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Iran/Arms Transaction: Legal Memoranda: Sale and Shipment of Military Equipment to Iran (1)
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Iran/Arms Transaction: Legal Memoranda: Sale and Shipment of Military Equipment to Iran (1)
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Culvahouse, Arthur B.: Files
Folder Title: Iran/Arms Transaction: Legal Memoranda:
Sale and Shipment of Military Equipment to Iran (1)
Box: CFOA 1131
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
\
\
THE WHITE HOUSE
11/24/86
WASHINGTON
JPsays:
If we ship arms under a
Finding regardless of amounts
arms Export control ace & to
it is legal not with standing
8,4 limit. Bell Smith sorular
in myn 1981 of meese agreed in you 86
as had Jr for cast fa Tow- town
cost $10000 per its expensive 50 mgn)
he not sure I and if 2000
stiel raising possibility of cost
of missile parts + Town was 100myu
DONALD T. REGAN
CHIEF OF STAFF
THE WHITE HOUSE
WASHINGTON
TO: A.B. CulvA House
FROM
WILLIAM B. LYTTON III
Deputy Special Counsellor
to the President
FYI
COMMENT
FILE
ACTION
Imm CUNTRA
THE WHITE HOUSE
WASHINGTON
August 4, 1987
MEMORANDUM FOR ARTHUR B. CULVAHOUSE,
FROM:
WILLIAM B. LYTTON III
W.B. JR. Glt
SUBJECT:
ARMS EXPORT CONTROL ACT
Attached is an outline of an argument as to why the Arms
Export Control Act was not violated by the 1985 arms
shipments.
I.
Introduction
The following are what we consider the best arguments for
the legality of U.S. consent to retransfer of U.S. -origin arms
from Israel to Iran in 1985. Attached are copies of a more
extensive paper on the subject by Joy Yanagida (Tab A) as well as
a Memorandum for the Attorney General prepared by the Department
of Justice's Office of Legal Counsel (Tab B).
II. The recognized exception to the transfer requirements of
the AECA for transactions conducted as covert actions pursuant to
the National Security Act also extends to retransfers.
A. The Arms Export Control Act ("AECA"), 22 U.S.C. Section
2751, et. seq., contains several specific requirements which must
be met before the USG transfers defense articles or defense
services to other countries. On its face, the AECA admits of no
exception and there is little doubt that the 1986 direct
transfers to Iran did not satisfy express requirements of the
AECA (Yanagida at 2-6).
B. Congress, however, has acknowledged that an exception
to the AECA transfer requirements exists for transactions
conducted as covert actions pursuant to the National Security
Act, 50 U.S.C. Section 401, et. seq.
1. The National Security Act provides certain specific
functions to be performed by the NSC and CIA, but also states
that the NSC shall "perform[ ] such other functions as the
President may direct
"
(50 U.S.C. Section 402) and the CIA is
authorized "to perform such other functions and duties related to
intelligence affecting the national security as the National
Security Council may from time to time direct " (50 U.S.C.
Section 403 (d) )
2. In 1981, the Departments of Justice and State and
the CIA concluded that "it seems clear that Congress had not
regarded the Foreign Assistance Act (FAA) and the AECA as an
exclusive body of law which fully occupy the field with respect
to U.S. arms transfers." (Yanagida at 9).
3. In 1985, Congress enacted legislation recognizing
the President's right to transfer arms as covert actions outside
the aegis of the AECA.
a. 50 App. U.S.C. Section 415 (a) (1) provides:
the transfer of a defense article or defense
service exceeding $1,000,000 in value by an
intelligence agency to a recipient outside that
agency shall be considered a significant
anticipated intelligence activity
By deeming such arms transfers as significant
anticipated intelligence activities, Congress imposed
certification and reporting requirements for arms transfers
conducted as covert actions pursuant to the National Security
Act, but did not prohibit such transfers or make them subject to
the AECA.
b. The House Report to the above law made clear
that Congress recognized, and at least condoned the practice,
that the executive was making arms transfers as covert actions,
outside the AECA.
[C]overt transfers of military equipment or services
bypass the established statutory framework for the
consideration and approval of security assistance
programs. Being secret, these transfers avoid public
commentary, congressional review and debate.
Therefore, they occur without many of the usual checks
and balances built into Foreign Assistance Act and the
Arms Export Control Act
In the past, notice of some transfers of significant
military equipment had not been provided until after
the fact. H. Rep. 99-106 (I) at 10-11, 99th Cong. 1st
Sess., May 15, 1985 (to accompany H.R. 2419).
C. The AECA provides that the President may not consent to
the retransfer of the arms from an original transferee to a third
nation "unless the United States itself would transfer the
defense article under consideration to that country." 22 U.S.C.
Section 2753. The AECA also contains some additional
requirements concerning retransfer. (Yanagida at 14-15).
D. Given the existence of a recognized exception to AECA
requirements in the case of a covert arms transfer pursuant to
the National Security Act, there is simply no logical reason why
the USG cannot conduct or approve a covert arms retransfer
outside the AECA.
E. The Hughes-Ryan Amendment (22 U.S.C. Section 6422)
prohibits the expenditure of funds by the CIA for operations
abroad unless the President finds such an operation is "important
to the national security."
1. Although it is unclear that even an unwritten
finding was made for the August/September shipment, no CIA or
other U.S. Government funds were expended in this retransfer and
thus the need for a finding is doubtful.
2. Although there may have been a signed retroactive
finding, there was no prospective written finding for the
November 1985 retransfer, in which the CIA played a role.
- The need for a finding for this shipment
is not clear as CIA's General Counsel
Stanley Sporkin recognized.
- Even though it has been the President's
practice, there is no statutory requirement
that a finding be written.
- The November shipment was ultimately
returned to the Israelis.
F. Section 501 of the National Security Act requires
Congressional notification of "any significant anticipated
intelligence activity" which is "carried on for or on behalf of
any entity of the United States," but states that such
notification need only be made "in a timely fashion" (50 U.S.C.
Section 413(b)). Section 501 also expressly recognizes that the
notification requirement applies only "to the extent consistent
with all applicable authorities and duties, including those
conferred by the Constitution upon the executive and legislative
branches of Government
=
III. On December 17, 1986, OLC prepared a memorandum for the
Attorney General concerning the legality of the arms transfers.
OLC concluded that the 1985 transactions were in the nature of
direct transactions from the U.S. to Iran, using Israel as a
conduit (Tab B at 16-17).
A. This opinion, however, was based on incomplete
information. Evidence adduced in the months since December 1986
suggests that in 1985 the President would not have approved
direct transfers to Iran and casts doubt on OLC's presumption
that the U.S. firmly agreed to replenish in advance of Israeli
shipments.
IV. That section of the AECA providing for criminal sanctions
makes criminal the violation of two specific sections of the AECA
(22 U.S.C. Section 2778). Neither section deals with retransfer
requirements. The export of certain defense articles and defense
services without a license is a criminal violation, but seems to
refer only to exports from the U.S.
TAB A
ARMS SHIPMENTS
TABLE OF CONTENTS
Page
Summary
1
1986 Direct Transfers by the United States
3
1.
Authorizing Legislation
3
The National Security Act
3
Congressional Acquiesence in Covert Arms
Transfers
4
2.
Hughes-Ryan Requirements
6
3.
Notification to Congress
6
Justice Department Memorandum
8
4.
AECA Restrictions
8
AECA Anti-terrorism Restrictions
9
AECA Reporting Requirements
11
1985 Retransfers by Israel
12
1.
Authorizing Legislation
13
A.
AECA Restrictions
13
AECA Retransfer Restrictions
14
Consent by the President or his
Designee
14
Demilitarization
14
Report of Retransfer Agreement
14
Original Acquisition Cost
14
B.
The National Security Act
15
(i) Retransfers as Covert Actions
15
Justice Department Memorandum
15
(ii) NSC Staff Involvement
16
Justice Department Memorandum
17
2.
Hughes-Ryan Requirements
17
3.
Notification to Congress
18
- 1. -
ARMS SHIPMENTS
Summary
This memorandum describes the law applicable to the seven
shipments of U.S.-origin arms to Iran during the period August
1985 to October 1986. The United States made four direct ship-
ments in 1986, authorized as covert actions pursuant to a written
Presidential finding. In 1985, Israel retransferred three
shipments of U.S.-origin arms to Iran, without written U.S.
authorization. For the U.S. and Israeli shipments, respectively,
described below are (a) the authorizing legislation; (b)
requirements of a "Presidential finding" under the Hughes-Ryan
Amendment insofar as the CIA may have been involved; and (c)
reporting requirements.
Both the U.S. and Israeli shipments comprised TOW and HAWK
missiles and components of the latter. All are items on Category
IV of the Munitions List, which includes "guided, tactical and
strategic missiles, launchers and systems. In general, export
of defense articles and services on the Munitions List 1/ may be
authorized through one of four routes, two of which are inapplic-
able here:
(1) as a private transaction licensed under the Interna-
tional Traffic in Arms Regulations, 22 C.F.R. Pt. 121 et
seq. ("ITAR"), regulations implementing the the Arms Export
Control Act (22 U.S.C. §§ 2751-2796c) ("AECA");
(2) as a governmental transfer under the military assistance
program of the Foreign Assistance Act of 1961 (22 U.S.C.
$$ 2151-2429a) ("FAA");
(3) as a governmental transfer authorized as a foreign
military sale ("FMS") under the AECA; or
(4) as a covert action pursuant to the National Security
Act, 50 U.S.C. $$ 401 et seq. If CIA funds are involved in
the action, $ 662 of the FAA, 22 U.S.C. $ 2422 ("the Hughes-
Ryan Amendment"), also requires a Presidential finding that
the action is important to the national security of the
United States.
