-------------------------Indexing Terms------------------------- REPORTNUM: NSIAD-00-191 TITLE: DEFENSE TRADE Analysis of Support for Recent Initiatives DATE: 08/31/2000 ----------------------------------------------------------------- ****************************************************************** ** This file contains an ASCII representation of the text of a ** ** GAO Testimony. ** ** ** ** No attempt has been made to display graphic images, although ** ** figure captions are reproduced. Tables are included, but ** ** may not resemble those in the printed version. ** ** ** ** Please see the PDF (Portable Document Format) file, when ** ** available, for a complete electronic file of the printed ** ** document's contents. ** ** ** ****************************************************************** GAO/NSIAD-00-191 Report to the Chairmen, Committee on International Relations and Committee on Armed Services, House of Representatives August 2000 DEFENSE TRADE Analysis of Support for Recent Initiatives GAO/ NSIAD- 00- 191 Letter 3 Appendixes Appendix I: Examples of Export Control Problems 22 Appendix II: The Defense Trade Security Initiative 27 Appendix III: Comments From the Department of Defense 30 Appendix IV: Comments From the Department of State 31 Appendix V: GAO Contacts and Staff Acknowledgments 36 Tabl es Table 1: Summary of DOD's 81 Defense Cooperation Initiatives 7 Table 2: DOD's Export Control Examples and GAO's Analysis 23 Abbreviations DOD Department of Defense National Security and International Affairs Division Lett er B- 285761 August 31, 2000 The Honorable Benjamin A. Gilman Chairman, Committee on International Relations House of Representatives The Honorable Floyd D. Spence Chairman, Committee on Armed Services House of Representatives Last year, the Department of Defense (DOD) compiled a list of 81 defense cooperation initiatives in an effort to enhance cross- border defense trade and investment. Thirty- four of these initiatives were part of an ongoing effort to reinvent the Foreign Military Sales Program. 1 Forty- seven of the initiatives were intended to streamline processes and/ or change policies in several areas considered important for defense cooperation, including export controls, release of classified information to foreign countries, procurement from domestic and foreign companies, and industrial security. DOD senior officials saw these defense cooperation initiatives as necessary to achieving three desired outcomes: to improve interoperability in coalition warfare scenarios, to reduce a gap in military capabilities between the United States and North Atlantic Treaty Organization allies, and to ensure that U. S. defense companies successfully compete abroad. Since the initial compilation of these initiatives, most of DOD's attention has been focused on export controls. Because the State Department has primary responsibility for controlling the export of defense articles and services, the State Department and DOD formed a working group to develop proposals to change the export control process. As a result of State Department and DOD discussions, on May 24, 2000, the administration announced 17 proposals, known as the Defense Trade Security Initiative, to adjust the U. S. defense export control system. As with DOD's initiatives, these proposals are intended to achieve the three desired outcomes identified above. 1 The Foreign Military Sales Program facilitates the purchase of defense articles and services from the U. S. government by eligible foreign governments and international organizations. Because of your concern about the potential national security implications of DOD's efforts to modify policies and procedures for regulating defense trade and investment, we reviewed as requested the status and basis for DOD's defense cooperation initiatives. In July 2000, we provided a description and status of the 81 initiatives. 2 As agreed with your offices, in this report we have focused on the basis for DOD's 47 initiatives dealing with defense trade and investment. Specifically, we examined (1) the data and analysis supporting the 47 initiatives and (2) the likelihood that the initiatives will achieve DOD's desired outcomes. Since the administration's Defense Trade Security Initiative was developed in response to industry and foreign government concerns (as were DOD's initiatives), we are also providing information for you to use in upcoming deliberations on the potential effects of the administration's modifications to the U. S. export control system. Results in Brief To develop its defense cooperation initiatives, DOD largely relied on incomplete data and did not perform the analysis necessary to determine the underlying causes for problems it identified. Some of the initiatives addressed known problems, such as those that had been identified through efforts to modernize DOD's existing computer systems. However, for others DOD had very little data or analysis demonstrating the underlying problems and how best to resolve them. For example, the Department identified initiatives to reduce the time it takes to process export licenses. To streamline the process, DOD largely relied on data collected on the average processing time to develop timesaving initiatives, but it did not examine the reasons for lengthy processing time on particular cases. As a result, the initiatives to shorten the processing time may not address any underlying problems in the decision- making process. In addition, DOD justified its initiatives using examples of situations depicting problems with the export control system, but many of the examples were either not accurate or did not include information needed to understand the reasons the situation arose. It is unclear whether DOD's initiatives will achieve the desired outcomes of improving U. S. and foreign forces ability to operate together in coalition warfare scenarios, reducing a gap in military capabilities between the United States and its allies, and ensuring that U. S. companies successfully 2 Defense Trade: Status of the Department of Defense's Initiatives on Defense Cooperation (GAO/ NSIAD- 00- 190R, July 19, 2000). compete in overseas markets. DOD has not clearly demonstrated how its defense cooperation initiatives, for instance, will improve interoperability between U. S. and foreign forces. In fact, the after action report on the recent Kosovo coalition operation did not identify U. S. export controls, which were a major focus of the Department's initiatives, as a major impediment to interoperability. While the DOD's initiatives may help some companies share technology or successfully compete in overseas markets, they do not address many relevant factors that fall outside of the Department's sphere of influence and control. For example, national governments have traditionally tended to purchase major defense equipment from their domestic companies or when buying foreign products require domestic production as a condition of sale. A preference for domestic production appeared to influence a recent competition involving a European and a U. S. product. The European government selected the European product even though the U. S. government provided assurances that access to U. S. technology would not be inhibited. The effects on desired outcomes of the administration's Defense Trade Security Initiative proposals remain uncertain. The Departments of State and Defense have not agreed on how to implement some proposals such as exempting exports to certain allies from licensing requirements. For example, the Departments have not agreed on criteria or parameters for assessing comparability of allied countries' export control regimes. Once the Departments agree, the administration will have to negotiate changes to the export control systems of the affected countries. In addition, the Departments of State and Defense have agreed in principle on the need to enhance computer interconnectivity between the departments but have not agreed on how best to accomplish this objective. In commenting on a draft of this report, DOD disagreed with our findings because the Department believes it performed adequate analysis of the underlying problems. The State Department agreed with our critique of DOD's export control examples. However, the State Department disagreed with our characterization of the computer enhancement proposal because it believes that the Departments have already agreed that the implementation of the proposal is limited to improving communications and data exchange connectivity between the State Department and DOD. Because the Departments did not provide any additional supporting information, we did not revise our report. Background International defense cooperation has become increasingly important to governments and defense companies since the end of the Cold War. The U. S. government has identified international cooperation as a major part of its national security strategy for the 21st century since many security