Standing bars, caps and winding up

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1. Standing bars on assistance

Section 620 of the Foreign Assistance Act of 1961, codified at 22 U.S.C. 2370, collects many standing bars on assistance (22 U.S.C. 2370). Several turn on money owed. No assistance under the Act may go to the government of a country indebted to an American citizen or person for goods or services furnished or ordered, in three situations (22 U.S.C. 2370(c)). They are where the creditor has exhausted available legal remedies, including arbitration, and where the government does not deny or contest the debt. The third is where the debt arises under an unconditional guaranty of payment by the government or a predecessor, given directly or indirectly through any controlled entity. The bar does not apply if the President finds it contrary to national security.

2. Loan defaults

No assistance under the Act may go to a government more than six months in default on principal or interest on a loan made under the Act (22 U.S.C. 2370(q)(1)). The bar lifts if the government meets its obligations, or if the President decides, after consulting the House Committees on Foreign Affairs and Appropriations and the Senate Committees on Foreign Relations and Appropriations, that assistance is in the national interest.

A wider bar applies after a year in default on any American government loan (22 U.S.C. 2370(q)(2)). It covers assistance under the Act, the Peace Corps Act, the Millennium Challenge Act of 2003 and the African Development Foundation Act (22 U.S.C. 2370(q)(2)). It also covers the BUILD Act of 2018, section 5854 of title 22, and section 23 of the Arms Export Control Act on sales credit. The same national interest determination, after the same consultations, lifts it. No borrower under the Act with a loan outstanding on or after 19 September 1966 may be relieved of liability to repay any principal or interest (22 U.S.C. 2370(r)). How sales credit works is covered in FMS credit and who may receive it.

3. A cap on large programs without Congress

Two $100,000,000 limits apply (22 U.S.C. 2370(k)). Without Congress’s express approval, no assistance may go to a country for building a productive enterprise where the total American assistance will exceed $100,000,000. The statute exempts productive enterprises in Egypt described in the presentation materials. Except as the special authority in section 2318 provides, no military assistance may go to a country for a program whose total value since 1 July 1966 will exceed $100,000,000. The exception is a program included in the presentation to Congress while it considered authorizations or appropriations. Nothing in the Act or any other law lets the President waive these limits.

4. Relations and dues

No assistance under the Act or any other law, and no Food for Peace sales, may go to a country where diplomatic relations with the United States have been severed by either side (22 U.S.C. 2370(t)). The bar ends only when relations are resumed and new agreements for the assistance or sales are negotiated and concluded after resumption.

Every decision to provide or continue a program must take account of the country’s standing on its United Nations dues, assessments and other obligations (22 U.S.C. 2370(u)). Where it is delinquent for the purposes of the first sentence of Article 19 of the United Nations Charter, the President must report to the Senate Committee on Foreign Relations and the Speaker of the House. The report sets out the government’s assurance that it will pay its arrears and stay current, or gives a full explanation of the unusual or exceptional circumstances that make it economically unable to give that assurance. Before development loans, Alliance loans, supporting assistance or Food for Peace sales, the President must also weigh the country’s military share of its budget and its use of foreign exchange for military equipment (22 U.S.C. 2370(s)(1)).

5. Authorization and notice

Notwithstanding any law enacted before 12 January 1971, no money appropriated for foreign assistance, including foreign military sales, may be obligated or spent without a prior authorization by law (22 U.S.C. 2412(a)(1)). Nor may it be spent beyond an amount previously set by law (22 U.S.C. 2412(a)). The limit does not apply to the extent later legislation authorizes the spending (22 U.S.C. 2412(b)). It can be overridden only by a law enacted after 12 January 1971 that specifically repeals or modifies it (22 U.S.C. 2412(c)).

Within 30 days after any law appropriating funds under the Act, other than sections 2261 and 2397, or under the Arms Export Control Act, the President must notify Congress of the planned recipients (22 U.S.C. 2413(a)). The notice names each country and international organization and the amount each will receive by category of assistance (22 U.S.C. 2413(a)). The rule does not apply to continuing appropriations, and cannot be waived under the special waiver authority in section 614(a) of the Act (22 U.S.C. 2413(b)).

6. Winding up

When assistance under the Act or the Arms Export Control Act is terminated, funds may remain available for obligation for up to eight months for the necessary expenses of winding up, and then until spent (22 U.S.C. 2367(a)). Funds obligated before termination may be spent on winding up despite laws restricting expenditure. Those expenses may include completing the training or studies, outside their home countries, of students whose courses began before termination.

To settle termination claims fairly under extraordinary contractual relief standards, the President may adopt as a government obligation any contract with an American or third-country contractor that was funded with assistance before termination (22 U.S.C. 2367(b)). The government may assume the resulting liabilities in whole or in part. Amounts certified as obligated for terminated assistance stay available and may be reobligated for the costs of termination (22 U.S.C. 2367(c)). Termination of assistance does not require ending guarantee commitments made before it took effect (22 U.S.C. 2367(d)). These rules apply to any termination under any law, unless a law specifically says otherwise (22 U.S.C. 2367(e)).

Key terms

Standing bar	A permanent condition in the Act that blocks assistance in stated circumstances.
Productive enterprise	A project for which assistance above $100,000,000 needs Congress’s express approval.
Prior authorization	The requirement that assistance appropriations be authorized before they are spent.
Arrears report	The report on a country’s United Nations delinquency and its assurance to pay.
Allocation notice	The report within 30 days of an appropriation showing each recipient’s share.
Extraordinary contractual relief	The standard used to settle contractor claims after termination.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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