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[Senate Report 110-139]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 292
110th Congress                                                   Report
                                 SENATE
 1st Session                                                    110-139

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                   NAVAL VESSEL TRANSFER ACT OF 2007

                                _______
                                

                 July 31, 2007.--Ordered to be printed

          Mr. Biden, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                         [To accompany S. 1565]

    The Committee on Foreign Relations, having had under 
consideration a bill (S. 1565) to provide for the transfer of 
naval vessels to certain foreign recipients, reports favorably 
thereon and recommends that the bill do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................1
 IV. Cost Estimate....................................................2
  V. Evaluation of Regulatory Impact..................................3
 VI. Changes in Existing Law..........................................3

                               I. PURPOSE

    This bill authorizes the transfer of a total of eight 
excess naval vessels--two Oliver Hazard Perry class guided 
missile frigates and six Osprey class coastal minehunters--to 
Turkey, Lithuania, and Taiwan.

                          II. COMMITTEE ACTION

    S. 1565 was introduced by Senator Biden on June 7, 2007. 
Senator Lugar was an original cosponsor, and Senator Hagel 
joined as a cosponsor on June 27, 2007. On June 27, 2007, the 
Committee ordered the bill reported favorably by voice vote.

                            III. DISCUSSION

    Section 824(b) of the National Defense Authorization Act 
for Fiscal Year 1994, as amended (10 U.S.C. 7307(a)), requires 
that a naval vessel that is in excess of 3,000 tons or that is 
less than 20 years of age may not be disposed of to another 
nation unless the disposition of that vessel is approved by law 
enacted after August 5, 1974. Accordingly, section 2(a) of S. 
1565 authorizes a grant of two guided missile frigates to 
Turkey, one coastal minehunter ship to Turkey, and two coastal 
minehunter ships to Lithuania. Section 2(b) authorizes the sale 
and transfer of two coastal minehunter ships to Taiwan, and one 
coastal minehunter ship to Turkey.
    The U.S. Navy, with the approval of the Office of 
Management and Budget, requested the authority to transfer the 
ships named in the bill and assured the Committee on Foreign 
Relations that the transfer of these excess defense articles 
would not degrade the capabilities of the U.S. Navy and would 
enable three allies to carry out important naval security 
missions. The U.S. Navy estimates (using a formula in which the 
original acquisition value of each ship is multiplied by a 
coefficient based upon the condition of the ship) that the sale 
of three coastal minehunter ships will result in payments of 
$52.7 million by Taiwan and Turkey.
    The bill also contains other provisions that are 
traditionally included in ship transfer bills. Section 2(c) 
provides that the value of any vessels transferred on a grant 
basis will not count against the annual cap on transfers of 
excess defense articles contained in Section 516 the Foreign 
Assistance Act of 1961. Section 2(d) requires that the 
recipient country pay for any costs incurred by the United 
States in connection with the transfer. Section 2(e) directs 
that, to the maximum extent possible, any repairs required for 
one of these vessels before being transferred should be carried 
out at a shipyard within the United States. Finally, section 
2(f) provides that authority for ships to be transferred under 
this Act shall be available for two years after the date of 
enactment of this Act.

                           IV. COST ESTIMATE

    In accordance with Rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the committee provides this 
estimate of the costs of this legislation prepared by the 
Congressional Budget Office.

                            United States Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 10, 2007.

Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1565, the Naval 
Vessels Transfer Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sam 
Papenfuss.
          Sincerely,
                                            Peter R. Orszag

               Congressional Budget Office Cost Estimate

                                                     July 10, 2007.

                                S. 1565

    S. 1565 would authorize the transfer of eight naval vessels 
to foreign countries: five by grant and three by sale. In each 
case, the bill identifies the vessel, the type of transfer, and 
the recipient country. The authority to transfer those vessels 
would expire two years after enactment. Under the bill, any 
cost of refurbishment and transfer must be paid by the 
recipient country and is typically paid directly to the private 
shipyard that does the work.
    Based on information from the Navy regarding the value of 
those ships and recent experience with actual sales and grants, 
CBO estimates that the sales would increase offsetting receipts 
by a total of $53 million--$12 million in 2008 and $41 million 
in 2009. (Asset sales are a credit against direct spending.) 
Implementing the bill would not have a significant effect on 
spending subject to appropriation.
    S. 1565 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandate Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Sam Papenfuss. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                   V. EVALUATION OF REGULATORY IMPACT

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VI. CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of Rule XXVI of the 
Standing Rules of the Senate, the committee notes that no 
changes to existing law are made by this bill.

                                  
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