§ 2764. — Guaranties.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 22USC2764]
TITLE 22--FOREIGN RELATIONS AND INTERCOURSE
CHAPTER 39--ARMS EXPORT CONTROL
SUBCHAPTER II--FOREIGN MILITARY SALES AUTHORIZATIONS
Sec. 2764. Guaranties
(a) Guaranty against political and credit risks of nonpayment
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) 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 to friendly
countries and international organizations. Fees shall be charged for
such guaranties.
(b) Sale of promissory notes of friendly countries and international
organizations; guaranty of payment
The President may sell to any individual, corporation, partnership,
or other juridical entity (excluding United States Government agencies
other than the Federal Financing Bank) 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 2763 of this title, and may guarantee
payment thereof.
(c) Guaranty Reserve Fund; payment of guaranties; guaranty reserve below
prescribed amount
Funds obligated under this section before December 16, 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 August 8, 1985, be referred to as the ``Guaranty
Reserve Fund''. Funds provided for necessary expenses to carry out the
provisions of section 2763 of this title and of section 2311 of this
title 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. For purposes of any provision in this chapter or any other Act
relating to a prohibition or limitation on the availability of funds
under this chapter, 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 chapter. Any guaranties issued
hereunder shall be backed by the full faith and credit of the United
States.
(Pub. L. 90-629, ch. 2, Sec. 24, Oct. 22, 1968, 82 Stat. 1324; Pub. L.
93-189, Sec. 25(4), Dec. 17, 1973, 87 Stat. 730; Pub. L. 93-559,
Sec. 45(a)(3), (4), Dec. 30, 1974, 88 Stat. 1814; Pub. L. 96-533, title
I, Secs. 104(a), 105(b)(3), Dec. 16, 1980, 94 Stat. 3132, 3134; Pub. L.
99-83, title I, Sec. 106(b), (c), Aug. 8, 1985, 99 Stat. 196; Pub. L.
100-71, title I, July 11, 1987, 101 Stat. 409.)
Amendments
1987--Subsec. (c). Pub. L. 100-71, which directed that the second
par. be struck out and a new one-sentence par. be inserted, was executed
to reflect the probable intent of Congress by substituting the new
sentence for the third sentence which read as follows: ``Funds
authorized to be appropriated by section 2771(a) of this title to carry
out this chapter 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.''
1985--Subsec. (c). Pub. L. 99-83 inserted provisions authorizing the
single reserve to be termed the ``Guaranty Reserve Fund'', and
substituted provisions relating to payment of claims under guarantees,
for provisions relating to report to Congress respecting any payment of
claims reducing the single reserve.
1980--Subsec. (a). Pub. L. 96-533, Sec. 105(b)(3), substituted
``defense articles, defense services, and design and construction
services'' for ``defense articles and defense services''.
Subsec. (c). Pub. L. 96-533, Sec. 104(a), substituted provisions
making funds obligated before Dec. 16, 1980 available for expenditure
after such date for payment of guaranteed claims, requiring the
President to report to Congress the reduction of the single reserve
below $750,000,000 with recommendation for an appropriations
authorization of additional funds and deeming the principal amount of a
guaranteed loan to be funds made available for use under this chapter
for purposes of any limitation on availability of funds for prior
provisions for obligation of available funds in an amount equal to 10
per centum of principal amount of contractual liability related to a
guaranty under this section, making such funds a single reserve for
payment of guaranteed claims, and providing for transfer of any funds
deobligated during any current fiscal year to the general fund of the
Treasury.
1974--Subsecs. (a), (b). Pub. L. 93-559, Sec. 45(a)(3), inserted
``other than the Federal Financing Bank'' in parenthetical text.
Subsec. (c). Pub. L. 93-559, Sec. 45(a)(4), substituted ``10'' for
``25'' in two places.
1973--Subsec. (c). Pub. L. 93-189 substituted ``to carry out this
chapter'' for ``pursuant to section 2771 of this title'' and inserted
``principal amount of'' before ``contractual liability'' wherever
appearing.
Effective Date of 1985 Amendment
Amendment by Pub. L. 99-83 effective Oct. 1, 1985, see section 1301
of Pub. L. 99-83, set out as a note under section 2151-1 of this title.
