United States General Accounting Office

GAO Report to Congressional Committees

September 1998 EXPORT CONTROLS

National Security

Issues and Foreign

Availability for High

Performance

Computer Exports

GAO/NSIAD-98-200

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280321 

September 16, 1998

Congressional Committees

In January 1996, the executive branch revised controls on the export of

U.S.-manufactured high performance computers (HPC) by raising

thresholds of computer performance for which exporters must obtain a

license. The revised regulation established a four-tiered system as a basis

for controlling HPC exports to all countries; tier 3 includes some countries

that may pose national security and proliferation risks to the United

States. HPC exports to terrorist countries in tier 4 were essentially

prohibited.

Section 1214 of the Fiscal Year 1998 National Defense Authorization Act

(P.L. 105-85) required that we review the national security risks relating to

the sale of computers with a composite theoretical performance of

between 2,000 and 7,000 millions of theoretical operations per second

(MTOPS)1

 to end users in tier 3 countries. To accomplish this, we focused

on efforts by the executive branch to determine national security risks

associated with such HPC sales. As required by the act, we also reviewed

the foreign availability of computers with performance levels at 2,000 to

7,000 MTOPS and the impact on U.S. exporters of foreign sales of these

computers to tier 3 countries.

Background The U.S. export control system is about managing risk; exports to some

countries involve less risk than to other countries and exports of some

items involve less risk than others. Under United States law, the President

has the authority to control and require licenses for the export of items

that may pose a national security or foreign policy concern. The President

also has the authority to remove or revise those controls as U.S. concerns

and interests change.2

In 1995, as a continuation of changes begun in the 1980s, the executive

branch reviewed export controls on computer exports to determine how

changes in computer technology and its military applications should affect

U.S. export control regulations. In announcing its January 1996 change to

HPC controls, the executive branch stated that one goal of the revised

1

MTOPS is the composite theoretical performance of a computer measured in millions of theoretical

operations per second. In principle, higher MTOPS indicates greater raw performance of a computer to

solve computations quickly, but not the actual performance of a given machine for a given application.

2

In this report, revision of export controls refers to removal of licensing requirements for groups of

countries based on the performance levels of HPCs.

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B-280321 

export controls was to permit the government to tailor control levels and

licensing conditions to the national security or proliferation risk posed at a

specific destination.

According to the Commerce Department, the key to effective export

controls is setting control levels above the level of foreign availability of

materials of concern. The Export Administration Act (EAA) of 1979

describes foreign availability as goods or technology available without

restriction to controlled destinations from sources outside the United

States in sufficient quantity and comparable quality to those produced in

the United States so as to render the controls ineffective in achieving their

purposes. Foreign availability is also sometimes associated with the

indigenous capability of foreign sources to produce their own HPCs, but

this meaning does not meet all the EAA criteria.

The 1996 revision of HPC export control policy removed license

requirements for most HPC exports with performance levels up to

2,000 MTOPS—an increase from the previous level of 1,500 MTOPS. For

purposes of export controls, countries were organized into four “computer

tiers,” with each tier after tier 1 representing a successively higher level of

concern to U.S. security interests. The policy placed no license

requirements on tier 1 countries, primarily Western European countries

and Japan. Exports of HPCs above 10,000 MTOPS to tier 2 countries in Asia,

Africa, Latin America, and Central and Eastern Europe would continue to

require licenses. A dual-control system was established for tier 3 countries,

such as Russia and China. For these countries, HPCs up to 7,000 MTOPS

could be exported to civilian end users without a license, while exports at

and above 2,000 MTOPS to end users of concern for military or proliferation

of weapons of mass destruction reasons required a license. Exports of

HPCs above 7,000 MTOPS to civilian end users also required a license. HPC

exports to terrorist countries in tier 4 were essentially prohibited.

Results in Brief The executive branch has identified high performance computing as

having applications in such national defense areas as nuclear weapons

programs, cryptology, conventional weapons, and military operations.

However, except for nuclear weapons, the executive branch has not

identified how and at what performance levels specific countries of

concern may use HPCs for national defense applications—an important

factor in assessing risks of HPC sales.

