Export-Import Bank: The U.S. Export-Import Bank's Financing of Dual-Use
Exports (Correspondence, 09/01/2000, GAO/NSIAD-00-231R).

Pursuant to a congressional request, GAO provided information on the
Export-Import Bank's financing of dual-use exports during fiscal years
1998-2000.

GAO noted that: (1) the fiscal year (FY) 1998, the Export-Import Bank
financed one dual-use export to Indonesia and one dual-use export to
Venezuela, using $9.4 million or less than 1 percent of its financing
authority to support dual -use exports; (2) according to Bank officials
and documentation, the items have been delivered and are being used
primarily for civilian purposes; (3) during FY 1999, the Bank committed
to finance one dual-use export to Brazil and two such exports to
Croatia, using $153.2 million or less than 10 percent of its financing
authority to finance dual-use exports; (4) the items provided by these
exports are not in use, according to the Bank; (5) in FY 2000 to date,
the Bank has authorized the financing of five dual-use exports to
Venezuela, using $31.3 million or 2 percent of its authority to support
dual-use exports; and (6) according to the Bank, none of the items
supported by these five dual-use exports is in use yet.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-231R
     TITLE:  Export-Import Bank: The U.S. Export-Import Bank's
	     Financing of Dual-Use Exports
      DATE:  09/01/2000
   SUBJECT:  Dual-use technologies
	     Exporting
	     Foreign trade policies
	     Off-budget federal entities
	     International trade restriction
IDENTIFIER:  Venezuela
	     Croatia
	     Brazil
	     Indonesia

******************************************************************
** 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-00-231R

Eximbank's Financing of Dual- Use Exports

United States General Accounting Office Washington, DC 20548

National Security and International Affairs Division

B- 286054 September 1, 2000 Congressional Committees Subject: Export- Import
Bank: The U. S. Export- Import Bank's Financing of Dual- Use Exports

Since October 1994, the Export- Import Bank of the United States has had
statutory authority 1 to provide loans and loan guarantees to help finance
U. S. exports of defense articles and services, provided that it determines
these items are nonlethal and meant primarily for civilian use. These
exports, which the Bank refers to as “dual- use” exports,
include such items as air traffic control systems that have military
applications but will be used mainly for civilian purposes. The Bank is
authorized to use up to 10 percent of its total annual export financing
authority to support the sale of dual- use exports. This report responds to
our statutory mandate to report on the end uses of such dual- use exports
supported by the Bank, in order to assure that they have been employed
primarily for civilian purposes.

In September 1999, we reported on the Bank's financing and end uses of dual-
use exports approved in fiscal year 1997, 2 as required. That report also
summarized dualuse commitments for fiscal years 1998- 99. This report
provides information regarding the extent of financing and end uses of dual-
use exports approved during fiscal year 1998. It also summarizes the
commitments to finance dual- use exports made in fiscal years 1999 and 2000
to date. The enclosure to this report lists the specific items, recipients,
and amounts of the Bank's dual- use financing for fiscal years 1998- 2000.

RESULTS IN BRIEF In fiscal year 1998, the U. S. Export- Import Bank financed
one dual- use export to Indonesia and one dual- use export to Venezuela,
using $9.4 million or less than 1 percent of its financing authority to
support dual- use exports. According to Bank officials and documentation,
the items have been delivered and are being used primarily for civilian
purposes.

1 The Export- Import Bank Reauthorization Act of 1997 (P. L. 105- 121, Nov.
26, 1997) extended through 2001 provisions in 1994 legislation (P. L. 103-
428, Oct. 31, 1994) authorizing the Bank to finance certain dual- use
exports. It also extended through 2001 a provision requiring us to report
annually not later than September 1 on dual- use items financed by the Bank
during the second preceding fiscal year- which, for the purposes of this
report, corresponds to fiscal year 1998. 2 See U. S. Export- Import Bank's
Financing of Dual- Use Exports (GAO/ NSIAD- 99- 241R, Sept. 1, 1999).