challenges can no longer be addressed by a single nation. Further, shrinking defense budgets and rapid technological changes have changed the current business environment for defense companies. Looking to replace declining domestic sales, defense companies have been motivated to seek cross- border industrial partnerships to gain access to each other's markets. However, companies and foreign customers are concerned about some U. S. government restrictions that they believe have impeded industry's ability to partner and cooperate internationally. DOD's identification of its initiatives was an attempt to improve conditions for cross- border defense cooperation. DOD identified several outcomes it wants to achieve with its defense cooperation initiatives, including improving interoperability, reducing the military capabilities gap, and ensuring that U. S. defense companies successfully compete abroad. These desired outcomes are not new, but DOD leadership has determined that addressing them in a post- Cold War era requires greater cross- border defense industrial cooperation and increased interaction with U. S. allies. DOD officials recognize that promoting a global defense market presents both benefits (such as increased interaction with allies) and security risks (such as the loss of the U. S. technological edge or the potential spread of weapons). As a result, in 1998, DOD commissioned several studies on these benefits and risks, and in the following year formed a senior- level working group to identify initiatives to facilitate cross- border cooperation among defense companies while protecting U. S. security interests. The working group compiled a list of 81 defense cooperation initiatives. Table 1 provides a summary of the initiatives and their overall objectives. Thirty- four of the initiatives were part of an ongoing effort to reinvent the Foreign Military Sales Program and have not been fully implemented. Forty- seven of the initiatives were intended to streamline processes and/ or change policies in several areas, including export controls, release of classified information to foreign countries, procurement from domestic and foreign companies, and industrial security. DOD has completed implementing about one- third of its 47 initiatives, but the majority are ongoing, with no established timetable for completion. Table 1: Summary of DOD's 81 Defense Cooperation Initiatives Categories of initiatives and selected examples Objectives Thirteen Foreign Disclosure Initiatives, a such as To reduce the time associated with releasing establishing guidelines for training in international security and disclosure and classified information to foreign entities and to initiating reviews to decrease time to approve foreign visits and/ or access to ensure that personnel have training and guidelines classified information. to release information only when it is appropriate and authorized. Eleven Automation Initiatives such as To facilitate expedited license processing; protect replacing several systems and databases, such as the Foreign Disclosure agency sensitive information; reduce repetitive System Classified Military Information Database and the Technology Protection submission of technical data; provide a standard System Munitions Database and user interface for the submission and review of developing a new computer system for the Departments of Defense, State, supporting documentation; and comply with the Commerce, and other federal agencies involved in the export control process. Government Paperwork Elimination Act and the Clinger- Cohen Act. Twelve Export Control Initiatives such as To improve the timeliness and quality of the export developing a DOD plan to improve effectiveness of the export licensing review review process; facilitate cooperation with trusted process, allies by reducing burdens for obtaining export expanding the International Traffic in Arms Regulations export licensing licenses; and assist industry by providing insight into exemptions to other countries- similar to the historical exemption provided to the licensing process for foreign military sales and Canada, and direct commercial sales. establishing an ombudsman to give exporters an avenue to the licensing system. Eight Defense Industrial Base Initiatives such as To improve the bilateral framework for cooperation concluding the Declaration of Principles with the United Kingdom, and facilitate a more integrated industrial base; documenting DOD's utilization of foreign sources, and improve the quality of information on U. S. reliance on starting industrial base discussions with other countries. foreign sources; and identify common areas to improve cooperation. Three Defense Industrial Security Initiatives such as To eliminate unnecessary requirements that do not proposing changes to the National Industrial Security Program Operating enhance national security. Manual. Thirty- four Foreign Military Sales Reinvention Initiatives such as To establish a better working relationship between developing policies for U. S. government and industry cooperation and for Foreign the U. S. government and industry to provide Military Sales agreements, accurate information on requirements and pricing to adjusting Foreign Military Sales surcharges, b and meet customer's needs; provide foreign customers reimbursing U. S. government for support of direct commercial sales and foreign greater visibility and participation in the development military financing/ direct commercial contracts. of agreements; and increase U. S. government partnering with U. S. industry in the area of direct commercial sales opportunities. a The disclosure initiatives cover the approval of foreign customers' visits and/ or access to classified information. b Surcharges are authorized charges included in Foreign Military Sales agreements, which are calculated as a percentage of the basic cost of the item or service to recover costs that have been incurred by the U. S. government. Source: GAO analysis of DOD initiatives. DOD's defense cooperation initiatives prompted additional discussions on the U. S. export control system. In December 1999, the Departments of State and Defense established a new working group to develop proposals to change the export control process. The State Department is responsible for controlling the export of defense items but refers export license applications to DOD and other agencies when technical or policy reviews are needed before making a licensing decision. By March 2000, the Departments of State and Defense had agreed to 15 proposals intended to streamline the export control process. The proposals ranged from improving the use of existing regulatory exemptions to creating new types of export licenses. The White House, the National Security Council, and the Department of Justice joined the discussions, and the parties reached final agreement on these and two additional proposals that were announced on May 24, 2000, as the Defense Trade Security Initiative. DOD Selected Many of To improve defense cooperation, DOD compiled a list of initiatives, 47 of Its Initiatives Without which were intended to address problems with the Department's internal export control and procurement processes and policies. Although some Sufficiently Analyzing initiatives were intended to correct deficiencies previously identified the Underlying through audit reports, DOD proposed many of the 47 initiatives without Problems first analyzing the reasons for the problems. For these initiatives, DOD had very little data or analysis demonstrating the underlying problems and how best to resolve them. In addition, DOD justified some of its initiatives using examples to demonstrate problems with the export control process. However, the information provided on the examples was often incomplete and in many cases, the reports on the incidents contained factual errors. Without a full understanding of the underlying problems, it is unclear whether DOD's initiatives will correct problems that may exist. Some Initiatives Were Thirteen of the 47 initiatives were supported by audit recommendations or Intended to Address Known based on the need to modernize existing computer systems. For example, Deficiencies, but Many Were certain initiatives cited the need to establish training, guidance, and Based on Limited Analysis communication processes to improve efficiency within the export licensing process that DOD uses to provide technical reviews to the State of the Problems Department. The Department of Defense Inspector General, in a 1999 audit report, identified deficiencies in these areas and recommended changes to address these problems. DOD identified other initiatives that were part of its ongoing modernization efforts to replace a variety of internal software programs or databases pertaining to classified information, export licenses, and foreign visits. For example, one of these databases had not been upgraded for about 20 years, and another required changes to make the system Y2K compliant. The remaining 34 initiatives were largely based on limited data or analysis of the underlying problems. For example, 14 of DOD's initiatives to change the processes for controlling exports and release of classified data were consistent with recommendations in a white paper prepared by the Defense Security Cooperation Agency in 1999. 