Ex-Im Bank: The U.S. Export-Import Bank's Financing of Dual-Use  
Exports (27-SEP-07, GAO-07-1234R).				 
                                                                 
Since October 1994, the U.S. Export-Import Bank (Ex-Im) has had  
statutory authority to provide loans, guarantees, and insurance  
to help finance U.S. exports of dual-use (military and civilian) 
defense articles and services, provided that it determines these 
items are nonlethal and meant primarily for civilian use. These  
dual-use exports include such items as vehicles that are used by 
the military for civilian or humanitarian purposes. The 	 
legislation also requires us to report annually on the end uses  
of the dual-use exports financed by Ex-Im during the second	 
preceding fiscal year--which, for the purposes of this letter,	 
corresponds to 2005. Since we last issued a letter in 2001	 
reporting on Ex-Im financed dual-use exports, the enclosure to	 
this letter provides detailed information regarding the dual-use 
exports financed during fiscal years 2002 through 2004. 	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1234R					        
    ACCNO:   A76775						        
  TITLE:     Ex-Im Bank: The U.S. Export-Import Bank's Financing of   
Dual-Use Exports						 
     DATE:   09/27/2007 
  SUBJECT:   Accountability					 
	     Bank loans 					 
	     Dual-use technologies				 
	     Exporting						 
	     Federal funds					 
	     Fund audits					 
	     Insurance						 

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GAO-07-1234R

   

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September 27, 2007

Congressional Committees

Subject: Ex-Im Bank: The U.S. Export-Import Bank's Financing of Dual-Use
Exports

Since October 1994, the U.S. Export-Import Bank (Ex-Im) has had statutory
authority^1 to provide loans, guarantees, and insurance to help finance
U.S. exports of dual-use (military and civilian) defense articles and
services, provided that it determines these items are nonlethal and meant
primarily for civilian use.^2 These dual-use exports include such items as
vehicles that are used by the military for civilian or humanitarian
purposes. The legislation also requires us to report annually on the end
uses of the dual-use exports financed by Ex-Im during the second preceding
fiscal year--which, for the purposes of this letter, corresponds to 2005.
Since we last issued a letter in 2001 reporting on Ex-Im financed dual-use
exports, the enclosure to this letter provides detailed information
regarding the dual-use exports financed during fiscal years 2002 through
2004.^3

Ex-Im Did Not Finance Dual-Use Exports in 2005

In fiscal year 2005, Ex-Im did not finance any dual-use export projects.
According to Ex-Im officials, dual-use items were last financed in 2002,
and Ex-Im has not considered any requests for dual-use financing since
then. The officials attributed the program's decline to a shift in Ex-Im's
portfolio from transactions with governments to private sector
transactions.

Agency Comments

We provided a copy of the draft version of this letter to Ex-Im's
Engineering and Environment Division, which is responsible for monitoring
end user compliance with dual-use requirements. The agency had no
comments.

^1The Export-Import Bank Reauthorization Act of 2006 (P.L. 109-438,
December 20, 2006) extended through September 1, 2011, provisions in 1994
legislation (P.L. 103-428, October 31, 1994) authorizing Ex-Im to finance
certain dual-use exports. Under this legislation, Ex-Im can use up to 10
percent of its total annual loan, guarantee, and insurance authority to
support the sale of these dual-use exports.

^2According to Ex-Im officials, a dual-use export is eligible for
financing if convincing evidence exists that the export is nonlethal in
nature, the export will be used mainly for civilian activities, and the
buyer or end user provides certification to that effect.

^3GAO, Export-Import Bank: The U.S. Export-Import Bank's Financing of
Dual-Use Exports, GAO-01-1110R (Washington, D.C.), August 31, 2001.

United States Government Accountability Office
Washington, DC 20548

Scope and Methodology

To determine the extent of financing and end uses of the dual-use exports
financed from fiscal years 2002 to the present, we reviewed Ex-Im
documents and interviewed Ex-Im officials who monitor end user compliance
with dual-use requirements, including the Vice President of the
Engineering and Environment Division.

We conducted our work from July 2007 through September 2007 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to interested congressional
committees. We will also send copies to the President and Chairman of
Ex-Im, the Secretary of Defense, and the Secretary of State. We will also
make copies available to others upon request. In addition, this report
will be available at no charge on the GAO Web site at
[3]http://www.gao.gov .

If you or your staffs have any questions about this report, please contact
me at (202) 512-4347 or [4][email protected] . The key contributors to this
report were Anthony Moran, Assistant Director; Leah DeWolf; Karen Deans;
and Ernie Jackson.

Loren Yager
Director, International Affairs and Trade

Enclosure

List of Recipients

The Honorable Christopher J. Dodd
Chairman
The Honorable Richard C. Shelby
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate

The Honorable Robert C. Byrd
Chairman
The Honorable Thad Cochran
Ranking Member
Committee on Appropriations
United States Senate

The Honorable Barney Frank
Chairman
The Honorable Spencer Bachus
Ranking Member
Committee on Financial Services
House of Representatives

The Honorable David R. Obey
Chairman
The Honorable Jerry Lewis
Ranking Member
Committee on Appropriations
House of Representatives

         Dual-Use Exports Financed by Ex-Im for Fiscal Years 2002-2004

In fiscal year 2002, Ex-Im financed four dual-use export projects for a
total of $24.6 million and processed an additional project that expired
before it was financed. ^4 Ex-Im officials provided us with documentation
for each of the 2002 projects showing that they monitored them to ensure
their end uses were for civilian and humanitarian purposes. In fiscal
years 2003 and 2004, Ex-Im did not finance any dual-use projects. (See
table 1.)

Table 1: Dual-Use Exports Financed by U.S. Export-Import Bank, Fiscal
Years 2002-2004

Dollars in millions
Fiscal  Recipient Project                     End user     Export   Amount
year    country                                             value financed
2002    Venezuela Refurbish aircraft used in  Venezuelan               
                     support of civilian         Air Force                
                     activities, such as                                  
                     assistance in the case of a                          
                     natural disaster.                          $0^a       $0
           Venezuela Aircraft repair parts and   Venezuelan               
                     equipment for aircraft used Air Force                
                     for civilian and                                     
                     humanitarian missions                       8.5      7.2
           Venezuela Engine and propeller repair Venezuelan               
                     services for aircraft used  Air Force                
                     for civilian and                                     
                     humanitarian missions                         6      5.1
           Venezuela Construction equipment      Venezuelan               
                     (such as road construction  Armed Forces             
                     maintenance equipment) to                            
                     be used in support of road                           
                     construction projects                       3.3      2.8
           Dominican Vehicles, helicopters, and  Secretary of             
           Republic  training to assist the      State of the             
                     Dominican Republic in       Armed Forces             
                     implementing a humanitarian                          
                     relief program to provide                            
                     civil services and                                   
                     assistance for natural                               
                     disasters                                  10.4      9.5
Total for 2002                                              $28.2    $24.6
2003: Ex-Im did not finance any dual-use projects               0        0
2004: Ex-Im did not finance any dual-use projects               0        0
Total 2002-2004                                              28.2     24.6

Source: GAO presentation of Ex-Im data.

^aAs noted above, this project expired before it was financed.

^4In fiscal year 2002, Ex-Im's 10 percent cap on dual-use financing was
$1.04 billion.

(320523)

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