B- 286054 GAO/ NSIAD/ 00- 231R Eximbank's Financing of Dual- Use Exports 2
During fiscal year 1999, the Bank committed to finance one dual- use export
to Brazil

and two such exports to Croatia, using $153.2 million or less than 10
percent of its financing authority to finance dual- use exports. The items
provided by these exports are not currently in use, according to the Bank.
In fiscal year 2000 to date, the Bank has authorized the financing of five
dual- use exports to Venezuela, using $31.3 million or 2 percent of its
authority to support dual- use exports. According to the Bank, none of the
items supported by these five dual- use exports is in use yet.

DUAL- USE EXPORTS FINANCED IN FISCAL YEAR 1998 In fiscal year 1998, the U.
S. Export- Import Bank (Eximbank) reported that it financed two dual- use
exports totaling $9.4 million. This amounted to less than 1 percent of the
Eximbank's fiscal year 1998 financing authority to support the sale of dual-
use exports. 3 One of these exports, totaling $7.7 million, was for the
procurement of trucks to be used by Venezuela's Army in civilian
construction activities in the country's frontier regions. The other export,
totaling $1.7 million, was for the purchase of aircraft parts to be used in
aircraft belonging to the Indonesian Air Force. These aircraft are intended
primarily for civilian activities, such as humanitarian aid and relief
efforts. According to Eximbank officials, documents, and field visits by
these or other U. S. officials, the items provided by the two dual- use
exports approved for financing during fiscal year 1998 are being used for
primarily civilian purposes.

DUAL- USE EXPORT COMMITMENTS FOR FISCAL YEARS 1999- 2000 During fiscal year
1999, the Eximbank reported that it committed to finance three dual- use
exports totaling $153.2 million. This amounted to less than 10 percent of
the Eximbank's fiscal year 1999 financing authority to support the sale of
dual- use exports. 4 The first export, totaling $53 million, was for the
refurbishment and the procurement of aircraft to be used by the Brazilian
Air Force in support of territorial protection and development. The second
export, totaling $14.6 million, was for the purchase of radar equipment to
be used by Croatia's Navy for coastal surveillance. The third export,
totaling $85.6 million, was for the procurement of equipment to be used by
Croatia's Air Force for civil air traffic control. None of the dual- use
exports items approved for financing during fiscal year 1999 has been
delivered, according to Eximbank officials.

So far in fiscal year 2000, the Eximbank reported that it has committed to
finance five dual- use exports totaling $31.3 million. 5 This amounts to 2
percent of the Eximbank's

3 In fiscal year 1998, the Eximbank's 10- percent cap on dual- use financing
amounted to $1, 716. 4 million. 4 In fiscal year 1999, the Eximbank's 10-
percent cap on dual- use financing amounted to $1, 575. 4 million. 5 On July
12, 2000, the Eximbank postponed approving the financing of two of these
dual- use exports,

totaling $21.1 million, to Venezuela because that country had not complied
with the Bank's end- use reporting requirements for seven dual- use exports
financed in fiscal years 1997 and 1998. On July 28, 2000, Venezuela complied
with the end- use reporting requirements. On August 1, 2000, the Eximbank
approved the financing of the two pending dual- use exports to Venezuela.
The Eximbank made this

B- 286054 GAO/ NSIAD/ 00- 231R Eximbank's Financing of Dual- Use Exports 3
fiscal year 2000 financing authority to support the sale of dual- use
exports. 6 The first

export, totaling $1.5 million, is for the procurement of trucks, vans, and
buses to be used by the Venezuelan Navy in support of territorial protection
and development. The second export, totaling $2.4 million, is for the
purchase of trucks, buses, ambulances, and automobiles to be used by the
Venezuelan Navy in support of territorial protection and development. The
third export, totaling $6.3 million, is for the refurbishment of an aircraft
to be used by the Venezuelan Air Force in support of territorial
development. The fourth export, totaling $3.5 million, is for the
procurement of dump trucks and truck bodies to be used by the Venezuelan
Army in support of territorial development. The fifth export, totaling $17.6
million, is for the purchase of trucks and construction equipment to be used
by the Venezuelan Army in support of territorial development. None of the
dual- use exports items approved for financing during fiscal year 2000 has
been delivered to date, according to Eximbank officials.