Each route triggers reporting requirements.
Neither the ITAR nor the FAA govern the transactions at
issue. The direct U.S. sales were exempt from the ITAR because
1.
By terms of 15 C.F.R. $ 270.10, Munitions List items are not
subject to Export Administration Regulations (15 C.F.R. Pt.
370 et seq.) implementing the Export Administration Act, 50
App. §§ 2401 et seq., ("EAA").
- 2 -
U.S. Governmental transfers are so exempt. 2/ The arms retrans-
ferred by the Israelis almost certainly were not obtained through
the ITAR, and therefore are not subject to ITAR restrictions,
because TOWs and HAWKs are not available commercially (See testi-
mony of Sam Cummings to the Tower Commission). The military
assistance program authorized under the FAA is also inapplicable,
since the U.S. did not use the program to transfer the TOWs and
HAWKs to Iran, and has not used the program to transfer arms to
Israel.
The direct U.S. shipments do not raise substantial legal
issues. They were authorized as covert actions, thus obviating
issues of compliance with the AECA. As required by the Hughes-
Ryan Amendment, the President found that the operation was
"important to the national security.' There are substantial
grounds for deferring congressional notification, though
questions on the duration of the deferral may well be revisited
by Congress.
The Israeli retransfers pose more complex legal questions.
Since Israel obtained the arms from the United States pursuant to
the AECA, they already were subject to AECA restrictions on
retransfer. Israel was obliged to obtain U.S. authorization to
retransfer; as well, it sought a U.S. commitment to replenish
Israeli stocks. The retransfer was not handled as a routine AECA
retransfer. The AECA retransfer limitations, more exacting than
those on direct shipments, were not satisfied. As a legal
matter, it is likely but not conclusive -- that the President
may authorize retransfers as covert actions just as he may with
direct shipments.
As a factual matter, presuming information in the Tower
Report is correct, it is not clear that the President authorized
the shipments before the fact, especially since his concurrence
was verbal. Indeed, it is not even clear that he intended to
authorize them as covert actions, though one may fairly deduce
that he did so.
2.
$ 38 (b) (2) of the AECA, 22 U.S.C. $ 2778, provides:
Except as otherwise specifically provided in [the ITAR]
regulations issued under subsection (a) (1), no defense
articles or defense services designated by the President
under subsection (a) (1) may be exported or imported without
a license for such export or import, issued in accordance
with this Act and regulations issued under this Act, except
that no license shall be required for exports or imports
made by or for an agency of the United States Government (A)
for official use by a department or agency of the United
States Government, or (B) for carrying out any foreign
assistance or sales program authorized by law and subject to
the control of the President by other means.
(emphasis added throughout, unless otherwise specified.)
- 3 -
The Hughes-Ryan Amendment requirement for a finding is
triggered by the expenditure of funds "by or on behalf of the
CIA." A fair case can be made that the requirement did not apply
to the first two Israeli retransfers, since they did not involve
the CIA; and that it was satisfied for the third and final
retransfer, (the only one that involved the CIA) because the
retransfer was authorized by the President.
It may well be that notification to the Congress is not
required by statute; that authorization to retransfer does not
per se constitute "intelligence activity" or "special activity."
If notification nonetheless is deemed applicable or desirable,
the arguments for or against postponement parallel those applic-
able to direct shipments.
1986 Direct Transfers by the United States
The 1986 arms transfers were authorized as a covert action
undertaken pursuant to the National Security Act of 1947. Upon a
finding by the President on January 17, 1986 that arms shipments
to Iran were "important to national security,' four shipments
took place:
Feb. 20, 1986
1000 TOWs
May 24, 1986
1 pallet of HAWK spares
Aug. 3, 1986
3 pallets of HAWK spares
Oct. 29, 1986
500 TOWs
Authorization of the covert action rendered inapplicable the
complex of restrictions under either the AECA (for foreign
military sales ("FMS") conducted by the U.S. Government) or the
FAA (which establishes nearly identical provisions governing the
military assistance program). Such restrictions probably could
not have been satisfied in the case of transfers to Iran.
1. Authorizing Legislation.
The National Security Act.
It is now accepted doctrine the Executive Branch may
transfer items on the Munitions List as covert actions not
subject to the AECA or the FAA. Such transfer may be effected
through: first, a DOD transfer of the weapons to the CIA under
the Economy Act of 1932, 3/ which permits a federal agency to
procure equipment from another; and second, a CIA transfer to the
foreign country under its general authority conferred by the
National Security Act of 1947.
3.
$ 601 of P.L. 98-216; $ 1(2) of 98 Stat. 3, Feb. 14, 1984;
31 U.S.C. § 1535, then 31 U.S.C. § 686.
- 4 -
Neither the Economy Act nor the National Security Act
authorize covert arms transfers expressly. Section 601 (a) of the
Economy Act simply provides:
The head of an agency or major organizational unit
within an agency may place an order with a major organiza-
tional unit within the same agency or another agency for
goods or services if --
(1) amounts are available;
(2) the head of the ordering agency or unit decides
the order is in the best interest of the United
States Government;
(3) the agency or unit to fill the order is able to
provide or get by contract the ordered goods or
services; and
(4) the head of the agency decides ordered goods or
services cannot be provided by contract as
conveniently or cheaply by a commercial
enterprise.
The CIA's general authority to conduct covert operations
requires that agency, under NSC direction, to perform services of
common concern for the benefit of existing intelligence agencies
and to
perform such other functions and duties related to intelli-
gence affecting the national security as the National
Security Council may from time to time direct. 4/
Congressional Acquiesence in Covert Arms Transfers. As
recently as 1981, there had been concern over whether covert arms
transfers could take place outside AECA auspices. 5/ By 1985,
Congress recognized that arms transfers constitute "significant
intelligence activities." It imposed certification and reporting
requirements, but neither prohibited such transfers nor rendered
4.
$ 102 (d) of the National Security Act of 1947, 50 U.S.C.
$ 403 (d).
5.
Letter, William French Smith to William J. Casey, October 5,
1981, and accompanying memorandum of the Legal Adviser. See
also Memorandum for Office of the Legal Counsel to Attorney
General, undated but post-November 1986.
- 5 -
them subject to the AECA or FAA restrictions. 6/ 50 App. U.S.C.
$ 415 (a) (1) provides:
the transfer of a defense article or defense service exceed-
ing $1,000,000 in value by an intelligence agency to a
recipient outside that agency shall be considered a signifi-
cant anticipated intelligence activity for the purpose of
[section 501 of the National Security Act of 1947.] 7/
The House Report to P.L. 99-569 makes clear that Congress
recognized that arms were being transferred under the guise of
covert activity:
[C]overt transfers of military equipment or services bypass
the established statutory framework for the consideration
and approval of security assistance programs. Being secret,
these transfers avoid public commentary, congressional
review and debate. Therefore, they occur without many of
the usual checks and balances built into the Foreign Assist-
ance Act and the Arms Export Control Act.
Section 502 (b) will not require prior notification of
all covert military transfers, only those which involve
expensive, technologically important items of military
equipment
Thus, the Committee is creating a rule that
a transfer of an item of a value in excess of $1,000,000 is
per se "significant"; and leaving transfers of an item of a
value of less than $1,000,000 to be determined as the
Intelligence Oversight Act and its legislative history
dictate
The propriety of transferring arms as covert actions,
outside the aegis of the AECA, is well-established.
6.
Section 403 (a) of the FY 1986 Intelligence Authorization Act
(P.L. 99-169, 99 Stat. 1002, 1006, Dec. 4, 1985) ("IAA"),
incorporated permanently into the National Security Act of
1947 by section 602 of the FY 1987 IAA (P.L. 99-569, Oct.
27, 1986).
7.
Section 501 is discussed infra.
Separate memoranda discuss 50 App. U.S.C. $ 415 (a) (3), which
provides:
An intelligence agency may not transfer any defense
articles or defense services outside the agency in
conjunction with any intelligence or intelligence-related
activity for which funds were denied by the Congress.
8.
H. Rep. 99-106 (I) at 10-11, 99th Cong. 1st sess., May 15,
1985 (to accompany H.R. 2419).
- 6 -
2. Hughes-Ryan Requirements. Section 662 of the FAA, 22
U.S.C. $ 2422, the Hughes-Ryan Amendment, provides in part:
No funds appropriated under this authority of this or any
other Act may be expended by or on behalf of the Central
Intelligence Agency for operations in foreign countries,
other than activities intended solely for obtaining
necessary intelligence, unless and until the President finds
that each such operation is important to the national
security of the United States
9/
The President made the requisite finding on January 17, 1986. 10/
The sufficiency of that finding has not yet been challenged.
3. Notification to Congress. Section 501 of the National
Security Act of 1947, 50 U.S.C. § 413, requires timely
notification to Congress of "significant anticipated intelligence
activities." There is no dispute that notification was required;
as noted supra, covert transfers of defense articles in excess of
$1,000,000 are now per se "significant anticipated intelligence
activities" and automatically trigger the requirement. There may
be some question, however, over the duration for which
notification was deferred.
