Ernest Hemingway with Ilya Ehrenburg and Gustav Regler during the Spanish Civil War.

In January 1937 the Congress passed the Neutrality Act of 1937 at the request of President Roosevelt. The act banned weapons sales to Spain. It did however allow countries to purchase weapons for cash if they could carry them on their own ships.

In July 1936, civil war broke out in Spain. Germany and Italy supported the rebels, led by General Francisco Franco, and France and the Soviet Union supported the legitimate government. Fear of the Spanish Civil War spreading resulted in the Europeans imposing an arms embargo against all sides of the dispute. President Roosevelt asked American arms manufacturers to impose a moral embargo, as legislation then on the books did not provide him with the power to impose an embargo on a country in the midst of a civil war. When this did not work, Roosevelt asked that the law be extended to civil wars, and Congress promptly complied.

Liberals who supported the Republican government in Spain were outraged. They claimed that it was not fair to deny the legitimate government the arms that it needed to defend itself, especially since Nazi Germany and Italy continued to support Franco.

On April 30, Congress passed a resolution making the Neutrality Acts permanent. In addition, the acts contained two new features. American citizens were forbidden to travel on belligerent vessels, and the President was allowed to sell to belligerents for cash, as long as the belligerents could carry the goods away on their ships.