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A Department of Energy (DOE) study on nuclear weapons was completed

in June 1998. The study shows that nuclear weapons programs in tier 3

countries, especially those of China, India, and Pakistan, could benefit

from the acquisition of HPC capabilities. The executive branch has only

recently begun to identify how specific countries of concern would use

HPCs for nonnuclear national defense applications. To date, a Department

of Defense (DOD) study on this matter begun in early 1998 is not

completed.

With regard to foreign availability of HPCs,3

 we found that subsidiaries of

U.S. computer manufacturers dominate the overseas HPC market and they

must comply with U.S. controls. Three Japanese companies are global

competitors of U.S. manufacturers, two of which told us that they had no

sales to tier 3 countries. The third company did not provide data on such

sales in a format that was usable for our analysis. Two of the Japanese

companies primarily compete with U.S. manufacturers for sales of

high-end HPCs at about 20,000 MTOPS and above. Two other manufacturers,

one in Germany and one in the United Kingdom, also compete with U.S.

HPC suppliers, but primarily within Europe. Only the German company has

sold HPCs to tier 3 countries. Japan, Germany, and the United Kingdom

each have export controls on HPCs similar to those of the United States,

according to foreign government officials. Because there is limited

competition from foreign HPC manufacturers and U.S. manufacturers

reported no lost sales to foreign competition in tier 3 countries, we

concluded that foreign suppliers of HPCs had no impact on sales by U.S.

exporters. In addition, Russia, China, and India have developed HPCs, but

the capabilities of their HPCs are believed to be limited. Thus, our analysis

suggests that HPCs over 2,000 MTOPS are not available to tier 3 countries

without restriction from foreign sources.

HPC Proliferation and

National Security

Risks Not Assessed

The executive branch has determined that HPCs are important for

designing or improving advanced nuclear explosives and advanced

conventional weapons capabilities. It has identified high performance

computing as having applications in such national defense areas as

nuclear weapons programs, cryptology, conventional weapons, and

military operations. According to DOD, high performance computing is an

enabling technology for modern tactical and strategic warfare and is also

important in the development, deployment, and use of weapons of mass

destruction. It has also played a major role in the ability of the United

States to maintain and increase the technological superiority of its

3

We used a description of foreign availability in the EAA as our criteria.

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warfighting support systems. HPCs have particular benefits for military

operations, such as battle management and target engagement, and they

are also important in meeting joint warfighting objectives like joint theater

missile defense, information superiority, and electronic warfare. However,

the executive branch has not, with the exception of nuclear weapons,

identified how or at what performance levels, countries of concern may

use HPCs to advance their own military capabilities.

The House Committee on National Security in December 1997 directed

DOE and DOD to assess the national security risks of exporting HPCs with

performance levels between 2,000 and 7,000 MTOPS to tier 3 countries. In

June 1998, DOE concluded its study on how countries like China, India, and

Pakistan can use HPCs to improve their nuclear programs. According to the

study, the impact of HPC acquisition depends on the complexity of the

weapon being developed and, even more importantly, on the availability of

high-quality, relevant test data. The study concluded that “the acquisition

and application of HPCs to nuclear weapons development would have the

greatest potential impact on the Chinese nuclear program—particularly in

the event of a ban on all nuclear weapons testing.” Also, India and

Pakistan may now be able to make better use of HPCs in the 1,000 to 4,000

MTOPS range for their nuclear weapons programs because of the testing

data they acquired in May 1998 from underground detonations of nuclear

devices, according to the DOE report. The potential contribution to the

Russian nuclear program is less significant because of its robust nuclear

testing experience, but HPCs can make a contribution to Russia’s

confidence in the reliability of its nuclear stockpile. An emerging nuclear

state is likely to be able to produce only rudimentary nuclear weapons of

comparatively simple designs for which personal computers are adequate.

We were told that DOD’s study on national security impacts has not been

completed.

We attempted to identify national security concerns over other countries’

use of HPCs for conventional weapons development. However, officials

from DOD and other relevant executive branch agencies did not have

information on how specific countries would use HPCs for missile,

chemical, biological, and conventional weapons development.