The statute does not require prior notification, but rather
takes due regard of the need for secrecy in conducting covert
operations. Section 501 (a) provides in part:
To the extent consistent with all applicable
authorities and duties, including those conferred by the
Constitution upon the executive and legislative branches of
the Government, and to the extent consistent with due regard
for the protection from unauthorized disclosure of
classified information and information relating to
9.
Section 3.1 of E.O. 12333 (3 C.F.R. comp. 1983 at 201-220,
Dec. 4, 1981), provides that the Hughes-Ryan Amendment
"shall apply to all 'special activities' as defined in this
Order." Section 3.4 (n) defines "special activities" as
activities
conducted in support of national foreign policy
objectives abroad which are planned and executed so
that the role of the United States Government is not
apparent or acknowledged publicly, and functions in
support of such activities, but which are not intended
to influence Unitd States political processes, public
opinion, policies, or media and do not include
diplomatic activities or the collection and production
of intelligence or related support functions.
10. Reprinted in the Tower Rept. at B-58-60.
- i -
intelligence sources and methods, the Director of Central
Intelligence and the heads of all departments, agencies, and
other entities of the United States involved in intelligence
activities shall --
(1) keep the ["intelligence committees"] fully and
currently informed of all intelligence activities which
are the responsibility of, are engaged in by, or are
carried out for or on behalf of, any department,
agency, or entity of the United States, including any
significant anticipated intelligence activity,
Subordination of the notification requirement to the
constitutional "authorities and duties" of the executive
recognizes that covert actions are an executive responsibility;
that premature disclosure could be life-threatening; and that
legislation which did not accomodate the need for secrecy would
be deemed to traduce Presidential prerogatives. 11/
Section 413 (b) expressly contemplates that notice must
sometime be deferred:
The President shall fully inform the intelligence
committees in a timely fashion of intelligence operations in
foreign countries, other than activities intended solely for
obtaining necessary intelligence, for which prior notice was
not given under subsection (a) of this section and shall
provide a statement of the reasons for not giving prior
notice
11. See colloquoy between Senators Javits and Huddleston, 126
Cong. Rec. § 17693 (1980), cited in "Memorandum for the
Attorney General, Re: The President's Compliance with the
'Timely Notification' Requirement of Section 501 (b) of the
National Security Act," prepared by the Office of Legal
Counsel, Dec. 17, 1986.
But cf. the House Report to new § 403 of the National
Security Act, supra at note 8, which reveals that the House
expected that Congress would be notified before covert arms
sales occurred:
In the past, notice of some transfers of significant
military equipment had not been provided until after
the fact.
Accordingly, the Committee has adopted
Section 502 (b) [ultimately $ 403 (a) of the IAA] to
require prior notification of all military equipment
transfers whose value exceeds $1,000,000 per unit.
- 8 -
Justice Department Memorandum. The OLC memorandum of
December 17, 1986 reviewed the constitutional prerogatives of the
President in the conduct of foreign covert operations, as well as
the legislative history of the statute. It concluded:
Because the recent contacts with elements of the Iranian
government could reasonably have been thought to require the
utmost secrecy, the President was justified in withholding
section 501 (b) notification during the ongoing effort to
cultivate those individuals and seek their aid in promoting
the interests of the United States.
We do not foreclose the possibility that Congress will seek
to revisit these issues.
4. AECA Restrictions. If the transfers had not been
authorized as covert actions, they may not have satisfied AECA
requirements. Even if the requirements were inapplicable to the
direct transfers, whether or not they may be satisfied has legal
consequences for the Israeli retransfers. They are set out
below.
Initially, $ 4 of the AECA, 22 U.S.C. $ 2754, establishes
substantive conditions related to end use: that the arms be used
for internal security, self-defense, participation in collective
security arrangements, or to assist in public works. 12/ The
only possible candidate among these justifications is that the
arems were to have been used for Iranian self defense -- a
difficult case to sustain, albeit a subjective one.
12. That section provides:
Defense articles and defense services shall be sold or
leased by the United States Government under this Act to
friendly countries solely for internal security, for legiti-
mate self-defense, to permit the recipient country to
participate in regional or collective arrangements or
measures consistent with the Charter of the United Nations,
or otherwise to permit the recipient country to participate
in collective measures requested by the United Nations for
the purpose of maintaining or restoring international peace
and security, or for the purpose of enabling foreign mili-
tary forces in less developed friendly countries to con--
struct public works and to engage in other activities
helpful to the economic and social development of such
friendly countries.
- 9 -
Additional substantive conditions are established by AECA
$ 3 (a), 22 U.S.C. $ 2753(a), which provides that "No defense
article or defense service shall be sold or leased by the United
States Government under this Act to any country" unless four
conditions are met. The first two would have been satisfied in
the case of Iran; the last two are more problematic.
The first condition is that "the President find" that the
transfer "will strengthen the security of the United States and
promote world peace. Such a finding was made on January 2,
1973. (Presidential Determination 73-10, 3 C.F.R. 1105 (1971-1975
Comp.) ) The State Department, which has been delegated this
authority, deem the finding to remain effective to date.
(Congressional Presentation Document for FY 1987, Vol. I at 119
(1986))
Second, the recipient must agree not to transfer the arms or
permit third party use for unauthorized purposes "unless the
consent of the President has first been obtained. The State
Department deems the non-transfer agreements Iran made before
1980 to remain in force.
The third requirement is problematic. The recipient country
must agree that it "will provide substantially the same degree of
security protection afforded to such article or service by the
United States Government." (AECA $ 3 (a) (3)).
The fourth requirement under $ 3 (a) (4) subsumes the host of
other requirements under the AECA. No sale shall take place
unless "the country or international organization is otherwise
eligible to purchase or lease defense articles or defense
services."
AECA Anti-terrorism Restrictions. AECA § 3 (a) (4) in turn
requires consideration of two anti-terrorism prohibitions, both
of which may be waived for national security reasons. The
principal such prohibition, relating to states that "grant
sanctuary from prosecution," probably was not trigerred. 13/ A
second prohibition relating to states that "repeatedly provide
support" for terrorism is applicable to AECA transfers to Iran,
but since it was enacted August 27, 1986, it would apply only to
13. $ 3 (f) of the AECA, 22 U.S.C. § 2753 (f) provides in part:
(1) Unless the President finds that the national security
requires otherwise, he shall terminate all sales under this
Act to any government which aids or abets, by granting
sanctuary from prosecution to, any individual or group which
has committed an act of international terrorism.
To date, no determination has been made that Iran falls under
this category.
- 10 -
the last transfer. 14/ On January 23, 1984 the Secretary of
State determined for purposes of $ 6 of the EAA, that Iran is a
country which has repeatedly provided support for acts of
international terrorism (49 Fed. Reg. 2836). There is some
question as to whether these requirements, unlike other AECA
requirements, may be deemed to govern covert action transfers:
its language is categorical; it was promulgated as part of a
separate anti-terrorism bill; and it was passed subsequently to
amendments to $ 403 of the National Security Act, 50 U.S.C. $
415, through which Congress is deemed to have recognized the
propriety of covert action transfers outside the aegis of the
AECA or FAA. On the other hand, these factors support the
contrary position: the provision expressly amends the AECA; it is
neither an independent statute nor an amendment to the National
Security Act.
14. Section 40 to the AECA now provides in part:
(a) Except as provided in subsection (b), items on
the United States Munitions List may not be exported to
any country which the Secretary of State has
determined, for the purposes of [section 6 of the
Export Administration Act of 1979], has repeatedly
provided support for acts of international terrorism.
(b) The President may waive the prohibition
contained in subsection (a) in the case of a particular
export if the President determines that the export is
important to the national interests of the United
States and submits to the Congress a report justifying
that determination and describing the proposed export.
Any such waiver shall expire at the end of 90 days
after it is granted unless the Congress enacts a law
extending the waiver.
Section 509 (a) of the Omnibus Diplomatic Security and
Anti-Terrorism Act of 1986 (Pub. L. 99-399, 100 Stat. 874) ;
22 U.S.C. $ 2790.
- 11 --
AECA Reporting Requirements. The AECA carries a host of
reporting requirements. Both anti-terrorism provisions noted
above require congressional notification in the event of a
Presidential finding or waiver:
-- If the President finds that the national security re-
quires a sale to a country that aids or abets terrorism by
providing sanctuary to terrorists, AECA § 3 (f) requires a
report to the Speaker of the House and Committee on Foreign
Relations. 15/
--- If the President waives the ban on exports to countries
that have repeatedly provided support for acts of interna-
tional terrorism, AECA $ 40 requires a report to the Con-
gress.
Neither section specifies a deadline.
AECA $ 28 (b) imposes additional reporting requirements,
requiring the President to report quarterly sales of major
defense equipment for $7,000,000 or more. The transactions would
have triggered this threshold, provided: (a) the sales would not
have been aggregated; and (b) for want of a better proxy, costs
would have approximated DOD "standard costs" rather than the
prices charged Iran. 16/
15. By comparison, the corresponding for Presidential waiver
under section 620A of the FAA requires publication of the
waiver in the Federal Register and notification to the House
Committee on Foreign Affairs and the Senate Committee on
Foreign Relations "at least fifteen days before the waiver
takes effect."