3 The white paper, however, was largely based on concerns from customers and industry, and DOD did not verify the information provided or assess the basis for the concerns before undertaking the initiatives. In addition, a 1999 Defense Science Board report on globalization and security also contained recommendations consistent with 14 of DOD's initiatives. 4 Some senior- level officials who worked on this report told us that limited empirical data existed to support the report's recommendations. When we examined the report's list of source documents, we found that 70 percent were taken from newspapers and periodicals; no original data were collected. Finally, the remaining initiatives were based on anecdotal evidence collected during meetings with allies and industry and from an informal survey of several major defense companies. However, DOD often did not validate whether the problems existed nor examine the underlying reasons for problems identified by allies and industry. Without examining the underlying reasons for problems that may exist, DOD has no assurance that many of its initiatives will resolve the problems. For example, DOD has several initiatives intended to reduce lengthy license processing time by including time limits for reviewing licenses and reducing the number of review levels. In examining processing time, DOD collected data on the average time it takes to review export licenses. While reducing processing time is a worthy objective, concentrating on average time may obscure reasons for lengthy processing times on particular cases or obscure the factors that contributed to a speedy licensing decision. Data could be collected on the export control licensing process that may provide indications of where problems lie in the process. In fact, a recent law stated that the State Department should perform such a study and report to congressional committees on the munitions licensing process. 5 Among 3 The Defense Security Cooperation Agency (in cooperation with the Office of Policy Support within the Office of the Secretary of Defense and the Defense Threat Reduction Agency as well as industry organizations) prepared a white paper entitled Arms Transfer/ Technology Transfer White Paper in 1999. 4 Nine recommendations were found in both the white paper and the Defense Science Board report. 5 P. L. 106- 113, Nov. 29, 1999, sec. 1310. other things, the Department's study is to analyze the processing time for each major category of licenses and include a breakdown of licenses by country. The State Department was to submit this report by the end of May 2000 but has not done so because of scarce resources and other demands, according to a senior State Department official. When the study is performed, it may contribute to an understanding of the reasons for various processing times. Further, the Principal Deputy Under Secretary of Defense for Acquisition, Technology, and Logistics told us that while the average processing time has been reduced, it does not appear to be the fundamental problem with the U. S. export control process. This official said that the major problem is not the time it takes to review an export license application but rather that the outcome of the review process is often not satisfactory. In other words, when reviewing license applications for national security concerns, DOD officials may decide to deny the application or place terms and conditions on the application. Such conditions may be so stringent that they hinder the export of the defense article or service. Some senior officials from defense companies also told us that the rules governing license approvals are not consistently applied. Many of DOD's Examples of To justify its export control- related initiatives, DOD prepared a list of Export Control Problems 20 examples to illustrate situations where the export control process takes Lacked Key Information or too long, is outdated, and hampers U. S. companies from competing abroad. Contained Factual Errors DOD compiled the list from news sources, e- mails, congressional testimony by a U. S. company president, and company and embassy officials. Of the 20 examples, 6 pertained to comments made by or opinions expressed by foreign company and government officials about the U. S. export control process that did not involve an export license. In addition, one example involved a company and export license that DOD officials could not identify because the DOD official who provided the example did not specify the name of the company and has since left the Department. Of the 13 examples where licensing information was available, several examples indicated inefficiencies in the export licensing process. Specifically, in one instance the State Department was slow in determining if it needed to notify Congress about an export, and in another instance an unexplained error in DOD and State Department records caused a delay in approving a license application. However, in 9 of 13 examples, DOD did not include information needed to understand the reasons that the situation arose or the examples contained factual errors. Appendix I provides DOD's description and our analysis of 10 of DOD's examples. The remaining three examples are discussed below. One example, based on a company's press release, stated that a Singapore- based consortium (two- thirds owned by a Chinese affiliate) terminated its contract with a U. S. aerospace company because this company was unable to secure necessary U. S. export licenses in a timely manner. Under this contract, the U. S. company was to build a $450 million satellite- based mobile telephone system. However, we found that the Department of Commerce- responsible for controlling the export of items with both civil and military applications- denied the U. S. company's license application. The Department, in consultation with other federal agencies, decided to deny the export application because of concerns of possible Chinese military involvement, questions about the company's dealings with China, and its hiring of a foreign national- the son of the Chinese general overseeing China's military satellite program. DOD's example indicates that lengthy processing time caused the company to lose the contract when, in fact, the company was denied the license because of concerns with the export. In a second example, based on an aviation publication, a U. S. company is still waiting for the State Department to complete a review of its Technical Assistance Agreement to build a Chinese communications satellite. 6 According to DOD's example, the U. S. government approved the agreement (in February 1998) and then temporarily suspended it in December 1998 to make sure it was in compliance with new export regulations. However, we found that the State Department suspended the agreement principally because of an ongoing criminal investigation of the company. Section 1512 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (P. L. 105- 261, Oct. 17, 1998) requires the President to certify that any export to the People's Republic of China of missile equipment or technology will not be detrimental to the U. S. space launch industry or will not measurably improve the missile or space launch capabilities of the People's Republic of China. Since the company's agreement involved missile technology, the State Department was required to suspend the agreement to review the case for the purpose of such a certification. After the review, the State 6 A Technical Assistance Agreement is an agreement for the performance of defense services or the release of technical data that is subject to the review and approval of the State Department. Department determined that it was not prepared to recommend such a certification because the company was under grand jury investigation for possible export violations; consequently, the suspension remained. In June 1999, the company asked the State Department to lift the suspension. The State Department responded in August 1999 that the suspension should not be terminated, but it did not disclose the reason for its decision. However, 5 days later, a State Department spokesman publicly stated that the Department was concerned about the company being investigated for allegedly breaking export control laws. DOD's example indicates that the company had not received a response from the State Department when, in fact, the Department had completed the review and communicated the response to the company. A third example, based on a DOD e- mail, stated that in June 1999 a U. S. company could not perform inspection and repair work on aircraft purchased by the Royal Thai