Effective Date of 1974 Amendment; Adjustment of Obligations Charged
Against Appropriations; Credit for Fiscal Year 1975 Appropriations
Section 45(b) of Pub. L. 93-559 provided that: ``The amendment made
by paragraph (4) of subsection (a) [amending this section] shall take
effect on July 1, 1974. Obligations initially charged against
appropriations made available for purposes authorized by section 31(a)
of the Foreign Military Sales Act [section 2771(a) of this title] after
June 30, 1974, and prior to the enactment of this section [Dec. 30,
1974] in an amount equal to 25 per centum of the principal amount of
contractual liability related to guaranties issued pursuant to section
24(a) of that Act [subsec. (a) of this section] shall be adjusted to
reflect such amendment with proper credit to the appropriations made
available in the fiscal year 1975 to carry out that Act [this
chapter].''
Delegation of Functions
Functions of President under this section delegated to Secretary of
Defense, with Secretary of Defense required to consult with Secretary of
State and Secretary of the Treasury in implementing delegated functions,
by section 1(f) of Ex. Ord. No. 11958, Jan. 18, 1977, 42 F.R. 4311, as
amended, set out as a note under section 2751 of this title.
Foreign Military Sales Debt Reform
Pub. L. 102-145, Sec. 118, as added by Pub. L. 102-266, Sec. 102,
Apr. 1, 1992, 106 Stat. 93, provided that the authority and conditions
provided under the heading ``Foreign Military Sales Debt Reform'' in
H.R. 2621, One Hundred Second Congress, 1st session, as passed by the
House of Representatives on June 19, 1991, shall be applicable to funds
appropriated by Pub. L. 102-145 (and are hereby enacted) in lieu of the
authority and conditions provided under the heading ``Foreign Military
Sales Debt Reform'' in Pub. L. 101-513 [set out below]. Provisions under
the heading ``Foreign Military Sales Debt Reform'' in H.R. 2621, as
referred to above, provided that: ``Subsection (b) under the heading
`Foreign Military Sales Debt Reform' in the Foreign Operations, Export
Financing, and Related Programs Appropriations Act, 1988 [Pub. L. 100-
202, Sec. 101(e) [title III, Sec. 301], set out below], is hereby
repealed.''
Pub. L. 101-513, title III, Nov. 5, 1990, 104 Stat. 1999, provided
that: ``Funds made available by the Foreign Operations, Export
Financing, and Related Programs Appropriations Act, 1988 [Pub. L. 100-
202, Sec. 101(e) [title III], set out below], for obligation and
expenditure after October 1, 1988, subject to a Presidential budget
request, under the heading `Foreign Military Sales Debt Reform',
subsection (b) `Interest Rate Reduction' shall be available, subject to
the same conditions and provisos, only after October 1, 1991.'' Similar
provisions were contained in the following prior appropriation acts:
Pub. L. 101-167, title III, Nov. 21, 1989, 103 Stat. 1214.
Pub. L. 100-461, title III, Oct. 1, 1988, 102 Stat. 2268-18.
Pub. L. 100-202, Sec. 101(e) [title III], Dec. 22, 1987, 101 Stat.
1329-131, 1329-148, as amended by Pub. L. 101-167, title III, Nov. 21,
1989, 103 Stat. 1214; Pub. L. 102-145, Sec. 118, as added by Pub. L.
102-266, Sec. 102, Apr. 1, 1992, 106 Stat. 93, provided in part that:
``(a) Refinancing.--Notwithstanding any other provision of law, the
President is authorized during fiscal years 1988 through 1991 to
transfer existing United States guaranties of outstanding Foreign
Military Sales (FMS) credit debt, or to issue new guaranties, either of
which would be applied to loans, bonds, notes or other obligations made
or issued (as the case may be) by private United States financial
institutions (the private lender) to finance the prepayment at par of
the principal amounts maturing after September 30, 1989 of existing FMS
loans bearing interest rates of eight percent or higher, and arrearages
thereon. The loans, bonds, notes or other obligations are hereinafter
referred to as the `private loan': Provided, That such guaranties which
are transferred or are made pursuant to paragraph (a) shall cover no
more and no less than ninety percent of the private loan or any portion
or derivative thereof plus unpaid accrued interest and arrearages, if
any, outstanding at the time of guaranty transfer or extension: Provided
further, That the total amount of the guaranty of the private loan
cannot exceed ninety percent of the outstanding principal, unpaid
accrued interest and arrearages, if any, at any time: Provided further,
That of the total amount of the private loan, the ninety percent
guaranteed portion of the private loan cannot be separated from the
private loan at any time: Provided further, That no sums in addition to
the payment of the outstanding principal amounts maturing after
September 30, 1989 of the loan (or advance), plus unpaid accrued
interest thereon, and arrearages, if any, shall be charged by the
private lender or the Federal Financing Bank as a result of such
prepayment against the borrower, the guarantor, or the Guaranty Reserve
