEFORE THE SUBCOMMITTEE ON FOREIGN OPERATIONS, SENATE COMMITTEE ON APPROPRIATIONS, ON APRIL 9, 1973, STATED:

"WE HAVE ISSUED SEVERAL REPORTS WITHIN THE PAST THREE YEARS WHICH POINT OUT THAT THE MAGNITUDE OF UNITED STATES MILITARY ASSISTANCE TO FOREIGN COUNTRIES IS NOT READILY APPARENT BECAUSE OF THE EXTENT TO WHICH ASSISTANCE FLOWS THROUGH PIPELINES OUTSIDE THE REGULAR, FUNDED MAP PROGRAMS APPROVED BY THE CONGRESS."

THE SENATE PASSED A BILL (S. 1443) WHICH CONTAINED, AMONG OTHER PROVISIONS, AN AMENDMENT TO SECTION 104(C) OF PUB. L. 480 WHICH PROHIBITED THE MAKING OF "COMMON DEFENSE" AGREEMENTS "UNLESS SUCH AGREEMENT HAS BEEN SPECIFICALLY AUTHORIZED BY LEGISLATION ENACTED AFTER THE DATE OF ENACTMENT OF THE FOREIGN MILITARY SALES AND ASSISTANCE ACT." (AT THAT TIME, MILITARY ASSISTANCE WAS BEING CONSIDERED BY THE SENATE IN SEPARATE LEGISLATION FROM FOREIGN ECONOMIC ASSISTANCE.) THE HOUSE-PASSED BILL HAD NO EQUIVALENT PROVISION.

THE INTENT OF THE AMENDMENT WAS STATED IN THE REPORT OF THE SENATE COMMITTEE ON FOREIGN RELATIONS AS FOLLOWS:

"THIS PROVISION AMENDS SECTION 104(C) OF THE 1954 ACT TO PROHIBIT 'COMMON DEFENSE GRANT' AGREEMENTS UNLESS EACH AGREEMENT IS SPECIFICALLY AUTHORIZED BY LEGISLATION.

"THIS CHANGE IN EXISTING LAW WILL SERVE TWO BASIC PURPOSES: (1) IT WILL KEEP CONGRESS AND THE AMERICAN PEOPLE BETTER INFORMED ABOUT THIS PARTICULAR ASPECT OF THE FOREIGN AID PROGRAM; AND (2) IT WILL ENABLE CONGRESS TO APPROVE, DISAPPROVE, OR AMEND AGREEMENTS MADE PURSUANT TO IT. IN A LARGER CONTEXT THIS PROVISION IS SIMPLY ANOTHER STEP FORWARD IN THE COMMITTEE'S EFFORTS TO HELP CONGRESS REDRESS THE IMBALANCE BETWEEN THE EXECUTIVE AND LEGISLATIVE BRANCHES IN THE FIELD OF FOREIGN POLICY." REPT. 93-189, JUNE 4, 1973, PP. 43-44.

THE CONFERENCE COMMITTEE CHANGED THE TEXT OF THIS AMENDMENT SOMEWHAT IN ORDER, AS SENATOR HUMPHREY, MANAGER OF THE BILL, EXPLAINED ON THE SENATE FLOOR, "TO AVOID GERMANENESS PROBLEMS ON THE FLOOR OF THE HOUSE." CONG. REC., DECEMBER 5, 1973, P. S21911. THE AMENDMENT, AS ENACTED, NOW READS:

"SEC. 40. EFFECTIVE JULY 1, 1974, NO AMOUNT OF ANY FOREIGN CURRENCY (INCLUDING PRINCIPAL AND INTEREST FROM LOAN REPAYMENTS) WHICH ACCRUES IN CONNECTION WITH ANY SALE FOR FOREIGN CURRENCY UNDER ANY PROVISION OF LAW MAY BE USED UNDER ANY AGREEMENT ENTERED INTO AFTER THE DATE OF THE ENACTMENT OF THIS ACT, OR ANY REVISION OR EXTENSION ENTERED INTO AFTER SUCH DATE OF ANY PRIOR OR SUBSEQUENT AGREEMENT, TO PROVIDE ANY ASSISTANCE TO ANY FOREIGN COUNTRY TO PROCURE EQUIPMENT, MATERIALS, FACILITIES, OR SERVICES FOR THE COMMON DEFENSE, INCLUDING INTERNAL SECURITY, UNLESS SUCH AGREEMENT IS SPECIFICALLY AUTHORIZED BY LEGISLATION ENACTED AFTER SUCH DATE." THE FOREIGN ASSISTANCE ACT OF 1973, PUB. L. 93-189, 87 STAT. 714, ENACTED DECEMBER 17, 1973.

THE GENERAL COUNSEL OF AID BELIEVES THAT THE ALLOCATION OF LOCAL CURRENCIES FOR VIETNAM MILITARY BUDGET SUPPORT MAY BE PROVIDED AT LEAST FOR THE REMAINDER OF CALENDAR YEAR 1974, REGARDLESS OF THE DATE OF THE ANNUAL OBLIGATING DOCUMENTS, SINCE SUCH OBLIGATING DOCUMENTS ARE OF A "MINISTERIAL AND IMPLEMENTARY CHARACTER," AND MERELY SERVE TO PUT INTO EFFECT THE PROVISIONS OF THE LETTER AGREEMENT OF FEBRUARY 23, 1973, WHICH WAS EXECUTED PRIOR TO THE STATUTORY DEADLINE.

THE GENERAL COUNSEL REFERS TO THE STATUTORY DEADLINE AT VARIOUS TIMES AS THE DATE OF "ENACTMENT OF THE STATUTE" (DECEMBER 17, 1973) AND "THE EFFECTIVE DATE OF THE SENATE AMENDMENT" (JULY 1, 1974). WE BELIEVE THAT THE PROPER REFERENCE DATE TO DETERMINE WHICH AGREEMENTS ARE COVERED IS DECEMBER 17, 1973; THE STATUTE EXPLICITLY MAKES THE PROHIBITION APPLICABLE TO AGREEMENTS (OR REVISIONS OR EXTENSIONS OF AGREEMENTS) ENTERED INTO "AFTER THE DATE OF THE ENACTMENT OF THIS ACT," ALTHOUGH IT SPECIFIES JULY 1, 1974, AS THE CUTOFF DATE AFTER WHICH MILITARY USE OF LOCAL CURRENCY IS FORBIDDEN.

OUR FIRST TASK IS TO DETERMINE WHETHER THE EXTENSION OF THE LETTER AGREEMENT OF FEBRUARY 23, 1973, MAY BE SAID TO HAVE BEEN ENTERED INTO PRIOR TO DECEMBER 17, 1973. BY THE TERMS OF THE AGREEMENT, WHILE THE PARTIES HAVE UNTIL THE END OF THE YEAR TO ACCEPT OR REJECT ANY PROPOSED AMENDMENTS TO THE FEBRUARY 23 LETTER AGREEMENT, IN ORDER TO BE CONSIDERED, ALL SUCH AMENDMENTS MUST BE PROPOSED IN OCTOBER. WE WOULD AGREE WITH THE GENERAL COUNSEL OF AID THAT IN THE ABSENCE OF ANY PROPOSED AMENDMENTS, THE LETTER AGREEMENT MAY BE CONSIDERED TO HAVE BEEN READOPTED ON NOVEMBER 1, 1973, FOR CALENDAR YEAR 1974, WELL BEFORE THE STATUTORY DEADLINE.