Navy under the Foreign Military Sales Program because the State Department required the company to first obtain a signed Technical Assistance Agreement, which the Royal Thai Navy refused to sign. The example stated that the State Department had not previously required a signed agreement for such work under its export control regulations. We found that the State Department had not changed its requirement. In fact, the State Department issued guidance in March 1997 to the contractors stating that a Technical Assistance Agreement is needed when providing defense services under a Foreign Military Sales agreement. In this particular case, the company had already obtained an approved agreement from the State Department in anticipation of this work. According to an e- mail sent by a DOD official in Thailand, the Royal Thai Navy refused to sign the agreement because it believed its contract was with the U. S. government and not the U. S. company. However, according to a company official, the Royal Thai Navy refused to sign the agreement because a DOD official advised against signing. Therefore, while DOD's example stated that the problem was a new State Department requirement for a Technical Assistance Agreement, in fact, the problem was a disagreement between the company and the Royal Thai Navy on the need for an agreement. DOD officials at the U. S. Embassy in Thailand sided with the Royal Thai Navy. These examples demonstrate the complexities of the export control system and the need to understand the underlying reasons for problems that may exist. Without a full appreciation of the problem, it is unclear whether DOD's initiatives will resolve existing problems. The Extent to Which DOD has several desired outcomes it wants to achieve from its defense DOD's Initiatives Will cooperation initiatives, including (1) improving interoperability in coalition warfare scenarios, (2) reducing a gap in military capabilities between the Achieve Desired United States and North Atlantic Treaty Organization allies, and Outcomes Is Unclear (3) ensuring that U. S. defense companies successfully compete abroad. Senior DOD officials have stated that the defense cooperation initiatives are an approach to achieving these desired outcomes in addition to efforts under way with the North Atlantic Treaty Organization member nations. However, DOD has not clearly demonstrated how its initiatives will achieve these three outcomes, especially since other factors can influence these desired outcomes. DOD has asserted that its initiatives will help achieve one of its desired outcomes- interoperability- but has not clearly demonstrated how these initiatives might result in this outcome. For example, regarding one recent conflict, the Kosovo/ Operation Allied Force After- Action Report did not identify U. S. export controls as a major impediment. 7 Instead, the report identified failures in communications and logistics and certain shortcomings in the Allies' capabilities as impediments to interoperability. The report also cited some concerns about the release of classified information to the allies and suggested the need to refine the policy and process for releasing such information. Although the report stated that the United States must carefully review its policy regarding licensing requirements for the allies, it provided no specific examples to support this suggestion. Further, officials responsible for supporting Kosovo operations from the U. S. European Command, as well as DOD and State Department arms transfer officials, told us that the U. S. export control system was not an impediment to interoperability in Kosovo. In fact, the State Department had established an expedited review process for export licenses designated to support the Kosovo operations. Additional resources were devoted to reviewing these export licenses, which were given priority over routine licenses that companies submitted. Also, some officials from major U. S. defense companies told us that DOD's export control initiatives are unlikely to help achieve interoperability because other factors may have a more direct impact on interoperability than DOD's initiatives. 7 Kosovo/ Operation Allied Force After- Action Report to Congress, DOD (Jan. 31, 2000). DOD's initiatives may facilitate greater technology sharing between U. S. and European companies that, in turn, could affect the Department's second desired outcome of closing the transatlantic military and technology gap. Nonetheless, other factors, beyond DOD's influence, could more directly impact this outcome. For example, the Secretary General of the North Atlantic Treaty Organization and U. S. government officials have stated that European nations are not investing sufficient resources in developing military and technological capabilities and, in fact, European investment in defense research and development has been significantly below U. S. levels. According to some European officials, the gap in defense spending results from different spending priorities and different threat perceptions. In addition, whereas the United States has a global military threat and interest, European countries generally have focused on European security. 8 Finally, DOD's initiatives may increase opportunities for some U. S. companies to compete in European and other overseas defense markets. However, like the United States, European countries tend to purchase major defense equipment from their domestic companies when such options exist. For example, in the United Kingdom's recent competition for the Beyond Visual Range Air to Air Missile, the U. K. government chose a European missile that is still in development over a U. S. product that DOD officials advocated was proven and less expensive. DOD also assured the U. K. government that access to U. S. technology would not be a problem. However, according to the U. K. Ministry of Defense, it selected the European option because it would provide superior military capability. Further, even when importing major weapon systems, many European countries have obtained benefits to their domestic economies by requiring subcontract awards to firms in their own countries. 9 DOD's defense cooperation initiatives may encourage the formation of “global” defense alliances that can help achieve some of its desired outcomes, but this may not affect other countries' procurement decisions, policies, and practices. In addition, if defense budgets remain constant, defense companies will compete in a limited global defense market, 8 NATO: Implications of European Integration for Allies' Defense Spending (GAO/ NSIAD- 99- 185, June 30, 1999). 9 For more information on this practice, see Defense Trade: U. S. Contractors Employ Diverse Activities to Meet Offset Obligations (GAO/ NSIAD- 99- 35, Dec. 18, 1998). thereby creating a situation where all companies may not be able to survive. Effect of the On May 24, 2000, the administration unveiled 17 proposals to expedite and Administration's reform the U. S. export control system, which it characterized as the first major post- Cold War adjustment to the U. S. system. However, it is Export Control uncertain what effects the proposals will have. In a press statement, the Proposals Is Uncertain State Department said that the proposals are intended to increase mutual security by (1) increasing interoperability, (2) enhancing defense capabilities, and (3) promoting transatlantic defense industrial cooperation and competition. As with DOD's cooperation initiatives, the administration has not demonstrated how its proposals will achieve these identified outcomes. Further, State Department officials told us that there was no analysis of existing problems. As a result, there is little assurance that the underlying problems with the U. S. export control system have been sufficiently analyzed to determine what the causes of the problems are and that the 17 proposals will remedy problems that may exist. Appendix II provides a description of the proposals, which are collectively known as the Defense Trade Security Initiative. The effects of the proposals on desired outcomes cannot be assessed until the Departments of State and Defense issue regulations covering key proposals and gain some experience in their implementation. Some of the proposals call for fine- tuning regulatory procedures and practices and do not require significant changes to implement. However, the Departments have not agreed on the criteria or parameters for other proposals, such as granting exemptions to certain countries and/ or foreign companies from export licensing requirements. The U. S. government has experience with exemptions of this nature, but according to the State Department, problems have arisen when the regulatory exemption was misused. Specifically, the U. S. government has long granted an export exemption enabling many controlled defense articles to be exported to Canada without licenses. However, the scope of that exemption was limited in April 1999 because the State Department concluded that some companies misunderstood the exemption and unauthorized exports occurred. 