security any access to america's advanced technology any information they might gain about united states military operations could potentially be used to attack our men and women in uniform abroad and here at home  threatens our national security in iraq we've heard on the news too many times the cases where terrorists posed as iraqi soldiers or police in order to get close to military checkpoints or barracks only to detonate improvised explosive devices and suicide bombs sometimes killing u s soldiers as well as civilians in the process we cannot ignore the link between illegal exports of military items and such for example in two thousand and eight various individuals and companies were indicted for purchasing items capable  attempting to illegally transport or transfer items to iran and china since two thousand and seven g a o is included ensuring effective protection of technology is critical to the u s national security interests as high risk areas those weaknesses may be what's more disturbing is there appears to be a gigantic loophole in our laws that make it easier for our enemies get ahold of our sensitive military technology and one day use it against us the loophole t a o uncovered in this investigation revealed that the military and sensitive dual use technology can easily and legally bought within the united states then those items can be illegally boarded with almost zero chance of detection here's how easy it is to make the bottom number of sensitive dual use items from united states companies including night vision goggles body armor and f sixteen engine computer and technology used in nuclear weapons and show not how the law has been broken or evaded by a bad actor but how the laws simply inadequate other words here may be what is legal not what is illegal now that we've identified in our laws it's our responsibility to figure out how to country industry has to offer they deserve to know that when they are on the battlefield they have every advantage over the enemy and that includes the best technology our industry can produce so i look forward to working with you to figure out how we can make sure these dual use items states of curiosity and high technology is on display in our military our universities our computer software manufacturers and our healthcare industry and every day the united states is under assault by foreign countries and groups that seek to acquire u technologies and products that threaten u s national security our export control system is woefully inadequate to ensure that high technology u s goods are not misused either for conventional military w m d purposes as we will hear today undercover g a o investigative information to purchase dangerous dual use technologies including some which could be useful for a nuclear weapons program clearly our export control program sensitive items not regulated in any way whatever was able to provide information mask its identity and pretend to be a domestic purchaser clearly foreign countries or terrorist groups but private industry must also play a cooperative and constructive role private companies can and must assist the government by identifying questionable orders and reporting them to law enforcement action in this context its findings to their undercover investigation that sensitive dual use in military technology can easily and legally be purchased from dealers and manufacturers in the united states and without detection i believe that these disturbing findings have serious implications for a national security and for american troops working to keep us safe i think most americans would be alarmed to learn that by using a fake company in fictitious identity investigators were able to purchase items that could potentially be used for the development of nuclear and chemical weapons guided missiles and improvised explosive devices which have been frequently used to attack our troops in iraq and afghanistan they were also able to purchase military grade radios night vision goggles infrared which could potentially be used against u s troops in combat jail investigators were also able to export versions of some of these items without to a country which is a known transshipment point to terrorist organizations and foreign governments attempting to acquire sensitive military technology these findings are even more disturbing when you consider the frequency with which terrorists and criminal organizations and foreign governments attempt to obtain  technologies from manufacturers and distributors in the united states the department of justice recently reported that foreign states and criminal and terrorist organizations arms technology and other materials to their technological capacity on a daily basis given this information and the ease with which the g a o was able to purchase and export sensitive items you can't help but worry about how many times these attempts have been successful and about what that mean for our national security demonstrate a clear lack of regulation over the domestic sales of military and dual use technologies and serious loopholes in our export control system that's why i look forward to hearing the testimony of our witnesses today and hearing the witnesses recommendations on how we in congress can improve safeguards for domestic sales and improve our export control program to make sure that these potentially dangerous items don't end up in this country however the properly what is being taken out of this country may pose an equal if not greater threat to our national security mr chairman american manufactured components and products should the phone the company received a different answer in the end they were disappointed that they were not able to secure a concrete answer regarding their product now i'm left to believe that this problem exists with countless products and i support call for a fundamental reexamination of the current programs and processes within the jurisdiction over export control and once that examination is completed i look forward to working with my colleagues to ensure a s citizen can legally purchase and then rather easily mail us that would otherwise have to be granted a license for export is shocking mr chairman while our men and women in uniform are bravely serving over the central has to regulate domestic purchases of sensitive military technology that could be used by terrorists and others against our service members i look forward to working with my colleagues to ensure that the proper oversight and regulations are in must not allow gaps in our system that will allow this technology to fall into the wrong and we appreciate the information that you are bringing mr chairman thank you for the time and i will