Code of Conduct Arms Transfer Act of 1998

Code of Conduct on Arms Transfers Act of 1998 - Prohibits U.S. military assistance and arms transfers to a foreign government unless the President certifies to the Congress that the government: (1) meets specified conditions regarding democracy, including that it was chosen by free and fair elections and promotes civilian control of the military, the rule of law, and respect for individual rights; (2) does not engage in human rights violations, investigates and prosecutes those responsible for human rights violations, permits access to political prisoners by international organizations, and provides access to such organizations in situations of conflict or famine; (3) is not engaged in acts of armed aggression in violation of international law; and (4) is participating in the United Nations Register of Conventional Arms.

Authorizes the President to request from the Congress an exemption from such prohibition, stating that: (1) it is in the national security interest to provide military assistance and arms transfers to a government; or (2) an emergency exists under which it is vital to the U.S. interest to do so. Makes the exemption effective upon such request, unless disapproved by the Congress.

Directs the President to: (1) compile a list of countries that do not meet the requirements of this Act; (2) notify the governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies, done at Vienna, July 11 and 12, 1996, that the listed countries are ineligible to receive U.S. arms sales and military assistance; and (3) request that the notified countries also declare the listed countries as ineligible for arms sales and military assistance.

Requires the President to continue efforts through the United Nations and other international fora, such as the Wassenaar Arrangement, to limit arms transfers worldwide, particularly transfers to the listed countries, for the purpose of establishing a permanent multilateral regime to govern the transfer of conventional arms. Directs the President, in conjunction with the submission of the annual congressional presentation documents for foreign assistance programs, to report to the Congress on progress made toward establishing such regime.