10 Under the new country exemption proposal, the administration envisions that the United Kingdom and Australia are the two countries most ready to take advantage of a broad export license exemption. The administration started discussions with the United Kingdom first. However, State Department and U. K. government officials told us that the United Kingdom's export system is not compatible with that of the United States in several areas. For example, U. S. export control laws require restrictions on other countries' ability to transfer U. S.- controlled defense articles to third countries. In contrast, according to these officials, the United Kingdom does not have the same restrictions. The U. S. and U. K. governments have yet to evaluate the compatibility of their export licensing systems and determine how enforcement concerns will be addressed. The negotiations may lead to a binding agreement between the United States and the United Kingdom. Once the agreement is reached, the details of the implementing regulatory language are key to avoiding misinterpretation of the exemption and possible abuses of the export control system. The Departments of State and Defense also do not agree on how to implement another key proposal to establish an interagency computer system to exchange export license application information. Specifically, the two Departments have not established up- front what their needs are. DOD has allocated funds to establish an interagency database that would include interconnectivity not only with the State Department but also with industry, the Department of Commerce, and other federal agencies involved in the export licensing process. In contrast, the State Department would prefer a more limited scope whereby interconnectivity would be established between the Departments of State and Defense utilizing upgrades of existing systems. Many decisions have to be reached and actions taken before the administration can implement some of its proposals. In making such decisions, a senior State Department official told news reporters in June 2000 that the State Department is likely to establish strict standards for 10 On June 19, 2000, the U. S. and Canadian governments announced an agreement to strengthen their respective export control regimes. As part of this agreement, the Canadian government will introduce legislative and regulatory changes to strengthen certain defense export controls. The U. S. government, concurrent with these changes, intends to revise its regulations to reinstate most of the pre- April 1999 Canadian exemption. implementing the proposals, which may take time. Senior DOD officials, however, have emphasized the importance of implementing the proposals in the near term. In addition, the administration has to determine if it will need to establish new monitoring or enforcement procedures to make certain that defense articles are properly controlled once exported. While the Departments are hiring additional staff, they will need to evaluate whether the new resources are sufficient once the proposals are fully implemented. Until such decisions are reached, it is uncertain how the U. S. export control system will change. Conclusions The administration, the U. S. defense industry, and foreign governments have expressed a high level of concern about current restrictions on cross- border cooperation. This level of concern indicates that the postCold War environment of declining defense budgets, multinational military operations, and rapid technological changes has created the need for a reexamination of U. S. defense trade and investment policies. Based on work done by DOD, the administration is moving forward to implement proposals to change the U. S. export control system. Without a clear and common understanding of perceived versus real problems and their underlying causes and without an appropriate analytical framework to tie changes to desired goals, it will be difficult to anticipate the outcomes of changes and to determine whether progress is being made. Such a situation will likely require subsequent reexamination. Agency Comments In written comments on a draft of this report, DOD stated that it disagreed with our findings, which it characterized as assumptions. Specifically, DOD said it did not develop its initiatives without first examining the underlying causes of the problems and did not rely exclusively on the export control examples cited in our report as support. According to DOD, many of its initiatives addressed problems raised by contractors and foreign governments. In addressing these complaints, DOD said it performed extensive analysis of the problems including the formation of a Rapid Improvement Team to examine the export license process. DOD also stated that the effects of the administration's export control proposals are not uncertain. According to DOD, it has achieved procedural improvements in its own export control process resulting in reduced license review times. DOD's comments are reprinted in appendix III. DOD also provided some technical comments, which we have incorporated as appropriate. We agree that DOD relied on problems raised by contractors and foreign government officials to identify many of its initiatives. Although complaints are a means of identifying potential problems, they do not amount to a validation of the problems or an assessment of the underlying causes for problems that may exist. As stated in our report, some initiatives were intended to address known deficiencies such as those previously identified in audit reports, but many were based on limited analysis of problems identified in white papers, task force reports, and through discussions with industry and foreign government representatives. Moreover, the Rapid Improvement Team, which DOD established to reengineer the export control process, relied on corporate knowledge of its participants and did not focus on collecting and analyzing data to validate the problems they discussed. Finally, we examined the 20 export control cases provided by DOD and found that many did not contain information necessary to understand the situation or were inaccurate. DOD has used these examples on many occasions to support its initiatives, referring to them in speeches and congressional testimony. DOD did not provide any other examples to support its position. Because DOD has not provided additional information to support its initiatives, we see no need to revise our report. While DOD states that the effects of the Defense Trade Security Initiative are not uncertain, it only provided reductions of the average license review times as an example of a known outcome. Although DOD has implemented initiatives to increase the timeliness of its review process, this represents only one aspect of a broad range of changes to modify the export control system. We acknowledge that there is value in reducing processing time. However, concentrating on average time may obscure the reasons associated with such time frames. As with many of DOD's initiatives, the administration's proposals are based on limited analysis of the underlying causes for existing problems. Therefore, there is no assurance that problems are going to be addressed by the proposed solutions. Further, decisions still have to be reached on how to implement proposals such as computer system improvements and the country licensing exemption. Until these decisions are reached, it is not possible to determine their effects. We see no reason to revise our report based on DOD's comments. In written comments on a draft of this report, the State Department agreed with our assessment of DOD's export control examples and disagreed with our characterization of the status of the computer system improvements. For example, the State Department has indicated that it already has a modern computer system and has been working with the defense industry to electronically receive export license applications. While the Departments of Defense and State have agreed in principle to a proposal to enhance U. S. government export license computer systems, our discussions with agency officials shows that the Departments have not agreed on the implementation of this initiative. DOD has requested funding to create a new interagency database to improve interconnectivity between industry; the Departments of Defense, State, and Commerce; and other federal agencies involved in the U. S. export control process. In contrast, the State Department has said that the proposal is limited to enhancing communications and data exchange connectivity between the State Department and DOD. At the time of our review, both Departments have been working separately with industry on prototypes for electronic license applications, which may result in some duplication of efforts or incompatible approaches. Therefore, we believe that the two Departments