thank you contributed to the safety of our citizens but it is also placed a high burden on our various federal agencies to ensure the safe production and sale of these sensitive technologies while there are laws that expressly prohibits direct sales of our most sensitive military technologies to foreign countries or entities the laws which govern domestic sales of these items are far weaker than they could be in fact some component parts to manufacture weapons of mass destruction may be sold domestically and then potentially resold internationally with little or no accountability under the law currently most of these companies undergo voluntary due diligence to ensure the sales of items on the commerce control list and not resold to foreigners but in this global world in which we live today controls must be in place throughout the transaction process to ensure that the counterparty corporations are legitimate we cannot ignore the fact that there are groups trying to reverse engineer our technology and use them directly against our men and women in uniform for instance the navy's tomcat immortalized in the movie top gun this technology was considered to be of such strategic importance only one foreign purchaser was ever allowed to put your the f fourteen the imperial iranian air force that existed during the reign of the shah we all hundred seventy nine the monarchy since then the united states has essentially severed all relations with iran including imposing an embargo on the sale of any spare parts for the f fourteen yet shadow companies have ordered parts for the uranium tomcats and no one seems to have been paying attention to what parts were being sold and to whom we must make certain that our standards for export are as rigorous as our standards for imports we must make certain that the department of commerce bureau of industry and security implement unimpeded and for those who would violate our existing laws those who would compromise the security of our nation but more importantly compromise the courageous lives of our men and women in uniform they should be prosecuted by the department of justice to the fullest terrorist organization u s technology items identified in criminal cases are suitable for military nuclear guided missile and improvised explosive device applications as you all mentioned these items can legally be sold within the united states the objective of our investigation was to make undercover purchases of technology here in the u s if successful we plan to shift several of these items over to set up this operation we established a bogus front company called manakin consult we also use bogus identities and undercover credit cards and a mailbox as our business address most of the items that we targeted for purchase are identical to items cited in recent criminal cases although we had a limited budget relatively simple backstop our operation could have easily been by a foreign government or terrorist organization seeking to acquire u s technology moving out of the results of our investigation we were able to purchase a number of sensitive u s military and dual use we didn't successfully ship several of these items by mail undetected to southeastern asia several of the more troubling dual use items that we purchase and also be shown on the monitors first in my hand i have a triggered spark gap we purchased this item for seven hundred dollars from the manufacturer we also received a price quote for an additional one hundred of these items in addition to medical these items can be used to detonate nuclear weapons in two thousand and five this item was cited is part of a criminal case involving illegal export to pakistan second i have in my hand an accelerometer we purchased this item for two thousand eight hundred dollars from the manufacturer in addition to having commercial application this item can be used in smart bomb and nuclear and chemical explosive applications in two thousand and seven this item was cited as part of a criminal case involving illegal exports to china and third i have in my hand gyro chip we purchased this item for three thousand one hundred dollars from the manufacturer we also obtained a price for an additional ten of these items in addition to commercial use these items can be used to help guided missile a large corporation was recently found to have illegally exported eighty five of these items to china examples of the sensitive military items purchased include first the modular tactical vest body armor you see on my right in front of me and also shown on the monitor we purchased this item for two thousand four hundred dollars f process and it ministry we are very aware of the challenges of the twenty first century and the way we look at them is you have diffuse challenges if you security threats ranging there are a range of nation states all the way down to non state actors individuals but you also have a real diffusion of markets when the export control system was first crafted many of the major markets were not markets then china and india being too obvious examples and you have a much greater diffusion of technology the u s is no longer the world leader and a range of technologies as it was twenty years ago and our authorizing statute which is the export administration act of nine hundred seventy nine is a cold war statute and if anyone looks at it you'll see replete with references to the coordinating committee for multilateral export controls that was the trade equivalent of nato that has ceased to exist in one thousand nine hundred four not only is it the one nine hundred seventy nine it's a lapse it's not permanent legislation in the years i've been i've been in this position in our legal office for more than fifteen years it's only been in effect for about a year and a half total so so clearly there's a statute on the dual use that seriously needs revisions pursuant to an executive order we continue to apply the provisions of the act to the extent permitted by law and implement our regulations under another statute called the international emergency economic powers act this authority provides for a limited control over domestic transfers of items certain domestic and third country transfers of technology deemed to be exports to be exports based on the involvement of foreign nationals given the volume of trade from the united states for example it was about one point three trillion dollars worth of exports to the united states last year to this outreach program we also have a broad compliance horsman program to help ensure that exports are in court with the regulatory requirements regarding compliance we do things like following up with a license reporting requirements carefully