16. DOD established its price to the CIA on the basis of
"standard costs" prescribed in chapter 2 of Army Regulation
37-60 (Pricing for Materiel and Services, July 1986):
Feb. 20, 1986
1000 TOWs
$3.9 m
(Iran pd $12 m)
May 24, 1986
1 pallet of HAWK spares
Aug. 3, 1986
3 pallets of HAWK spares
total est. 4.3 m
(Iran pd $8m)
Oct. 29, 1986
500 TOWs
1.7 m
(Iran pd $7m)
(Total paid by Iran - $27 m)
Total - $9.9 m
According to the GAO, DOD's standard cost should have been
$2.1 million more, bringing the total "standard cost" for
all U.S. transactions to $11.3 million.
- 12 --
In sum, the U.S. transfers were properly promulgated as
covert actions, pursuant to a written finding by the President.
Deferral of congressional notification is justifiable, but
questions on the duration of deferral are likely.
1985 Israeli Retransfers
In 1985, the Government of Israel made three shipments of
U.S. -origin arms to Iran:
Aug. 30, 1985
100 TOWs
Sept. 14, 1985
408 TOWs
Nov. 25, 1985
18 HAWKs
part of an abortive 120 HAWK shipment
The President has stated that he cannot recall whether he
authorized the first two retransfers before they took place. 17/
At best, such authorization was verbal and appparently no
contemporaneous written record was made. Authorization for the
November shipment was conferred, but not memorialized in writing.
The Israeli retransfers pose issues more complex than those
raised by the direct transfer. Since Israel initially obtained
the arms through an FMS transaction under the AECA, the arms were
subject to AECA retransfer restrictions. These restrictions are
more exacting than those applicable to direct shipments. Had
they been applicable, they would not have been satisfied.
Indeed, North appears to have been so advised. The cover memo to
the January 17, 1987 finding stated:
We have researched the legal problems of Israel selling U.S.
manufactured arms to Iran. Because of the requirement in
U.S. law for recipients of arms sales to notify the U.S.
Government of transfers to third countries, I do not
recommend that you agree with the specifics of the Israeli
plan.
The cover memo to the draft January 6, 1986 finding,
inadvertently signed by the President, acknowledged the defects
of an AECA retransfer and proposed to authorize the retransfer as
a covert action not subject to the AECA:
Since the Israeli sales are technically a violation of our
Amrs Export Control Act embrgo for Iran, a Presidential
Covert Action Finding is required in order for us to allow
the Israeli transfers to proceed, for our subsequent
replenishment sales to Israel, or for other assistance which
may be deemed appropriate (e.g. intelligence) 18/
17. Tower Report at III-7.
There the have his evidence that
18. Tower Report at B-59.
the cover memo wer signed seen
- 13 --
At the same time, there are some hurdles to making the claim
that the AECA was rendered moot because the operation was a
covert action. Specifically, it is not clear that:
(i) the President or his designee so authorized the first
two transfers before they occurred;
(ii) the executive may exempt retransfers from AECA
restrictions by characterizing them as covert actions; and
(iii) that the NSC staff is authorized to undertake covert
activity normally undertaken by the CIA, which is authorized
by statute and subject to oversight.
1. Authorizing Legislation.
A. AECA Restrictions. The AECA incorporates the
strictures on direct transfers into the restrictions on
retransfers. The somewhat circuitous provisions of AECA $
3 (a) (2), 22 U.S.C. § 2753 (a) (2), require FMS recipients to commit
not to retransfer the arms "unless the consent of the President
has first been obtained," a responsibility delegated to the
Secretary of State by E.O. 11958 19/ In turn, the consent of the
President or his designee may not be granted "unless the United
States itself would transfer the defense article under
consideration to that country." As discussed above, it is not
clear that the United States could have made the transfer under
the AECA. But since the United States could --- and did -- make
the transfer under the National Security Act, one could argue
that § 3 (a) was satisfied.
19. 42 FR 4311, 3 CFR 1977 Comp at 79, Jan. 18, 1977.
- 14
AECA Retransfer Restrictions. The AECA poses additional
restrictions on retransfer of FMS arms, some of which if
applicable, would not have been satisfied. These are set out
principally in $ 3 of the AECA, 22 U.S.C. $ 2753:
--- Consent by the President or his Designee. As noted
above, the President or his designee, the Secretary of
State, must agree to a retransfer before it takes place.
$ 3 (a) (2).
-- Demilitarization. The President may not consent to the
transfer of "significant defense articles" unless the items
are "demilitarized" or the recipient commits to the United
States not to retransfer absent consent by the President.
The statute expressly requires that the commitment be in
writing. § 3(a). HAWKs and TOWs have been designated
"significant defense articles" as defined by 22 CFR
121.1(b).
-- Report of Retransfer Agreement. The President is re-
quired to "promptly submit a report" to the Speaker of the
House and Senate Committee on Foreign Relations on "the
implementation" of each retransfer agreement.
-- Original Acquisition Cost. If the "original acquisition
cost" of the transfer exceeds $14 million, the President may
not consent to the transfer unless he submits a
certification to Congress. AECA $ 3 (d) (1), 22 U.S.C. $
2753 (d) (1) prohibits the President from not granting his
consent if "a transfer of any major defense equipment [is]
valued (in terms of its original acquisition cost) at
$14,000,000 or more," unless he has certified to the Con-
gress the identity of the transferor, the articles in
question, the recipient, and the date and purpose of the
proposed retransfer. These Presidential responsibilities
have been delegated to the Secretary of State pursuant to
E.O. 11958, supra at 13. It is debatable whether the
threshold amounts are satisfied. 20/
20. We do not know the "original acquisition cost" of the
shipments, but the "standard cost" established under Army
regulations is set out as a possible proxy:
Aug/Sept 1985 508 TOWs
amt the Army billed the CIA
as "standard cost" to resupply Israel $1.8 m
(+$6 m pd by Iran to Israel)
November 1985 18 HAWKS del'd
($5 m pd by Iran)
scheduled delivery and Iranian payment:
120 HAWKs
$24.72 m
-- 15 -
At minimum, technical requirements of the AECA ordinarily
applicable to retransfer were not satisfied.
We do not suggest that Israel failed to comply with any
applicable retransfer restrictions, since it may well have had
substantial reason to believe that, through then National
Security Adviser Robert McFarlane, the President had consented to
the retransfer. 21/ Thus, we have not considered applicability
of sanctions of AECA $ 3(c), 22 U.S.C. 2753(c), which bar certain
credits, guarantees, sales and deliveries to countries that have
breached the aforementioned retransfer conditions.
B. The National Security Act.
(i) Retransfers as Covert Actions. The better
view may be that the authorization for the retransfers was a
covert action exempt from the AECA and the FAA. This is not
conclusive, however. Since the restrictions on FSM restransfer
had already attached, could the Executive vitiate them by
authorizing retransfer as a covert action? or did the restric-
tions "run with" the arms?
On the one hand, Congress seems to view retransfers as
qualitatively different from initial transfers: additional, more
stringent reporting and certification requirements are imposed on
retransfer. The Congress has acquiesced in the practice of
bypassing AECA requirements in the case of initial tranfers, but
it is difficult to say that it has done so in the case of
retransfers.
On the other hand, one could deem a retransfer to be a
subset of transfers. If the President could authorize a transfer
outside AECA auspices, then a retransfer and commitment to
replenish would be subsumed under the recognition of overall.
authority. Authorization to retransfer is after all, within
Presidential responsibilities to conduct foreign affairs and act
as Commander-in-Chief. A role for Congress has developed, too,
legislating substantive restrictions that in some cases require
Congressional authorization for specific transactions. Its
authority is grounded in its responsibilities over foreign
commerce, appropriations and to implement laws necessary and
proper to implement its powers. These responsibilities are often
more attenuated in the context of retransfers instead of direct
shipments. A direct shipment introduces items into the stream of
foreign commerce and requires significant expenditures of funds.
A retransfer may not.
Justice Department Memorandum. OLC's view is that these
were not retransfers at all, but direct shipments. The United
21. See Tower Rept. at III-7 and B-14-21.
- 16 -
States simply used Israel as an instrument of convenience to
accomplish U.S. objectives. As a legal matter, this leaves open
the question of whether a retransfer could be deemed a covert
action. As a factual matter, it ignores the difference in
political implications of transfers and restransfers. For
example, on August 2, 1985, prior to any of the retransfers,
Robert McFarlane says he told David Kimche that the United States
probably would not sell arms directly to Iran, but was open to
the possibility of Israeli retransfers. 22/ The purpose of the
President's finding on January 17, 1986 was to stop relying on an
Israeli conduit and ship arms directly -- another indication that
transfers and retransfers have qualitatively different
ramifications.
In short, it is not a foregone conclusion that retransfer of
FMS items, like direct shipments, may be deemed exempt from the
FAA or AECA through designation as a covert action.
(ii) NSC Staff Involvement. The second question in
characterizing the authorization to retransfer as a covert
operation is that the NSC staff undertook the action, thus
nominally avoiding Congressional restrictions, oversight and
reporting requirements. The CIA, which was involved only
incidentally, is authorized to "perform such other functions and
duties related to intelligence affecting the national security as
the National Security Council may from time to time direct.
$ 102 (d) of the National Security Act of 1947, as amended, 50
U.S.C. $ 403 (d). Its actions are subject to the explicit report-
ing requirements § 662 of the FAA and $ 501 of the National
Security Act of 1947, as amended, as well as the continuing
oversight of the intelligence committees.