Fund (GRF), except that the private lender may include, in the interest
rate charged, a standard fee to cover costs, such fee which will be set
at prevailing market rates, and no guaranty fee shall be charged on
guarantees transferred or issued pursuant to this provision: Provided
further, That the terms of guaranties transferred or issued under this
paragraph shall be exactly the same as the existing loans or guarantees,
except as modified by this paragraph and including but not limited to
the final maturity and principal and interest payment structure of the
existing loans which shall not be altered, except that the repayments of
the private loan issued debt may be consolidated into two payments per
year: Provided further, That the private loan or guarantees transferred
or issued pursuant to this paragraph shall be fully and freely
transferable, except that any guaranty transferred or extended shall
cease to be effective if the private loan or any derivative thereof is
to be used to provide significant support for any non-registered
obligation: Provided further, That for purposes of sections 23 and 24 of
the Arms Export Control Act (AECA) [22 U.S.C. 2763, 2764], the term
`defense services' shall be deemed to include the refinancing of FMS
debt outstanding at the date of the enactment of this Act [Dec. 22,
1987]: Provided further, That not later than ninety days after the
enactment of this Act, the Secretary of the Treasury (Secretary) shall
issue regulations to carry out the purposes of this heading and that in
issuing such regulations, the Secretary shall (1) facilitate the
prepayment of loans and loan advances hereunder, (2) provide for full
processing of each application within thirty days of its submission to
the Secretary, and (3) except as provided in section 24(a) of the AECA,
impose no restriction that increases the cost to borrowers of obtaining
private financing for prepayment hereunder or that inhibits the ability
of the borrower to enter into prepayment arrangements hereunder:
Provided further, That the Secretary of State shall transmit to the
Committee on Foreign Affairs [now Committee on International Relations]
of the House of Representatives, the Committee on Foreign Relations of
the Senate, and the Committees on Appropriations of the House of
Representatives and Senate, a copy of the text of any agreement entered
into pursuant to this section not more than thirty days after its entry
into force, together with a description of the transaction.
``[(b) Repealed. Pub. L. 102-145, Sec. 118, as added by Pub. L. 102-
266, Sec. 102, Apr. 1, 1992, 106 Stat. 93.]
``(c) Arrearages.--(1) None of the funds provided pursuant to the
Arms Export Control Act (relating to Foreign Military Sales credits) [22
U.S.C. 2751 et seq.] or pursuant to chapter 2 of part II of the Foreign
Assistance Act (relating to the Military Assistance program) [22 U.S.C.
2311 et seq.] shall be made available to any country for which one or
more loans is refinanced pursuant to paragraph (a) of this heading and
which is in default for a period in excess of ninety days in payment of
principal or interest on (A) any loan made to such country guaranteed by
the United States pursuant to paragraph (a) of this heading, and (B) any
other loan issued pursuant to the Arms Export Control Act outstanding on
the date of enactment of this provision [Dec. 22, 1987].
``(2) In conjunction with any interest rate reduction pursuant to
the authority provided in paragraph (b) of this heading, the President
shall require the country to commit in writing that within two years of
the effective date of the interest rate reduction it will be no more
than ninety days in arrears on the repayment of principal and interest
on all loans for which the interest rate is thus reduced and will remain
no more than ninety days in arrears for the remaining life of all such
loans. None of the funds provided pursuant to the Arms Export Control
Act [22 U.S.C. 2751 et seq.] or chapter 2 of part II of the Foreign
Assistance Act [22 U.S.C. 2311 et seq.] shall be made available to any
country during any period in which it fails to comply with such
commitment.
``(d) Purposes and Reports.--The authorities of paragraphs (a) and
(b) of this heading may be utilized by the President in efforts to
negotiate base rights and base access agreements, and for other
bilateral foreign policy matters: Provided further, That the Secretaries
of Defense, State, and Treasury shall transmit to the Committee on
Foreign Affairs of the House of Representatives, the Committee on
Foreign Relations of the Senate, and the Committees on Appropriations of
the House of Representatives and Senate a joint report detailing the
United States financial and foreign policy purposes served by
implementation of this authority on a country by country basis not later
than March 1, 1989, and a second joint report not later than August 1,
1989.''
Section Referred to in Other Sections
This section is referred to in sections 2763, 2765, 2771, 2774,
2775, 2776, 2777, 2791, 3402 of this title.