AGENCY COMMENTS We obtained oral comments on a draft of this report from the
Eximbank's Vice President of the Engineering and Environment Division, which
is responsible for monitoring end- user compliance with dual- use
requirements. He noted that the Eximbank generally agreed with the
information presented in this report.

SCOPE AND METHODOLOGY To determine the end uses of the items provided by the
dual- use exports financed in fiscal year 1998 and to identify the extent of
Eximbank financing of dual- use exports in fiscal years 1999 and 2000, we
reviewed pertinent Eximbank documents, such as memorandums to the Board of
Directors and engineering reports and evaluations regarding actual use of
export items. We also interviewed Eximbank officials who monitor end- user
compliance with dual- use requirements, including the Vice President of the
Engineering and Environment Division. We did not independently verify the
end use of these products.

We conducted our work during July and August 2000 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 James A. Harmon, the Chairman and
President of the Eximbank; the Honorable William S. Cohen, the Secretary of
Defense; and the Honorable

decision based on the end- use reports submitted by Venezuela and other
information indicating that the dual- use exports delivered to Venezuela
were being used primarily for civilian purposes. 6 For fiscal year 2000, the
Eximbank's 10- percent cap on dual- use financing amounts to $1,550 million,

according to Eximbank officials.

B- 286054 GAO/ NSIAD/ 00- 231R Eximbank's Financing of Dual- Use Exports 4
Madeleine K. Albright, the Secretary of State. We will also make copies
available to

others upon request. Please contact me on (202) 512- 4128 if you have any
questions concerning this letter. The major contributors to this letter were
Virginia C. Hughes and Juan F. TapiaVidela.

Jess T. Ford Associate Director, International Relations and Trade Issues

B- 286054 GAO/ NSIAD/ 00- 231R Eximbank's Financing of Dual- Use Exports 5
List of Recipients

The Honorable Phil Gramm Chairman The Honorable Paul S. Sarbanes Ranking
Member Committee on Banking, Housing, and Urban Affairs United States Senate

The Honorable Ted Stevens Chairman The Honorable Robert C. Byrd Ranking
Member Committee on Appropriations United States Senate

The Honorable James A. Leach Chairman The Honorable John J. LaFalce Ranking
Member Committee on Banking and

Financial Services House of Representatives

The Honorable C. W. Bill Young Chairman The Honorable David R. Obey Ranking
Member Committee on Appropriations House of Representatives

ENCLOSURE ENCLOSURE GAO/ NSIAD- 00- 231R Eximbank's Financing of Dual- Use
Exports 6

DUAL- USE EXPORTS FINANCED BY THE U. S. EXPORT- IMPORT BANK (EXIMBANK),
FISCAL YEARS 1998- 2000

Dollars in millions Fiscal year

Recipient country

Export ID number/ type of Eximbank financing/ description of export item

Amount of Eximbank financing End user

Intended end use/ status

Venezuela APO73274XX

/guarantee/ trucks $7.7

Venezuelan Army

Territorial development/ in use 1998

Indonesia APO69837XX

/loan/ aircraft parts 1. 7

Indonesian Air Force

Relief efforts/ in use

Brazil APO67303XX

/loan/ aircraft and aircraft components 53.0

Brazilian Air Force

Territorial development/ not in use

Croatia APO74581XX

/loan/ radars 14. 6 Croatian Navy Coastal

surveillance/ not in use 1999 a

Croatia APO73528XX

/guarantee/ radars 85.6

Croatian Air Force

Civil air traffic control/ not in use

Venezuela APO74654XX

/guarantee/ vehicles 1. 5

Venezuelan Navy

Territorial development/ not in use

Venezuela APO74918XX

/guarantee/ vehicles 2. 4

Venezuelan Navy

Territorial development/ not in use

Venezuela APO73839XX

/guarantee/ aircraft parts 6. 3

Venezuelan Air Force

Territorial development/ not in use

Venezuela APO76105XX

/guarantee/ trucks 3.5

Venezuelan Army

Territorial development/ not in use 2000 b

Venezuela APO75942XX

/guarantee/ trucks and construction equipment 17.6

Venezuelan Army

Territorial development/ not in use

a Commitments. b Commitments.

Source: GAO analysis of Eximbank data. (711556)
*** End of document ***