Such activities are not explicitly within the prescribed
ambit of the NSC staff. Indeed, neither the NSC nor its staff,
it is said in other contexts, is an intelligence agency.
E.O. 12333 does not identify either to be a member of the
Intelligence Community. The affirmative duties of the NSC
proper, the Council, are quite general. The National Security
Act describes the duties of the Council as: "In addition to
performing such other duties as the President may direct
"
50 U.S.C. § 401 (b). E.O. 12333, which is said to elaborate NSC
staff duties, makes only passing reference to the possibility
that agencies other than the CIA may conduct intelligence activi-
ties. It does not expressly identify the NSC staff as one of the
agencies. Section 1.8(e) of E.O. 12333 provides that the CIA
shall:
Conduct special activities approved by the President. No
agency except the CIA
may conduct any special activity
unless the President determines that another agency is more
likely to achieve a particular objective.
22. Tower Rept. at III-6.
- 17 -
Some may question whether the National Security Act and E.O.
12333 are affirmative grants of authority to the NSC staff to
conduct covert operations. Some may also question whether the
President, pursuant to his executive power and plenary authority
over foreign affairs, may direct his personal staff to undertake
activity that otherwise would be subject to statutory constraints
and Congressional oversight. The case for implementation by the
CIA is an easier one to make.
Justice Department Memorandum. Citing the 1981 example, the
Justice Department concluded that "under the executive branch's
prior interpretation of the Arms Export Control Act, this Act is
inapplicable to the arms transfers to Iran." (Memorandum for the
Attorney General from Charles J. Cooper, undated). The OLC
memorandum stated:
We understand that the arms transfer to Iran had an
intelligence objective among its objectives. Accordingly,
under prior precedent, section 102 (d) of the National
Security Act furnishes authority for the President's action,
and the restrictions of the Arms Export Control Act do not
apply.
2. Hughes-Ryan Requirements.
As set out supra at 10, the Hughes-Ryan Amendment prohibits
funds from being expended "by or on behalf of the CIA for opera-
tions in foreign countries" unless and until the President finds
that such operation is "important to the national security of the
United States.' It is not clear whether such a finding was made
for the August/September 1985 retransfer, since it was in any
event unwritten. 23/ It may well be that the Hughes-Ryan Amend-
ment does not require such finding:
-- No CIA funds were spent in authorizing the retransfer.
At best, the CIA had a latent role in that transaction,
providing transport for the U.S. replenishment of Israeli
stock on May 23, 1986 -- some nine months after the shipment
after a finding authorized such activity.
23. In the State Department view, such findings need not be
written; Memorandum, Office of the Legal Adviser to the
White House Counsel, Dec. 11, 1986 at 7. The Legal Adviser
concluded:
In the current case, Section 662 would be satisfied if
the President had adequately conveyed his judgment that
the operation in question would be important to U.S.
national security, or words expressing the same
substance.
- 18 -
-- Authorization for the retransfer was not an "operation in
a foreign country,' as we are told that term is understood
by intelligence experts. Arguably, it does not rise to the
level of "special activities;" defined in E.O. 12333 as:
activities conducted in support of national foreign
policy objectives abroad which are planned and executed
so that the role of the United States Government is not
apparent or acknowledged publicly, and functions in
support of such activities, but which are not intended
to influence United States political processes, public
opinion, policies or media and do not include diplo-
matic activities or the collection and production of
intelligence or related support functions.
A finding may well have been required for the November 1985
retransfer of HAWKs. The CIA provided transport to Iran when
Israeli arrangements for flight clearance fell through. Then CIA
General Counsel Sporkin prepared a draft finding, never signed,
after the retransfer took place. 24/ However, it is not disputed
that the President authorized the retransfer, an action that
arguably constitutes a verbal finding.
In short, one may credibly maintain that no finding was
required for the August/September 1985 shipment; and that a
finding was made for the November 1985 shipment in which the CIA
participated.
3. Notification to Congress. As set out supra, $ 501 of the
National Security Act requires notification of
all intelligence activities which are the responsiblity of,
are engaged in by, or are carried out for or on behalf of
any department, agency, or entity of the United States,
including any significant anticipated intelligence activity.
It may well be that the retransfers do not trigger the above
requirements, if the retransfers are characterized as Israeli
enterprises not "carried out for or on behalf of" the United
States. (However, this undercuts the OLC theory that the
retransfers could have been authorized as covert actions because
they were in fact direct transfers carried out by the Israelis
for the United States.) Moreover, Congress expressly required
notification of covert arms sales in excess of $1 million to be
reported, supra at 9-10, but it was silent on the question of
authorization to retransfer.
Insofar as notification was deemed necessary, issues related
to the propriety of deferral are similar to those related to
direct trnasfers (supra at 12-13).
24. Tower Rept. at B- 57-58.
U.S. Department of Justice
TAB
B
Office of Legal Counsel
December 17, 1986
Washington. D.C. 20530
Office of the
Assistant Attorney General
MEMORANDUM FOR THE ATTORNEY GENERAL
Re: Legal Authority for Recent Covert Arms Transfers to Iran
This memorandum responds to your request for a summary of
the legal authorities affecting the recently disclosed arms
transfers to Iran. Because the exact details of the transfers
have apparently not completely transpired, this memorandum will
provide a general framework for analysis, with references only to
the basic facts that have already emerged. Although this
memorandum does not deal with questions arising from the handling
of the monies that Iran paid for the arms in question, the
operation in which weapons were sold to Iran appears in other
respects to have been lawful.
I. General Authority for Arms Transfers to Iran
As you know, there are numerous statutes that regulate the
export of weapons. The principal statutes directly affecting
transfers by the government are the Foreign Assistance Act of
19611 and the Arms Export Control Act. Although both statutes
establish substantially comprehensive regulatory schemes in the
areas of military assistance and military sales, they do not
purport to constitute the sole and exclusive authority under
which the executive branch may transfer weapons to foreign
nations. Thus, the limitations that the Foreign Assistance Act
and Arms Export Control Act impose on arms transfers apply only
to transfers undertaken pursuant to those statutes. If the sales
to Iran were accomplished under other authorities, as we believe
1
Codified, as amended, in relevant part at 22 U.S.C. 2311 et
seq.
2
Codified, as amended, in relevant part at 22 U.S.C. 2751 et
seq.
-1-
3
they were, these restrictions would not apply.
Consistent with the President's constitutional
responsibilitiès for conducting the foreign policy of the nation,
Congress has recognized that the executive has considerable
discretion to use government resources for a variety of
activities not specifically authorized by statute. Most
conspicuously for present purposes, section 101 of the National
Security Act of 1947 assigns certain functions to the National
Security Council, but expressly acknowledges that that entity may
"perform[] such other functions as the 6 President may direct.
Similarly, section 102 of the same Act assigns certain functions
to the Central Intelligence Agency, while authorizing that Agency
"to perform such other functions and duties related to
intelligence affecting the national security as the National
Security Council may from time to time direct." We believe that
these two provisions may be relied on to support a wide range of
foreign covert activities not otherwise forbidden by law.
The authorities exercised by the NSC and the CIA include the
discretion to transfer arms to foreign recipients in the course
of intelligence or intelligence-related activities. Congress
recently confirmed the existence of such authority in section 403
of the Intelligence Authorization Act for Fiscal Year 1986, Pub.
L. No. 99-169, 99 Stat. 1002, 1006 (1985). That provision
provides in relevant part:
Sec. 403. (a) (1) During fiscal year 1986,
the transfer of a defense article or defense
service exceeding $1,000,000 in value by an
intelligence agency to a recipient outside
that agency shall be considered a significant
3
It should be noted that the Department of State and the
Department of Justice have both taken the position, long before
the operation at issue in this memorandum, that arms may be
transferred to foreign countries outside the context of the Arms
Export Control Act. See Memorandum of Law on Legal Authority for
the Transfer of Arms Incidental to Intelligence Collection, by
David R. Robinson, Legal Adviser, Department of State; Letter
from William French Smith to William J. Casey (Oct. 5, 1981).
4
For a detailed discussion of the President's constitutional
powers and responsiblities, as they relate to the Iran operation,
see our memorandum on section 501 (b) of the National Security
Act.
5
Codified as amended at 50 U.S.C. 402.
6
Codified as amended at 50 U.S.C. 403.
-2-
anticipated intelligence activity for the
purpose of section 501 of the National
Security Act of 1947.
(2) Paragraph (1) does not apply if--
(A) the transfer is being made to a
department, agency, or other entity of the
United States (so long as there will not be a
subsequent retransfer of the defense articles
or defense services outside the United States
Government in conjunction with an
intelligence or intelligence-related
activity); or
(B) the transfer--
(i) is being made pursuant to
authorities contained in part II of the
Foreign Assistance Act of 1961, the Arms
Export Control Act, title 10 of the United
States Code (including a law enacted pursuant
to section 7307 (b) (1) of that title), or the
Federal Property and Administrative Services
Act of 1949, and
(ii) is not being made in conjunction
with an intelligence or intelligence-related
activity.
(3) An intelligence agency may not transfer
any defense article or defense services
outside the agency in conjunction with any
intelligence or intelligence-related activity
for which funds were denied by the Congress.