have different goals and expectations as to how to achieve computer interconnectivity during the export license review process. We revised our report to clarify the different positions held by the two Departments. The State Department's comments are reprinted in appendix IV, along with our evaluation of them. The State Department also provided technical comments, which we incorporated as appropriate. Scope and To determine the analysis and data DOD used to support its initiatives, we Methodology compared DOD's specific initiatives with recommendations presented in audit reports, studies, and white papers, and we evaluated the sources of information used to support the need for the initiatives. We discussed the extent of empirical data collected and analyses performed with key officials from industry, DOD, and the State Department involved in the studies and the initiatives. We examined DOD's examples of problems with the U. S. export control system by reviewing the export licenses and government technical assessments of the licenses and discussed the circumstances of each case with relevant industry, DOD, and State Department officials. To determine the relationship between DOD's initiatives and desired outcomes, we reviewed DOD documents on global markets and international defense cooperation, including white papers, studies, speeches, congressional testimony, and DOD's initiatives. We also reviewed reports on interoperability and the European defense market to determine factors that could affect DOD's desired outcomes. We discussed the objectives of each initiative and the connection between the initiatives and desired outcomes with officials from 10 offices within the Office of the Secretary of Defense and with the Defense Threat Reduction Agency, the Defense Intelligence Agency, the Defense Security Cooperation Agency, the Defense Security Service, the Joint Chiefs of Staff, the military services, and the State Department. To examine the potential outcomes of the administration's proposals that make up the Defense Trade Security Initiative, we reviewed position papers and other documents on the Initiative. We discussed the Initiative and its likely impact on the U. S. export control system with senior DOD and State officials involved in its development. We performed our review from January through June 2000 in accordance with generally accepted government auditing standards. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this letter to Representative Sam Gejdenson, Ranking Minority Member, House International Relations Committee and to Representative Ike Skelton, Ranking Minority Member, House Armed Services Committee. We are also sending copies to the Honorable William S. Cohen, Secretary of Defense; the Honorable Madeleine K. Albright, Secretary of State; and the Honorable Jacob J. Lew, Director, Office of Management and Budget. Copies will also be made available to others upon request. Please contact me on (202) 512- 4841 if you or your staff have questions concerning this report. Another contact and key contributors to this assignment are listed in appendix V. Katherine V. Schinasi Associate Director Defense Acquisitions Issues Appendi Appendi xes x I Examples of Export Control Problems To justify the need for change to the export control system, the Department of Defense (DOD) prepared a list of examples of situations depicting problems with the system. Ten of these examples, pertaining to specific export licenses, are discussed in table 2 along with our analysis. We found that several of the examples indicated inefficiencies in the export licensing process but most contained factual errors or did not provide information needed to understand the reasons the situations arose. Table 2: DOD's Export Control Examples and GAO's Analysis DOD's export control examples GAO's analysis 1. A U. S. company waited 7 months for an export license to This example demonstrates a problem of lengthy processing time. supply technical data to a Dutch company that was building On September 21, 1998, a U. S company submitted an export components for a U. S. fighter engine. DOD characterized this license application amending an existing coproduction agreement. example as demonstrating that the export control process is The State Department approved the license application, valued at not suited to the current global environment. $20 million, on July 16, 1999. The approval process took almost 10 months because the Department was late in determining if the Arms Export Control Act required notice to Congress about this export. The State Department determined that the dollar value of this amendment and the value of the basic agreement required congressional notification. Before the Department could notify Congress, it had to provide the license application to the Arms Control and Disarmament Agency for review. The Agency took 3 months to review and approve the export, thus delaying the notification process. 2. By the time a major U. S. electronics company received a State Although the example suggests that the U. S. company was unable Department export license to bid on a contract to sell to submit a bid, in fact the company bid on the contract and lost. The electronic modules worth more than $50 million for European French spacecraft builder awarding the contract evaluated the commercial satellites, the foreign spacecraft builder had competing companies using five performance categories. The turned to suppliers in Europe and Japan. DOD used this builder rated the U. S. company poorly in one category because it example to demonstrate that the export licensing process perceived the U. S. export control system as possibly disrupting takes too long. future supply. In the remaining four categories, the U. S. company was rated acceptable in three and outstanding in one. We do not know how the company's rating compared with other companies competing for the contract or what the final determining factor was in awarding the contract. 3. A U. S. company applied to the State Department for a license Processing of the license application was delayed pending the to send updated repair instructions for helicopter engines to results of an investigation on the country receiving the export. The Greece. The license took 5 months. DOD used this example U. S. company submitted its export license application to the State to demonstrate that the export licensing process takes too Department on December 3, 1998, and it was approved on May 5, long. 1999. The license application took 5 months to approve because the State Department was delaying all munition exports to Greece in the spring of 1999 pending the conclusion of an investigation on whether Greece improperly transferred U. S. technology. 4. A U. S. company submitted license applications to send digital According to State Department records, the license review process maps of Bosnia to the Netherlands for use in Dutch Chinook took 51 days, rather than 3 months as stated. In addition, the export CH- 47 helicopters supporting the United Nation's license application did not indicate that the maps were intended for peacekeeping operations. The example stated that it took use in Kosovo. Therefore, according to a State Department official, 3 months to process the license applications, despite the the reason cited in the example for expediting the request- the Dutch Embassy urging the State Department to expedite the Kosovo situation- had no bearing on the license request. applications due to the deteriorating situation in Kosovo. DOD used this example to demonstrate that the export licensing process takes too long. (Continued From Previous Page) DOD's export control examples GAO's analysis 5. A U. S. company waited 3 months for a license to ship parts for Approval of the license application was delayed for an unknown British engines for a critical program for the United States. reason. The U. S. company submitted its export license application DOD used this example to demonstrate that the export to ship parts for the British engines for the Joint Strike Fighter licensing process takes too long. Program on November 6, 1997. The State Department then referred the application to DOD for review. However, there was a discrepancy in the two Departments' records as to when DOD completed its review. DOD's records showed that it completed its review on December 22, 1997, but the State Department's records indicated that DOD completed its review on February 6, 1998. According to the Director of the State Department export licensing office, the State Department accesses the DOD computer licensing system every night to obtain DOD's final position on all export licenses for that day. However, this case, for some unknown reason, was not retrieved. As a result, the State Department did not approve the export license until February 11, 1998. The license would have been issued in 1-� months rather than 3 months had the case been retrieved on the day that DOD completed its review. This example demonstrates inefficiencies in the export licensing review process. 