Cash Transfer Program for Israel

The Department of Commerce requested that GAO concur in an opinion issued by the General Counsel of the Maritime Administration that the Cargo Preference Act applies to cash grants and cash transfer programs of the Agency for International Development (AID). AID contended that the Act did not apply to its cash transfer programs. The cash transfer program represents a change in the method of distributing aid to Israel. From 1972 to 1978, assistance was distributed to Israel under the Commodity Import Program (CIP). Under CIP the United States reimbursed the Government of Israel for the foreign exchange monies used to purchase nonmilitary U.S. commodities. In 1978, in an effort to alleviate difficulties that the Israeli government was having making timely use of assistance distributed under CIP, Congress approved the cash transfer program. The cash transfer program replaced both CIP and other cash grant programs for aid to Israel. The program involved periodic disbursements of funds, two-thirds cash grant and one-third loan, requiring an unspecified form of Israeli certification that a certain level of U.S. nonmilitary products was imported by Israel. By use of cash transfers, the need to document each purchase of goods made by Israel to obtain reimbursement was obviated. Instead, the United States required assurances from the Israeli government that civil imports from the United States would be at least equal to the level of U.S. assistance and that the competitive position of U.S. exporters would not be adversely affected. Consistent with its prior case law on the subject, GAO limited its decision to the cash transfer program for Israel. The Act specifies that whenever the United States advances funds in connection with the furnishing of equipment, materials, or commodities, the cargo preference applies; GAO agreed with AID that the cash transfers are not advanced in connection with the furnishing of equipment, materials, or commodities. The cash transfer requirement that Israel maintain purchasing levels in the United States does not, in itself, require a finding that cargo preference should apply to such purchases, since the purchases may not necessarily be made with cash transfer funds. Accordingly, GAO did not believe that the cash transfer program for Israel was covered by the Act and could not concur in the Maritime Administration's determination.