(b) Às used in this section--
(1) the term "intelligence agency" means
any department, agency or other entity of the
United States involved in intelligence or
intelligence-related activities;
This provision, which was made a permanent part of the National
Security Act (new section 503) by the Intelligence Authorization
Act for Fiscal Year 1987, was primarily intended to limit the
executive's discretion to transfer arms in the course of
intelligence-related activities. Its present significance,
however, lies in its unambiguous recognition that the executive
possesses such discretion apart from the Foreign Assistance Act
-3-
and the Arms Export Control Act. 7 Assuming that the arms
transferred to Igan were sold to that country at a legally
National Security Act is broad enough to encompass the kind of
justified price, the language of sections 101 and 102 of the
discretion whose existence is manifest! implied in section 403
of the Intelligence Authorization Act. It follows that the NSC
and/or the CIA had authority to arrange for the sale of arms to
Iran as part of an intelligence or intelligence-related
operation, subject to such other restrictions as Congress may
have imposed by law. The remainder of this memorandum discusses
the applicability of such restrictions.
-
7 Because subsection (a) (2) states that subsection (a) (1) does
not apply to transfers made pursuant to authorities contained in
the Foreign Assistance Act or the Arms Export Control Act, the
clear implication is that the restriction in subsection (a) (1)
applies to transfers made pursuant to some other authority.
The same implication can be drawn from other congressional
actions that have imposed restrictions on covert arms transfers
without suggesting that such transfers were subject to existing
restrictions under the Foreign Assistance Act or the Arms Export
Control Act. For example, a provision was enacted in 1974
precluding funding for military assistance to Laos outside the
confines of the Foreign Assistance Act and the Arms Export
Control Act. See Pub. L. No. 93-559, sec. 12, 88 Stat. 1798
(1974) (repealed by Pub. L. No. 97-113, title VII, sec.
734 (a) (1), 95 Stat. 1560 (1981)).
8 Our point here is that the charters of the CIA and NSC appear
to recognize that those entities may use their facilities to
arrange an arms sale to Iran. Whether these or other
governmental agencies would be authorized to spend the sums of
money necessary to procure and give arms to Iran is a distinct
question, which need not be addressed at this time.
Because we have not seen the classified Schedule of
Authorizations referred to in section 102 of the Intelligence
Authorization Act for Fiscal Year 1986 or the similar schedule
referred to in the FY 1985 authorization legislation, we do not
know whether anything in those schedules would affect the issues
addressed in this memorandum.
This memorandum does not address the legal questions that may
arise from arms having been sold to Iran at prices higher than
the prices at which they were made available to the CIA or NSC.
9
Whether the ultimate source of this discretion is the
President's inherent constitutional authority in foreign affairs,
or the cited statutes, or some other statute, is a question that
need not be resolved. The crucial point is that section 403 of
the Intelligence Authorization Act clearly recognizes the
existence of the authority, whatever its source.
-4-
II. Section 501 of the National Security Act
Under section 403 of the Intelligence Authorization Act for
Fiscal Year 1986 (which has now been made permanent as new
section 503 of the National Security Act), an arms transfer by
either the NSC or the CIA exceeding $1 million in value is
subject to the congressional oversight provisions of Section 501
of the National Security Act. We have prepared a separate
memorandum in which we concluded that the requirements of section
501 were satisfied as to the recent arms shipments to Iran. We
will not repeat that discussion here.
III. The Hughes-Ryan Amendment
The so-called Hughes-Ryan Amendment, section 662 of the
Foreign Assistance Act, (codified as amended at 22 U.S.C. 2422),
provides in its present form:
10
The NSC clearly falls within the definition of an intelligence
agency given in section 403 (b) (1) of the Intelligence
Authorization Act: "any department, agency or other entity of
the United States involved in intelligence or intelligence-
related activities."
11
Covert intelligence operations are subject to the
congressional reporting requirements of section 501 of the
National Security Act, whether they are conducted by the CIA, the
NSC, or some other agency. Section 501(a), 50 U.S.C. 413(a),
imposes reporting requirements not only on the Director of
Central Intelligence, but also on "the heads of all departments,
agencies, and other entities of the United States involved in
intelligence activities" (emphasis added). Furthermore, the
reporting requirements apply to "all intelligence activities
which are the responsibility of, are in engaged in by, or are
carried out for or on behalf of, any department, agency, or
entity of the United States
M
(emphasis added). This
language is broad enough to encompass the NSC. Finally, even if
activities carried out by the NSC could somehow escape the broad
language of section 501(a), section 501 (b) contains unqualified
language requiring the President to "fully inform the
[congressional] intelligence committees in a timely fashion of
intelligence operations in foreign countries, other than
activities intended solely for obtaining necessary intelligence,
for which prior notice was not given under subsection (a) of this
section
.". Thus, unlike the Hughes-Ryan Amendment
(discussed in Part III of this memorandum), section 501 of the
National Security Act applies to all intelligence operations in
foreign countries, whether conducted by the CIA, the NSC, or some
other governmental entity.
-5-
No funds appropriated under the authority of
this 'chapter or any other Act may be expended
by or on behalf of the Central Intelligence
Agency for operations in foreign countries,
other than activities intended solely for
obtaining necessary intelligence, unless and
until the President finds that each such
operation is important to the national
security of the United States. Each such
operation shall be considered a significant
anticipated intelligence activity for the
purpose of section 413 of title 50 [i.e.
section 501 of the National Security Act].
The original version of this provision, Pub. L. No. 93-559, sec.
32, 88 Stat. 1804 (1974), contained identical language
pertaining to the President's national security finding and also
required him to "report[], in a timely fashion, a description
and scope of such operation to the appropriate committees of the
Congress
In 1980, the reporting requirement was
replaced with the current reference to section 501 of the
National Security Act.
The current version of Hughes-Ryan, which recognizes the I3
President's authority to conduct covert operations abroad,
applies by its terms only to activities involving the CIA and
requires only that the President make the requisite finding
before funds are expended on the operation. Thus, any transfer
of arms to Iran in which the CIA was not involved (for example,
an operation conducted by NSC staff members without the aid of
the CIA) is exempt from Hughes-Ryan. Thus, based on what we know
at this time, it appears that no presidential finding was
required under Hughes-Ryan with respect to the September 1985
arms transfer to Iran.
Further, the President's written finding of January 17, 1986
sufficed to satisfy Hughes-Ryan as to CIA-assisted transfers that
occurred after that date. Because the Iran project appears to
have been a single, ongoing operation and because the January 17,
12
The statutory language requiring a presidential finding was
not amended, and the legislative history indicates that no change
in this requirement was intended. See S. Rep. No. 730, 96th
Cong., 2d Sess. 5 (1980), reprinted in 1980 U.S. Code Cong. &
Admin. News 4192, 4196.
13 Cf. 120 Cong. Rec. 33,489 (1974) (colloquy between Senators
Humphrey and Hughes).
-6-
1986 finding was drafted broadly enough to cover multiple arms
shipments in the course of that ongoing operation, we do not
believe. that separate presidential findings were required for
each of the shipments that took place after that date.
Thus, the main issue under Hughes-Ryan concerns the November
1985 arms shipment. Robert McFarlane, formerly Assistant to the
President for National Security Affairs, has publicly testified
that shipments prior to January 17, 1986 were carried. 14 out
pursuant to an oral authorization from the President. And
it
appears that CIA resources were used to facilitate the November
shipment. 15 The question, then, is whether the President's oral
authorization of arms transfers to Iran could have implied or
constituted a Hughes-Ryan "finding" that would allow the CIA to
participate or aid in the transfer.
On its face, Hughes-Ryan requires only that the President
find each CIA foreign operation "important to the national
security of the United States" before such operation is
undertaken. The Hughes-Ryan Amendment contains no requirement
that this finding be reduced 10 writing or indeed that it be
articulated in so many words. We believe that the main purpose
of the presidential finding requirement is to ensure that the
14
Because there is some reason to believe that Mr. McFarlane's
recollection was not wholly accurate, this Office is preparing a
separate analysis of the legal issues that would arise from the
absence of an oral authorization by the President for the
September and/or November shipments.
15
There may have been pre-existing written "omnibus" Hughes-Ryan
findings that would cover whatever tasks the CIA performed in
connection with the November shipment. Further research into the
exact nature of the CIA's participation and into the existence of
such findings will be needed in order to resolve this issue.
Although the facts are not clear at this time, it appears
possible that the only significant CIA involvement in the
November shipment was through the use of one its proprietaries.
If the proprietary was paid for its services with non-CIA funds,
then CIA appropriations may not have been used at all. If that
is true, Hughes-Ryan would not be applicable to the November
shipment. Alternatively, the CIA's involvement in the November
shipment may have been so peripheral that it should be treated in
terms of a de minimis exception to Hughes-Ryan; such an analysis
would require further research.
16
There are other statutory provisions requiring that findings
or determinations by executive branch officials be committed to
writing. See e.q., 20 U.S.C. 2836(c) (3).
-7-
17 decides, before each operation, whether the
President national security himself justifies its being carried out. Such a
decision, which can be inferred from an oral authorization,
satisfies this purpose, and an oral authorization 18 therefore
satisfies the Hughes-Ryan finding requirement.
So far as we know, the only legal provision suggesting that
the President's finding under Hughes-Ryan might have to be in
written form is found in section 654 of the Foreign Assistance
Act:
(a) Report to Congress
In any case in which the President is
required to make a report to the Congress, or
to any committee or officer of either House
of Congress, concerning any finding or
determination under any provision of this
chapter
that finding or determination
shall be reduced to writing and signed by the
President.