6. A U. S. company license request to sell Air- Sea Rescue Flares The company's initial application was returned on January 14, 1999, to the Italian Coast Guard to rescue North Atlantic Treaty because of missing information needed for the license review Organization airmen during the Kosovo crisis was turned process. The company resubmitted its application on February 1, down because the licensing officer did not think the 1999, and the license was approved on April 13, 1999. The export application had enough detail. The flares had already been license application stated that the flares were to be used for the approved for sale to 30 countries, and the export to Italy was certification and operational testing of the launcher for the ATR- 42 eventually approved. DOD used this example to demonstrate aircraft; the application did not associate this export with the Kosovo that the export control process does not reflect the real world crisis. In addition, the application referred to a prior export of the situation. item about 8 years ago for which the State Department no longer has a record, but it did not indicate that the item had been approved for sale to 30 countries. According to the Director of the State Department export licensing office, such information is needed to facilitate the review of an export license application. The Department of Defense took almost 7 weeks to review this case because it had a backlog of export licensing cases and this license application did not identify an urgent requirement for turnaround, according to a DOD official. (Continued From Previous Page) DOD's export control examples GAO's analysis 7. A U. S. company applied for an export license to ship modules A pending determination of whether this export license application containing focal plane arrays (a type of optical sensor) to falls under the jurisdiction of the Department of Commerce or State Sweden. These modules were to be incorporated into Department delayed this case. At the time the U. S. company cameras for civilian use by factories, power plants, and similar submitted its export application, the U. S. government was customers. For 4 years, the company applied for and obtained determining whether the type of modules were to be controlled as a 6 export licenses from the Department of Commerce dual- use item by the Department of Commerce or as a munition authorizing the export of 1,000 modules. (The Department of item by the State Department. DOD officials believed that these Commerce is responsible for reviewing and approving exports modules were a munitions item and, consequently, advised the that have both civilian and military applications.) In November Department of Commerce to return the export application to the 1998, the U. S. company submitted another application to the company and direct the company to submit its application to the Department of Commerce to export 200 modules. In January State Department. Subsequently in April 1999, the State 1999, the Department of Defense, which was reviewing the Department determined that the modules should be controlled as a license at the request of the Department of Commerce, asked munitions item. the company for additional information. The company promptly submitted the requested information but received no reply from DOD. On May 12, 1999, the company's export application was returned without action but included instructions to apply for an export license at the State Department. DOD used this example to demonstrate that the export control process does not reflect the real world situation. 8. A U. S. company bid on a contract to sell gear knobs for use in The approved export license did not contain the restrictions cited in a commercial airliner to a manufacturer in a North Atlantic DOD's example. The U. S. company's initial export application was Treaty Organization country. The U. S. company has had a submitted on January 12, 1999, and was returned on January 22, license pending for months despite the fact that the knobs are 1999, because it lacked sufficient documentation for information in widespread commercial use. At the critical design review, needed during the licensing review process, such as specification of the company was told that the knobs had to be covered by a the end user and end- use of the export. The U. S. company shroud so the visiting foreign contractors could not see the resubmitted its application on March 11, 1999, and the license was product to be installed in their aircraft. DOD used this example issued on July 13, 1999. The approved license did not contain any to demonstrate that the export control process does not reflect restriction on shrouding the knob during the critical design review. the real world situation. The company is required to abide only by those restrictions stated on the approved license. (Continued From Previous Page) DOD's export control examples GAO's analysis 9. In September 1999, a U. S. company was preparing the GE- 4 The U. S. company did not use options available to it for export commercial satellite for launch in French Guiana scheduled for components with high failure rates. The U. S. company submitted its late November. During final checkout prior to shipment, a initial application on May 25, 1999, which the State Department failure occurred with one of the traveling wave tubes made by received on June 3, 1999. The export license application was for a German company. To determine the cause of the tube's 400 traveling wave tubes destined for France, Germany, and Japan. failure and remove the technical lien from the spacecraft, the A State Department licensing officer called the U. S. company to U. S. company submitted a license for the traveling wave tube discuss the case. Subsequently on July 19, 1999, the State to the State Department on June 2, 1999. The State Department returned the application and asked the U. S. company to Department rejected the license application as being too submit a new license application with additional information and broad. The tube had to be licensed for reexport to the clarifications. The U. S. company resubmitted its application on company in Germany for repair and/ or replacement before the September 13, 1999, for two traveling wave tubes destined for satellite could be retested with the repaired tubes. The license Germany with an urgent requirement to approve by September 23, application was resubmitted on September 15, 1999, to the 1999, in support of GE- 4 satellite. The application was approved on State Department. It was approved on October 6, 1999 October 6, 1999. The Director of the State Department export (21 days later). The license processing time almost caused a licensing office stated that the U. S. company should have used the shipping delay for the repaired satellite and thus was close to temporary licenses available under the export regulations, which are causing a launch slip and, consequently, steep financial commonly used by other companies. penalties for the company. Since the company already had authority to buy and install this commercial satellite component, company officials thought it seemed excessive to get an additional license for this activity. DOD used this example to demonstrate that the export control process does not reflect the real world situation. 10. In October 1998, a U. S. company submitted a license The U. S. company submitted its initial application on November 3, application to the State Department to enable it to compete on 1998. The State Department returned the application on March 29, the United Kingdom's Future Strategic Tanker Aircraft project. 1999, because it was concerned that commercial entities were The company's intent was to compete its aircraft as a possible involved as end- users in the case. Specifically, the tanker aircraft candidate to replace the United Kingdom's aging fleet of VC10 were to be owned and operated by commercial entities as cargo and TriStar aircraft. The company had also received notice planes and leased to the United Kingdom part- time as strategic that a European company would be proposing its aircraft in tankers- an unusual arrangement raising licensing policy questions. the competition. Because it had not received any feedback The State Department licensing officer informed the U. S. company from the U. S. government, the U. S. company resubmitted its about its concerns and asked the company to submit a new export license application in April 1999. Both the Departments application and include more details about the roles of the of State and Defense delayed the license approval, preventing commercial entities in the project. The U. S. company resubmitted its the U. S. company from participating in the U. K. competition application on May 5, 1999. After discussing its concerns with until significant high- level intervention brought this case to officials of the Embassy of the United Kingdom in Washington, the light. DOD used this example to demonstrate that the export State Department approved the license application with conditions control process does not reflect the real world situation. on August 16, 1999. The Director of the State Department export licensing office stated that DOD, unlike the State Department, was not concerned about the commercial entities and approved the case in 3 weeks without placing any conditions or restrictions on the expor t. Appendi x II The Defense Trade Security Initiative In May 2000, the administration agreed to these 17 proposals as part of its Defense Trade Security Initiative. 