reviewing data automated export system which is  system exporters put their data in before trade leave the country and inform us manufacturers exporters and shippers how to avoid becoming involved in potential export violations with various publications including red flag indicators one of which  specialized preventive enforcement efforts involve direct outreach to members of the sporting committee community to educate them on export control requirements to encourage voluntary compliance and to detect intenti testify in front of the committee today subcommittee today regarding important national security missions our dedicated staff from any other agency is committed to protecting our national security foreign policy in two thousand and eight we reported revenue of approximately two billion dollars and we are proud to be a component of the s and p five hundred index as discussed today's hearing will review the u s government safeguards in place to prevent an authorized know the department of commerce and the department of state are responsible for export control regulations within their respective jurisdiction let me tell you that working elmer takes these requirements very seriously as part of our commitment we have implemented an export management system to ensure that we are complying with all of likable u s export control while our system establishes a robust internal compliance capability to prevent transfer of sensitive or control product for improper end users or to on authorized destinations were purchased additionally our compliance processes incorporate the know your customer and red flag indicators guidelines issued by the u s government we have a staff dedicated export control personnel were regularly trained on with and other federal agencies in a sting operation involving a new jersey track the ultimate destination for those goods which was an individual who attempted to arrange the transaction was convicted of violating body armor but there's many cases of the binghamton case recently the shooter there was no binghamton new york ok i want to wear about twelve or thirteen people were murdered by someone they had body armor we don't know what type of body armor the body armor was used in some of the bank missiles capable of delivering these weapons i further confirm that the products will not be so that was considered part of the control system to get from us several these products so if i wanted to do something bad  with what i got i just sign this and say i promise not to use this to create a nuclear biological or chemical weapon honest that's what we saw in that osama bin laden it would be to be believable and enforce what we found in all cases and i doesn't exist i'm not sure what kind of record you would get that's the type of things that were happening is there any information that companies could do or require of buyers when making a domestic purchase of dual use items that would guess i mentioned some of the things that he said he did and he may be exhausted all options is still wasn't good enough to get he appears to have a lot more training than a lot of people probably dealing with here in recognizing a situation like we were met with all the either from a manufacturer to a distributor or to put it into a subsystem and so on but one of things we did look at in thinking about the scale of domestic commerce just to give you two examples chip which goes into a component that then goes into civil aircraft you're talking about several stages usually let me do a follow up on that same question particularly these items that we're talking about that have the domestic commercial use is there any camel protocol over their ultimate disposal process because at some point the technology is going to either malfunction already primary purpose and it would likely need to be discarded should this is just an area that we should be concerned about well again i think there's a distinction made at least currently between those things that are export it and those that are used for example to us eleven ship that is probably and thousands of commercial airliners around the world boeing's air buses to the extent they're operating domestically and the companies need to replace them again that's that's one set of circumstances if they're going to replace abroad then biggest criminal violations in the history of the arms export control act for illegally export into china and other countries technology relating to your highly sought after night vision goggles and the company was fined one hundred million dollars and i want to show you what daniel wilkins at the defense criminal investigative services said about your company he said this the illegal export of u s military technology and equipment threatens our national security in the most direct way american security and its critical military for you is are you here today to vouch on behalf of that those concerns are no longer valid about your company department of justice and he said exportation of this sensitive technology to china and other nations jeopardized our national security and the safety of our military men and women on the battlefield which is an extremely strong statement coming from the department of justice and what i don't understand and what the committee doesn't understand is your company is still doing business with the federal government correct that's correct and the justice department allowed your company to d fifty million dollars of that hundred million dollar criminal fine by allowing you to invest it toward a new more advanced night vision goggles isn't that true that's true now normally when a company is convicted of illegal activities of this magnitude they automatically barred from future government contracts why has that according to your understanding a hundred million dollar fine which apparently was levied in connection with the activity would you agree with that that if there is no compromise of the national security why in a world one hundred million dollars anyway let me move on this isn't the only time that i've been engaged in a legal export activities committee requested from the department of commerce copies of documents relating to other export violations and one of the document shows that in two thousand and seven which would have been within the timeframe you're talking about after the changeover in management at the company one of your subsidiaries was fined for illegally shipping vows used in chemical and biological weapons to china israel saudi arabia and taiwan isn't that right as i mentioned earlier i'm in the night vision business no knowledge of that but that certainly would have been within the period of time that you've indicated the