IT IS MORE DIFFICULT TO DETERMINE THE NATURE OF THE VARIOUS OBLIGATING OR SUPPLEMENTARY AGREEMENTS WHICH IMPLEMENT THE MORE GENERAL LETTER AGREEMENT. THERE WAS NO INFORMATION PROVIDED AS TO WHEN THESE OBLIGATING AGREEMENTS WERE EXECUTED, ALTHOUGH THE LETTER AGREEMENT STATES: "THE SUPPLEMENTAL AGREEMENTS FOR ALLOCATIONS FOR CY 1974 AND EACH ENSUING YEAR WILL BE CONCLUDED DURING THE LAST TWO MONTHS OF THE PRECEDING YEAR." IN FACT THEY WERE COMPLETED PRIOR TO DECEMBER 17, 1973, THERE IS NO PROBLEM. OUR IMPRESSION IS THAT IT WAS AFTER THE DATE OF ENACTMENT IN VIEW OF THE GENERAL COUNSEL'S CONCERN THAT WE RECOGNIZE THE "MINISTERIAL AND IMPLEMENTARY CHARACTER OF THE LATER OBLIGATIONAL DOCUMENTS." REFERS US, HOWEVER, TO AID'S OWN MANUAL OF OPERATIONS. SECTION IV (AID MANUAL ORDER 1151.1, SEPTEMBER 30, 1963), ENTITLED "THE AGREEMENT PROCESS," PROVIDES:

"THE LOCAL CURRENCY AGREEMENT PROCESS IS NORMALLY CARRIED OUT IN TWO STAGES: (1) GENERAL UNDERSTANDING WITH THE COOPERATING COUNTRY AND (2) AGREEMENTS WHICH OBLIGATE U.S.-OWNED CURRENCY OR WHICH RELEASE COUNTERPART FOR SEGMENTS OF THE LOCAL CURRENCY PROGRAM. ALTERNATIVELY, AGREEMENT MAY BE REACHED WITHOUT A GENERAL UNDERSTANDING ON SPECIFIC PERIODIC RELEASE AMOUNTS."

THE SECTION GOES ON TO STATE THAT THE GENERAL AGREEMENT "SHOULD CONTAIN NO COMMITMENTS BEYOND FIRM APPROVALS RECEIVED FROM AID/W."

THESE PROCEDURES, AS WRITTEN, APPEAR TO BE SAYING THAT WHILE NORMALLY BOTH THE GENERAL AGREEMENT AND OBLIGATION AGREEMENT ARE NECESSARY TO COMPLETE THE AGREEMENT PROCESS, ON OCCASION THE OBLIGATING DOCUMENTS ALONE MAY BE SUFFICIENT. IN OTHER WORDS, THE GENERAL LETTER AGREEMENT IS NOT AN ESSENTIAL ELEMENT OF THE AGREEMENT PROCESS BUT THE OBLIGATING DOCUMENTS ARE.

WE THEREFORE BELIEVE THAT THE AGREEMENT WITH THE GOVERNMENT OF VIETNAM FOR CALENDAR YEAR 1974 WAS NOT COMPLETED UNTIL THE OBLIGATING DOCUMENTS FOR CALENDAR YEAR 1974 WERE SIGNED. IF THIS WAS ACCOMPLISHED PRIOR TO DECEMBER 17, 1973, THE MILITARY USES OF PUB. L. 480-GENERATED FUNDS MAY BE CONTINUED THROUGH DECEMBER 31, 1974. IF THE OBLIGATING DOCUMENTS WERE NOT SIGNED PRIOR TO DECEMBER 17, 1973, ALL MILITARY USES OF THE CURRENCY MUST BE STOPPED AS OF JULY 1, 1974. WE NOTE IN THIS CONNECTION THAT THE LETTER AGREEMENT WITH THE GOVERNMENT OF VIETNAM PROVIDES: "ALLOCATIONS OF COUNTERPART AND PL 480 GENERATED PIASTERS WILL BE SUBJECT TO THE FOLLOWING, AS APPROPRIATE: (1) AVAILABILITY OF FUNDS ***."

THE MATTER PRESENTED IS ANSWERED ACCORDINGLY.