17 The President could, presumably, delegate this function to any
executive branch official who had been confirmed by the Senate.
3 U.S.C. 301. Such a delegation would have to be published in
the Federal Register, which would give Congress the opportunity
to object or enact new legislation if it were felt that such
delegation was inadvisable.
18 The legislative history of the Hughes-Ryan Amendment, which
focuses mostly on the reporting requirement and congressional
oversight generally, contains little discussion of the
presidential finding requirement itself. On the floor of the
Senate, Senator Humphrey mentioned in passing that national
security "would be the only reason we would want to have covert
operations
" The bill's sponsor, Senator Hughes,
interrupted to remark, "I hope that is the only reason." 120
Cong. Rec. 33,489 (1974). We interpret this exchange to confirm
our conclusion that the requisite finding could be inferred from
the President's having personally authorized a particular
operation. We know of nothing in the legislative history of
Hughes-Ryan suggesting that Congress meant to disallow oral or
implied "findings" by the President. Indeed, Senator Hughes
stated on the floor of the Senate that even the congressional
report itself, which was regarded as the more important
requirement of the Amendment, could be delivered orally by a
presidential aide. 120 Cong. Rec. 33,490 (1974) (colloquy
between Sen. Hughes and Sen. Stennis).
19
Codified at 22 U.S.C. 2414.
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(b) Action prohibition prior to execution of
report
No action shall be taken pursuant to any
such finding or determination [prior to the
date on which that finding or determination]
has been reduced to writing and signed by the
President.
(c) Publication in Federal Register
Each such finding or determination shall
be published in the Federal Register as soon
as practicable after it has been reduced to
writing and signed by the President. In any
case in which the President concludes that
such publication would be harmful to the
national security of the United States, only
a statement that a determination or finding
has been made by the President, including the
name and section of the Act under which it
was made, shall be published.
(d) Information accessible to Congress prior
to transmission of report
No committee or officer of either House of
Congress shall be denied any requested
information relating to any finding or
determination which the President is required
to report to the Congress, or to any
committee or officer of either House of
Congress, under any provision of this
chapter, the Foreign Military Sales Act [22
U.S.C. 2751 et seq.], or the Foreign
Assistance and Related Programs Appropriation
Act for each fiscal year, even though such
report has not yet been transmitted to the
appropriate committee or officer of either
House of Congress.
Because Hughes-Ryan and this provision are both in chapter 32 of
title 22, the President would be required to reduce the required
finding to writing before each covert operation if he were
required to make a report concerning that finding to Congress or
to any congressional committee or officer. Hughes-Ryan,
however, has never required the President to make any such
report concerning his findings: (1) in its present version,
Hughes-Ryan requires compliance with section 501 of the National
Security Act, which demands certain reports about "intelligence
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activities' 20 and "intelligence operations 21 but requires no
reports about presidential findings; (2) as originally
enacted, Hughes-Ryan required the President to report "a
description, 3nd scope" of the operation to certain congressional
committees; the Hughes-Ryan Amendment would have required that the President
(3) as originally introduced by Senator Hughes,
provide Congress with both a report of his finding and 24
description of the nature and scope of each operation; the
first of these requirements would have made the requirements of
section 654 applicable, but this requirement was dropped from
the final version of the bill; thus, Congress deliberately
rejected the language that might have brought section 654 into
play and substituted language that made section 654
20 50 U.S.C. 413 (a) (1) (requiring that executive branch officials
keep certain congressional committees "fully and currently
informed of all intelligence activities" within their
jurisdiction).
21 50 U.S.C. 413 (b) (requiring that the President "fully inform
the [congressional] intelligence committees in a timely fashion
of intelligence operations in foreign countries
for which
prior notice was not given under subsection (a) of this
section
)
22
Section 501 (a) (2), 50 U.S.C. 413 (a) (2), might require certain
executive branch officials to provide information about
presidential findings, if the information is in their "possession
custody, or control," to a congressional intelligence committee
upon that committee's request, but it does not require that the
President himself make any such report. Section 654 applies only
to findings as to which the President himself is required to
report to Congress.
23
As originally enacted, Hughes-Ryan forbade the CIA to spend
appropriated funds for covert foreign operations unless and until
the President had made the requisite national security finding
and had "report[ed], in a timely fashion, a description and scope
of such operation to the appropriate committees of the
Congress
24
See 120 Cong. Rec. 33,490 (1974), reproducing Senator Hughes'
proposed amendment, which would have permitted the President to
authorize covert operations "if, but not before, he (1) finds
that such operation is vital to the defense of the United States,
and (2) transmits an appropriate report of his finding, together
with an appropriate description of the nature and scope of such
operation" to certain congressional committees.
-10-
inapplicable. 25 We therefore conclude that section 654 26 by its
own terms does not apply to the Hughes-Ryan Amendment.
This conclusion is reinforced by the structure of the
Foreign Assistance Act and long-standing practice. This Act
deals primarily with overt foreign aid, including military
assistance. To subject covert operations, including covert arms
transfers, to the requirements of section 654(c), which requires
publication in the Federal Register, would not make much sense,
especially now that the National Security Act contains an
elaborate mechanism by which Congress is kept informed of covert
25 The language ultimately adopted by Congress was taken from the
House of Representatives' version of the proposed amendment. See
120 Cong. Rec. 39,135 (1974); H.R. Conf. Rep. No. 1610, 93d
Cong., 2d Sess. (1974), reprinted in 1974 U.S. Code Cong. &
Admin. News 6734, 6744-6745.
26 This analysis does not leave section 654 without any
applications. Chapter 32 of title 22 contains numerous
provisions requiring both a presidential finding or determination
and a report to Congress concerning such finding or
determination. See, e.q., 22 U.S.C. 2364(a); 2370 (f); 2371 (b);
2414a (b); 2428b(b); 2429(b) (1); 2429a(b) (2) (A). Furthermore,
chapter 32 also contains numerous provisions requiring
presidential findings or determinations without also requiring a
congressional report. See, e.q., 22 U.S.C. 2179(a); 2183 (a);
2199 (b); 2314(b); 2357(a); 2360(a); 2370( (a); 2775. Thus, there
is a meaningful distinction, reflected in the language of section
654, between findings concerning which the President must report
to Congress and findings concerning which no such report is
required.
It should be noted that the legislative history of section 654
suggests that it was enacted in response to incidents in which
(1) the Nixon Administration provided military aid to Cambodia
and obtained the presidential determination required by the
Foreign Assistance Act after the fact; and (2) President Nixon
orally determined to authorize military aid to Ceylon, but did
not put the determination in writing or inform Congress until
some weeks later. S. Rep. No. 431, 92d Cong., 1st Sess. (1971),
reprinted in 1972 U.S. Code Cong. & Admin. News 1883, 1895-1896.
The legislative history of section 654 cannot properly be used to
draw inferences about the subsequently enacted Hughes-Ryan
Amendment, especially if those inferences would be contrary to
the language and legislative history of Hughes-Ryan itself.
-11-
27
operations.
We are informed by the General Counsel of the CIA
that presidential findings made pursuant to Hughes-Ryan have
never been published in the Federal Register, and that Congress
has never objected to this practice. This confirms our
conclusion, based on the language and legislative history of the
statutory provisions at issue, that section 28 654 does not apply to
presidential findings under Hughes-Ryan.
Our conclusion, that Hughes-Ryan findings may take the form
of an oral authorization for a particular opgration, agrees with 30
previous opinions by Attorney General Bell, by this 31 Office,
and by the Legal Adviser at the Department of State.
27 The anomalous nature of publishing notice of covert operations
in the Federal Register is reduced, but not completely
eliminated, by the following provision in section 654(c): "in
any case in which the President concludes that such publication
would be harmful to the national security of the United States,
only a statement that a determination or finding has been made by
the President, including the name and section of the Act under
which it was made, shall be published." 22 U.S.C. 2414(c). Some
covert operations could well be so sensitive that the mere
publication of the section of the act under which a presidential
finding was made could in some circumstances serve to alert a
foreign intelligence agency to the possible existence of the
operation.
28
This conclusion is further strengthened by the nature of
section 654(d), which requires the executive branch to respond to
inquiries about presidential findings before the report
concerning them has been transmitted to Congress. Such a
provision would make no sense as applied to the covert operation
findings required by Hughes-Ryan.
29 In a classified memorandum of Oct. 20, 1977, for the Assistant
to the President for National Security Affairs, which dealt with
a particular proposed covert operation, Attorney General Bell
opined that the President's decision that the operation was
important to the national security constituted the finding
required by Hughes-Ryan "notwithstanding the fact that his
Finding has not been reduced to writing.'
30 OLC Memorandum for the Attorney General, Oct. 25, 1977, on
Requirements of the Hughes-Ryan Amendment, 22 U.S.C. 2422, at 6 &
n.9.
31
Memorandum of Dec. 11, 1986, to the White House Counsel et al.
on Validity of Oral Instruction to Initiate Covert Action.
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iv. Other Legal opjections to the Arms
A number of other legal provisions have been mentioned as
possibly raising problems about the arms transfers to Iran. None
of them raises serious questions, and they warrant only a brief
discussion.