company has had a change in management if it happened in two thousand  quote let me close with you after conviction at one hundred million dollars fine the company officials issued a statement saying they had conducted a comprehensive review of their policies and procedures and were initiating new monitoring to prevent illegal exports but in november two thousand and eight which is even later than this two thousand and seven incident you were able to purchase their night vision technology from one of its distributors using  exports is troubling and raises serious questions about whether it continues to put profits over the security of our nation and in closing mr chairman i just like to point out that while this hearing is going on in response to the memo from the committee i drafted a very simple certification that i think could reach address many of the issues that have been raised here at the hearing today that would require the name address phone number email business address employer identification number of anyone i also understand that this item is subject to export control laws that may prevent or restrict the sale or delivery of this item to anyone outside the united states i'm aware that i'm a criminal prosecution and or civil fines and penalties i ask mr cutts a few questions if i could and about the nuclear weapons issues two weeks ago as you know north korea detonated a nuclear weapon during an underground test threatening to test fire an inner connel intercontinental ballistic missile and what concerns me is this last year the strategic studies institute a component of the army war college report about the north korean missile program and other components for ballistic inertial guidance and what i want to ask you is about those two items the accelerometers and those are two of the categories of items that you were able to purchase using a fake company for additional ones of those i would say that they were they were similar and how difficult they were to correct those items can be sold within the u s without any life legally and let me ask you after you bought these items you were then able to send them to federal express to a country in southeast asia and i want to ask you what country it is i know that sensitive information but can you tell us why you chose that specific country because it is a known just out of curiosity how much did it cost to mail the halfway around the globe fifty dollars and what we labeled them as one document that was the word we use to meet your undercover investigation thank you for doing  defense where you are required to show that you are a member of the armed forces in order by the agreement that the distributor had with the manufacturer was that they required a military id but this distributor did not request a military on april fourth in my district three pittsburgh and two others were injured by a heavily armed man who fired on them as they responded to a domestic disturbance call the three officers who were murdered in the line of duty left five children without their father the standoff between the our man and the police units lasted for hours that morning swat officers were pinned down by a hail of bullets and the wounded policeman lay where they fel to fire on the police as a result of this protection you were able to purchase a bulletproof vest over the internet and you could have acquired the protective inserts from the same company enabling it even heavy ammunition to ship twenty more did they do any background check on you i don't know that with the military id seem to be what they were looking for what do you think these bulletproof vests post or emergency first responders and military i think this really is a and this is what the marine corps uses today it's hard to understand why anybody but military and potentially law enforcement would have a use for those like you three officers were killed and two were wounded by a man who was able to continue this onslaught because he had the same product you were able to buy off the internet i see no reason mr chairman why criminals should be able to buy bulletproof vests for use on our streets just as terrorists overseas should not be able to acquire them for use on the battlefield mr chairman for the sake of brave basically subvert know your customer well i think it goes back mr chairman to what i mentioned earlier i think the first issue would be those existing legal authority that is the statutory authority we have give us give us the authority to do anything differently in this case extend regulation in a significant way to domestic transfers and that's something that we have to look at very carefully to see whether the existing authority goes that far for companies look for and i think it's page forty there may be the last one there for example custom companies should be on the lookout if the customer is willing to pay cash or the customer is reluctant to offer information on the  companies to have some specific guidance from the government and it's very difficult i think for us to to identify the thousands not hundreds of thousands of u s companies that do business and sort of repeat individually each of them and it seems to me the perkins elmar example we talked about earlier exactly shows the benefit of these kind of because it's that kind of information that they've incorporated into their product into their corporate compliance program that's there are some red flags on that particular transaction at our field office in boston and world well that's a very good question and it is a complex system and i think it's evolved that way because of what i mentioned earlier last year for example there are one point three trillion dollars worth of exports from the united states probably the vast majority those are that would have a significant impact and so that's why the system has evolved to try to get more and more information about the types of transactions and the technology that they need to be most concerned about well  point and it's certainly a challenge that's why we we do so much on outreach for example we do thirty forty fifty outreach events every year throughout the country and there's a whole cottage industry of private entities that to export control compliance seminars i think in ell absolutely i mean the multilateral side there is agreement again a gun most but not all suppliers as to items to be listed but then certainly each country has individual discretion as to how they actually implement those controls and what you the book there the document i look at the tab number three because one of things that caught my attention you mentioned in your testimony that one seller actually signed up your company as a reseller