In accordance with United States law, the U.S. Government places conditions on the use of defense articles and defense services transferred by it to foreign recipients. Violation of these conditions can lead to the suspension of deliveries or termination of the contracts for such defense items, among other things. On occasion, the President has indicated that such violations by foreign countries "may" have occurred, raising the prospect that termination of deliveries to or imposition of other penalties on such nations might take place. However, since the major revision of U.S. arms export law in 1976, neither the President nor the Congress have actually determined that a "substantial violation" did occur thus necessitating the termination of deliveries or sales or other penalties set out in Section 3 of the Arms Export Control Act. This report reviews the pertinent sections of U.S. law governing permissible uses of U.S.-origin defense equipment and services by foreign nations, Presidential and congressional options for dealing with such violations, and illustrative actions previously taken by the United States in response to possible violations. The Arms Export Control Act (AECA), as amended, authorizes the transfer by sale or lease of United States origin defense articles and services through the government-to-government foreign military sales (FMS) program or through the licensed commercial sales process. Section 3(a) of the Arms Export Control Act sets the general standards for countries or international organizations to be eligible to receive United States defense articles and defense services provided under this act. It also sets express conditions on the uses to which these defense items may be put. Section 3(a)(2) of the AECA specifically provides that to be eligible to purchase defense articles and services from the United States: ...[a] country or international organization shall have agreed not ... to use or permit the use of [a defense] article or related training or other defense service for purposes other than those for which furnished, unless the consent of the President has first been obtained.... Section 3(c) of the Arms Export Control Act further sets out the circumstances under which a nation may lose (a) its U.S. Foreign Military Financing, (b) its loan guarantees for purchases of U.S. defense articles and services, (c) its rights to have previously purchased U.S. defense articles or services delivered, (d) its rights to have previously made agreements for the sale of U.S. defense articles or services carried out. Section 3(c)(1)(A) of the Arms Export Control Act stipulates, in part, that: No credits (including participations in credits) may be issued and no guarantees may be extended for any foreign country under this Act as hereinafter provided, if such country uses defense articles or defense services furnished under this Act, or any predecessor Act, in substantial violation (either in terms of the quantities or in terms of the gravity of the consequences regardless of the quantities involved) of any agreement entered into pursuant to any such Act ... by using such articles or services for a purpose not authorized under section 4 or, if such agreement provides that such articles and services may only be used for purposes more limited than those authorized under section 4 for a purpose not authorized under such agreement.... Section 3(c)(1)(B) of the AECA adds that, under the above conditions: "[n]o cash sales or deliveries pursuant to previous sales may be made...." Section 3(g) of the Arms Export Control Act, enacted in November 1999, further requires that: Any agreement for the sale or lease of any article on the United States Munitions List entered into by the United States Government after the date of enactment of this subsection [November 29, 1999 ] shall state that the United States Government retains the right to verify credible reports that such article has been used for a purpose not authorized under section 4 or, if such agreement provides that such article may only be used for purposes more limited than those authorized under section 4, for a purpose not authorized under such agreement. The purposes for which sales of defense articles and services by the United States are authorized are detailed in Section 4 of the Arms Export Control Act. This section of the act states that defense articles and defense services shall be sold to friendly countries "solely for": "internal security" "legitimate self-defense" enabling the recipient to participate in "regional or collective arrangements or measures consistent with the Charter of the United Nations" enabling the recipient to participate in "collective measures requested by the United Nations for the purpose of maintaining or restoring international peace and security" enabling the foreign military forces "in less developed countries to construct public works and to engage in other activities helpful to the economic and social development of such friendly countries." It should be stressed that the Arms Export Control Act as amended, the Foreign Assistance Act of 1961 as amended, and predecessor acts do not define such critical terms as "internal security" and "legitimate self-defense." It remains for the President or the Congress, as the case may be, to define the meaning of such terms as they may apply to the question of a possible violation by a foreign country of an applicable agreement governing the sale of U.S. defense articles or defense services. Section 3(c)(2) of the Arms Export Control Act requires the President to report promptly to the Congress upon the receipt of information that a "substantial violation" described in Section 3(c)(1) of the AECA "may have occurred." This Presidential report need not reach any conclusion regarding the possible violation or provide any particular data other than that necessary to illustrate that the President has received information indicating a specific country may have engaged in a "substantial violation" of an applicable agreement with the United States that governs the sale of U.S. defense articles or services. Should the President determine and report in writing to Congress or if Congress determines by joint resolution pursuant to Section 3(c)(3)(A) of the Arms Export Control Act that a "substantial violation" by a foreign country of an applicable agreement governing an arms sale has occurred, then that country becomes ineligible for further U.S. military sales under the AECA. This action would terminate provision of credits, loan guarantees, cash sales, and deliveries pursuant to previous sales. The President could, under Section 3(c)(3)(B) of the AECA, continue to permit "cash sales and deliveries pursuant to previous sales" by certifying in writing to Congress that termination of such sales and deliveries would have a "significant adverse impact on United States security." Such a Presidential waiver could not be invoked, however, if Congress, under Section 3(c)(3)(A), had adopted or were to adopt a joint resolution finding that country ineligible. The President retains the prerogative of vetoing any such joint resolution. Congress would then have to override the veto in order to impose its will. Congress also has the option of adopting regular legislation imposing varying degrees of penalties upon any country for violations of the conditions of an applicable agreement regarding use of U.S.-supplied defense equipment. Such legislation would also be subject to the veto process. Once a country is made ineligible for sales or deliveries under the Arms Export Control Act provisions, it can regain its eligibility only when: (1) Under Section 3(c)(4) of the act, the President "determines that the violation has ceased" (the violation which led to the status of ineligibility in the first place), and (2) the country involved "has given assurances satisfactory to the President that such violation will not recur." Alternatively, Congress could pass regular legislation that would exempt the particular country from specific sanctions imposed through AECA procedures, although that legislation would be subject to a Presidential veto. It should be noted that the United States has additional options to prevent transfer of defense articles and services for which valid contracts exist short of finding a foreign country in violation of an applicable agreement with the United States. Authority for suspension of deliveries or defense items or cancellation of military sales contracts is found in Sections 2(b), 42(e)(1) and 42(e)(2) of the AECA. Section 2(b) of the Arms Export Control Act permits the Secretary of State, under the President's direction, to, among other things, determine "whether there shall be delivery or other performance" regarding sales or exports under the AECA in order that "the foreign policy of the United States is best served thereby." Section 42(e)(1) of the Arms Export Control Act states that: Each contract for sale entered into under sections 21, 22, 29 and 30 of this Act, and each contract entered into under section 27(d) of the Act, shall provide that such contract may be canceled in whole or in part, or its execution suspended, by the United States at any time under unusual or compelling circumstances if the national interest so requires. Section 42(e)(2)(A) of the Arms Export Control Act further states that: Each export license issued under section 38 of this Act shall provide that such license may be revoked, suspended, or amended by the Secretary of State, without prior notice, whenever the Secretary deems such action to be advisable. Thus, all government-to-government agreements or licensed commercial contracts for the transfer of defense articles or defense services may be halted, modified, or terminated by the Executive branch should it determine it is appropriate to do so. Use of this authority does not prejudice the larger question of whether a "substantial violation" of an applicable agreement governing use of U.S. arms did in fact occur. That question can still be answered affirmatively or negatively, or left unanswered, depending on how the President or the Congress chooses to deal with it. To date, the President has never taken the next step and actually determined that a violation did occur thus necessitating the termination of deliveries or sales or other penalties set out in Section 3 of the Arms Export Control Act.