A. Omnibus Diplomatic Security and Antiterrorism Act of 1986.
Section 509 of the Omnibus Diplomatic Security and
Antiterrorism Act of 1986, Pub. L. No. 99-399, 100 Stat. 853, 874
(1986), which became effective August 27, 1986, amended the Arms
Export Control Act by adding a new section providing:
(a) Prohibition. Except as provided in
subsection (b), items on the United States
Munitions List may not be exported to any
country which the Secretary of State has
determined, for purposes of section
6(j) (1) (a) of the Export Administration Act
of 1979 (50 U.S.C. App. 2405 (j) (1) (A)), has
repeatedly provided support for acts of
international terrorism.
(b) Waiver. The President may waive the
prohibition contained in subsection (a) in
the case of a particular export if the
President determines that the export is
important to the national interests of the
United States and submits to the Congress a
report justifying that determination and
describing the proposed export. Any such
waiver shall expire at the end of 90 days
after it is granted unless the Congress
enacts a law extending the waiver.
The Secretary of State has identified Iran as a country that has
repeatedly. 32 grovided support for acts of international
terrorism.
The same reasons that require treating the covert arms
shipments to Iran as outside the ambit of the Arms Export Control
Act also require that this new amendment to the same Act be
treated as inapplicable to covert arms shipments. The President
32
49 Fed. Reg. 2836 (1984).
-13-
has independent authority, recognized in the National Security
Act, for transferring arms in the course of covert intelligence-
related operations; the congressional notification requirement in
the above-quotèd provision is at odds with the congressional
oversight process established in section 501 of the National
Security Act; and the sparse legislative history of this new
provision gives no indication of an intent to override section
501. We therefore conclude that this new provision was not
violated by the covert shipment of arms to Iran.
B. Export Administration Act of 1979.
Section 6(j) of the Export Administration Act of 1979, 50
U.S.C. App. 2405(j), limits the issuing of licenses for the
export of goods or technology to countries that the Secretary of
State has identified as having repeatedly provided support for
acts of international terrorism. This statute does not apply to
items on the United States Munitions List, which are covered
instead by the Arms Export Control Act. Nor does the statute
apply to shipments by the United States government, for which no
"license" is required. The Export Administration Act is
therefore inapplicable to the Iran project.
C. Executive Order 12333
It has been suggested that the Iran project in some way
violated the provisions of E.O. 12333, which is the executive
order dealing with the structure and conduct of the nation's
intelligence effort. E.O. 12333, however, like all executive
orders is a set of instructions from the President to his
subordinates in the executive branch. Activities authorized by
the President cannot "violate" an executive order in any legally
meaningful sense, especially in a case where no private rights
are involved, because his authorization creates a valid
modification of, or exception to, the executive order.
V. Three-way Transactions Involving Israel
Robert McFarlane, formerly Assistant to the President for
National Security Affairs, in the public testimony previously
mentioned, has said that the arms transfers that took place
before January 17, 1986 were accomplished by inducing Israel to
ship weapons, which she had obtained from the United States, to
Iran on the understanding that our government would replenish
Israeli stocks; we also gather that the commitment to resupply
Israel was kept. As a legal matter, we believe that such a
transaction is equivalent to one in which the United States sells
the weapons directly to Iran.
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Assuming that the weapons shipped to Iran were originally
supplied to Israel under the Foreign Assistance Act or the Arms
Export Control Act, Israel would have been forbidden to
33
retransfer them to Iran without the consent of the President.
These statutes permit the President to consent to retransfers,
but they also require him to comply with a number of formalities.
(1) Under the Arms Export Control Act, the President must not
consent to a retransfer "unless the United States itself would
transfer the 34 defense article under consideration to that
(2) Furthermore, retransfer of Munitions List items
country. is not permitted under this Act unless "the proposed recipient
foreign country [i.e. Iran] provides a commitment in writing to
the United States Government that it will not transfer such
defense articles
to any other foreign country or n35 person
without first obtaining the consent of the President.
(3)
Finally, the President must "promptly submit a report to the
Speaker of House of Representatives and to the Committee on
Foreign Relations of the Senate on the implementation of each
[retransfer] agreement. 35 So far as we know, the second and
third of these requirements were not complied with.
The President also has special statutory authority to
authorize military assistance and arms export sales, but the
33
22 U.S.C. 2314(a); 2753 (a) (2).
34
22 U.S.C. 2753 (a). The Foreign Assistance Act contains a
similar provision. 22 U.S.C. 2314(e). This language appears to
allow presidential approval if the United States would itself
transfer the defense article under some authority other than the
Arms Export Control Act (e.g., as part of a covert operation
undertaken pursuant to the National Security Act). If this
interpretation is correct, the requirement would have been
satisfied as to the Iranian project. As we point out in the
text, however, there appear to be other formalities that were not
satisfied.
35
22 U.S.C. 2753 (a). The Foreign Assistance Act contains a
similar provision. 22 U.S.C. 2314(e).
36 22 U.S.C. 2753 (a). The Foreign Assistance Act does not
contain a similar provision.
It should also be noted that the Arms Export Control Act imposes
additional congressional notification requirements for
retransfers of "major defense equipment" valued at $14 million or
more and for other retransfers valued at $50 million or more. 22
U.S.C. 2753 (d). "Major defense equipment" is defined as "any
item of significant military equipment on the United States
Munitions List having a nonrecurring research and development
cost of more than $50,000,000 or a total production cost of more
than $200,000,000. 22 U.S.C. 2794(6).
-15-
exercise of this authority is contingest upon prior consultations
with certain congressional committees, which again does not
seem to have been done.
Assuming that the formalities and congressional notification
requirements discussed in the previous paragraph were not
complied with, the arrangement with Israel cannot be regarded as
a retransfer specifically authorized by the Foreign Assistance
Act or the Arms Export Control Act. We do not believe, however,
that these statutes are the only authorities that could justify
the transaction. Nor do we believe that the three-way
transactions involving Israel and Iran are properly analyzed
under these statutes.
In evaluating the legal significance of the shipment to Iran
of weapons from Israeli stocks, one must focus on the nature of
the three-way transaction as a whole. According to Mr.
McFarlane's testimony, the transaction was designed to expedite
the arrival in Iran of arms that could lawfully have been
supplied directly from American stocks; further, Israel
participated in the transaction as an accommodation to the
American government, and did not itself gain or lose any weapons
as a result. Seen in this light, it is apparent that the real
nature of the transaction was a bilateral sale between the United
States and Iran, with Israel serving solely as a conduit or
facilitator in the execution of that sale.
We see no reason to treat the legality of Israel's
participation differently than we would treat the participation
of any other party that served as a conduit in a lawful covert
operation. Had the United States consigned weapons from American
stocks to Israel for shipment to Iran, Israel's role would have
been exactly equivalent to the role that common carriers or
public warehouses play in overt transactions. Because, so far as
we know, the weapons that Israel shipped to Iran and received
from the United States were completely fungible, a similar
equivalence is present here. Just as an illegal sale of arms to
Iran could not be made legal by using Israel as a conduit, so too
a legal transaction could not become illegal by Israel being used
37
22 U.S.C. 2364.
38 This memorandum does not deal with the financing of the
transaction, the details of which are apparently not yet clear.
If Israel retained some of the funds that the Iranians paid for
the weapons, the analysis might change, depending on whether the
retained funds were viewed as a fee in the nature of a brokers'
commission or as profit on a resale. Without now deciding how
the analysis would differ, we can note that retention of some
funds by Israel would make it less obviously appropriate to treat
the whole transaction as essentially a bilateral sale of U.S.
weapons to Iran.
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39
in the same way.
Several features of the relevant statutes support this
analysis. First, the statutes restricting retransfers of
American-supplied weapons clearly contemplate situations in which
the transferring country, not the United States itself, is the
source of the request to make the transfer. The Arms Export
Control Act, for example, requires the recipient of American arms
(in this case, Israel) to agree not to transfer the arms to 40
third country (e.q., Iran) without the President's approval,
and then goes on to specify certain factors that the President
must look to "[i]n considering a request for approval of any
transfer
M
Clearly, the statute is not aimed at
situations in which the President is considering requests from
himself for his own approval. The Foreign Assistance Act
contains 41 similar provisions, to which the same analysis
applies.
The Arms Export Control Act also makes an express
distinction between arms exports by private parties in the United
States (which ordinarily require an export license) and exports
by such private parties "by or for an agency of the United States
Government
(B) for carrying out any foreign assistance or
sales program authorized by law and subject to the control of the
President by other means" (which do not require an export
license). Analogously, a distinction should be made between
Israel's transferring American-supplied arms for her own benefit
(which would be subject to the retransfer requirements of the
Foreign Assistance Act or the Arms Export Control Act) and such
transfers "by or for an agency of the United States Government"
(which were not contemplated by the retransfer provisions of
those statutes). That Israel's shipments of arms to Iran were
"by or for an agency of the United States Government" is clear
from (1) the fact that the Israeli shipments were made at the
request of American authorities, and (2) the fact that Israel was
promised and given identical replacements for the arms that she
shipped to Iran.
39
So far as we know, there is no legal bar to the use of Israeli
help in American intelligence operations.
40
22 U.S.C. 2753 (a).
41
See 22 U.S.C. 2314 (a) (1) (B); 2314 (e).
42
22 U.S.C. 2778 (b) (2). Note that this provision appears to
assume that there may be arms sales programs carried out pursuant
to legal authorities other than the Arms Export Control Act.
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