1. Major Program License: Create a single comprehensive export license for hardware, technical data, and defense services issued at the beginning of a project where the U. S. firm is the prime contractor. 2. Major Project License: Create a single comprehensive license for a direct commercial sale of defense articles by a U. S. prime contractor to North Atlantic Treaty Organization member states, Japan, and Australia. 3. Global Project License: Create a single comprehensive license to cover all exports occurring under a government- to- government international agreement for a cooperative project. 4. Technical Data Exports for Acquisitions, Teaming Arrangements, Mergers, Joint Ventures, and Similar Arrangements: Develop a single comprehensive export authorization to permit qualified U. S. defense companies to exchange broad ranging technical data for a variety of business arrangements with qualified foreign firms from North Atlantic Treaty Organization members, Japan, or Australia. 5. Enhance the Use of Multiple Destination Licenses: Increase the use of an existing license to permit U. S. firms to market specific products to designated users for a specified purpose. 6. Enhance the Use of Overseas Warehousing Agreements: Increase the use of overseas warehousing and distribution agreements that permit U. S. firms to export large numbers of items (such as spare parts) to a foreign company. 7. Expedited License Review for North Atlantic Treaty Organization Allies: Expedite U. S. government review of export licenses for Defense Capabilities Initiative projects or programs. 8. Special Embassy Licensing Program: Expedite U. S. government review of licenses submitted by the governments of the North Atlantic Treaty Organization countries, Japan, and Australia via their embassies in Washington, D. C., for end use by the requesting government. 9. Interagency Export License Electronic Control Process: Enhance computer connectivity between the Departments of Defense and State to permit greater and more timely exchange of data on export license applications. 10. Extension of International Traffic in Arms Regulations Exemption to Qualified Countries: Extend a licensing exemption to countries that share with the United States congruent and reciprocal policies in export controls, industrial security, intelligence, law enforcement, and market access. This exemption would be limited to unclassified exports to a foreign government and companies that are identified as reliable by the U. S. government in consultation with the foreign government. 11. Defense Services Exemptions for Maintenance and Related Training: Create a new regulatory exemption for increased levels of maintenance services and training for North Atlantic Treaty Organization countries, Japan, and Australia. 12. Exemption for Department of Defense Bid Proposals: Permit U. S. firms to export certain technical data and services in support of DOD bid proposals without a license. 13. More Effective Use of Existing International Traffic in Arms Regulations Exemptions by the Department of Defense: Clarify the Department's use of existing regulatory exemptions that are available to it. 14. Streamlined Licensing for Commercial Satellite Components and Technical Data: Streamline the licensing process for parts and minor components and limited technical data needed to bid on projects and respond to insurance requests on commercial satellites. 15. International Traffic in Arms Regulations Exemption for Foreign Military Sales Defense Services: Permit the license- free export of technical data and defense services if they are expressly authorized in a Foreign Military Sales agreement and in the associated contract with a U. S. company. 16. Advance Retransfer Consent for Items Sold or Granted by the U. S. Government: Permit the retransfer of unclassified defense articles (valued under $7 million) previously sold or granted by the U. S. government if the articles are to be transferred only between the governments of North Atlantic Treaty Organization countries, Japan, or Australia that signed advance blanket retransfer assurances. 17. Review and Revise the U. S. Munitions List of Controlled Defense Articles and Services: Establish a process for reviewing portions of the U. S. Munitions List on an annual basis so that the entire list is reviewed over a 4- year period. Appendi x II I Comments From the Department of Defense Appendi x V I Comments From the Department of State Note: GAO comments supplementing those in the report text appear at the end of this appendix. Now on p. 4. See comment 1. Now on pp. 9- 10. See comment 2. Now on pp. 10- 12 and appenndix I. Now on p. 16. The following are GAO's comments on the State Department's letter dated August 9, 2000. GAO Comments 1. We have modified the text of the report to address this comment. 2. The law states that the State Department should provide the Senate Foreign Relations Committee and the House International Relations Committee with a study examining the munitions licensing process, including the time it takes to review various licenses. The State Department recognizes that it is expected to perform such a study, but it did not meet the statutory time frame because of other commitments. As we stated in the report, this study may contribute to an understanding of the reasons for various processing times. We encourage the State Department to fulfill its intentions of providing the congressional committees with this study. Appendi x V GAO Contacts and Staff Acknowledgments GAO Contact Thomas J. Denomme (202) 512- 4287 Acknowledgments In addition to the name above, Anne- Marie Lasowski, Marion Gatling, Lillian I. Slodkowski, John Ting, and John Van Schaik also made significant contributions to this report. (707524) Lett er GAO United States General Accounting Office Page 1 GAO/ NSIAD- 00- 191 Defense Trade Contents Page 2 GAO/ NSIAD- 00- 191 Defense Trade Page 3 GAO/ NSIAD- 00- 191 Defense Trade United States General Accounting Office Washington, D. C. 20548 Page 3 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 4 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 5 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 6 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 7 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 8 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 9 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 10 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 11 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 12 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 13 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 14 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 15 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 16 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 17 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 18 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 19 GAO/ NSIAD- 00- 191 Defense Trade B- 285761 Page 20 GAO/ NSIAD- 00- 191 Defense Trade Page 21 GAO/ NSIAD- 00- 191 Defense Trade Page 22 GAO/ NSIAD- 00- 191 Defense Trade Appendix I Appendix I Examples of Export Control Problems Page 23 GAO/ NSIAD- 00- 191 Defense Trade Appendix I Examples of Export Control Problems Page 24 GAO/ NSIAD- 00- 191 Defense Trade Appendix I Examples of Export Control Problems Page 25 GAO/ NSIAD- 00- 191 Defense Trade Appendix I Examples of Export Control Problems Page 26 GAO/ NSIAD- 00- 191 Defense Trade Page 27 GAO/ NSIAD- 00- 191 Defense Trade Appendix II Appendix II The Defense Trade Security Initiative Page 28 GAO/ NSIAD- 00- 191 Defense Trade Appendix II The Defense Trade Security Initiative Page 29 GAO/ NSIAD- 00- 191 Defense Trade Page 30 GAO/ NSIAD- 00- 191 Defense Trade Appendix III Page 31 GAO/ NSIAD- 00- 191 Defense Trade Appendix IV Appendix IV Comments From the Department of State Page 32 GAO/ NSIAD- 00- 191 Defense Trade Appendix IV Comments From the Department of State Page 33 GAO/ NSIAD- 00- 191 Defense Trade Appendix IV Comments From the Department of State Page 34 GAO/ NSIAD- 00- 191 Defense Trade Appendix IV Comments From the Department of State Page 35 GAO/ NSIAD- 00- 191 Defense Trade Page 36 GAO/ NSIAD- 00- 191 Defense Trade Appendix V Ordering Information The first copy of each GAO report is free. 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