Current Foreign

Availability of HPCs

Based on EAA’s description of foreign availability, we found that

subsidiaries of U.S. companies dominate overseas sales of HPCs. According

to U.S. HPC exporters, there were no instances where U.S. companies had

lost sales to foreign HPC vendors in tier 3 countries. The U.S. companies

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primarily compete against one another, with limited competition from

foreign suppliers in Japan and Germany. We also obtained information on

the capability of certain tier 3 countries to build their own HPCs and found

it to be limited. Tier 3 countries are not as capable of producing machines

in comparable quantity and of comparable quality and power, as the major

HPC-supplier countries.

The only global competitors for general computer technology are three

Japanese companies, two of which compete primarily for sales of high-end

computers—systems sold in small volumes and performing at advanced

levels. Two of the companies reported no exports to tier 3 countries, while

the third reported some exports on a regional, rather than country basis.4

One German company sells HPCs primarily in Europe but has reported a

small number of sales of its HPCs over 2,000 MTOPS to tier 3 countries. One

British company said it is capable of producing HPCs above 2,000 MTOPS,

but company officials said it has never sold a system outside the European

Union.

Our findings in this regard were similar to those in a 1995 Commerce

Department study of the HPC global market, which showed that American

dominance prevailed at that time, as well. The study observed that

American HPC manufacturers controlled the market worldwide, followed

by Japanese companies. It also found that European companies controlled

about 30 percent of the European market and were not competitive

outside Europe.

Other HPC suppliers also have restrictions on their exports. Since 1984, the

United States and Japan have been parties to a bilateral arrangement,

referred to as the “Supercomputer Regime,” to coordinate their export

controls on HPCs. Also, both Japan5

 and Germany, like the United States,

are signatories to the Wassenaar Arrangement6

 and have regulations that

generally appear to afford levels of protection similar to U.S. regulations

for their own and for U.S.-licensed HPCs. For example, both countries place

export controls on sales of computers over 2,000 MTOPS to specified

4

One of the three Japanese companies—Fujitsu—reported some of its HPC sales on a regional, rather

than country, basis. Therefore, we could not determine whether that company has provided any HPC

exports to tier 3 countries.

5

We also obtained information from the Japanese government and HPC vendors. We identified

controls in force but did not assess their implementation.

6

The 1996 Wassenaar Arrangement of Export Controls for Conventional Arms and Dual-Use Goods and

Technologies is an arrangement to share export information among 33 states with the purpose of

contributing to regional and international security by enhancing cooperation among export control

systems and international regimes.

Page 5 GAO/NSIAD-98-200 Export Controls
B-280321 

destinations, according to German and Japanese officials. However,

foreign government officials said that they do not enforce U.S. reexport

controls on unlicensed U.S. HPCs. A study of German export controls noted

that regulatory provisions specify that Germany has no special provisions

on the reexport of U.S.-origin goods. According to German government

officials, the exporter is responsible for knowing the reexport

requirements of the HPC’s country of origin. We could not ascertain

whether improper reexports of HPCs occurred from tier 1 countries.

Only one German company reported several sales to tier 3 countries of

HPCs over 2,000 MTOPS, and U.S. HPC subsidiaries reported no loss of sales

due to foreign competition. Officials of U.S. HPC subsidiaries explained that

they primarily compete for sales in local markets with other U.S. HPC

subsidiaries. None of these officials identified lost HPC sales to other

foreign vendors in those markets. Further, none claimed to be losing sales

to foreign vendors because of delays in delivery resulting from the

subsidiary’s compliance with U.S. export control regulations.

Because some U.S. government and HPC industry officials consider

indigenous capability to build HPCs a form of foreign availability, we

examined such capabilities for tier 3 countries. Based on studies and

views of specialists, we found that the capabilities of China, India, and

Russia to build their own HPCs still lag well behind those of the United

States, Japan, and European countries. Although details are not

well-known about HPC developments in each of these tier 3 countries, most

officials said and studies show that each country still produces machines

in small quantities and of lower quality and power than U.S., Japanese, and

European computers. For example:

• China has produced at least two different types of HPCs, the Galaxy and

Dawning series, both based on U.S. technology and each believed to have

an initial performance level of about 2,500 MTOPS. Although China has

announced its latest Galaxy’s capability at 13,000 MTOPS, U.S. government

officials have not confirmed this report.

• India has produced a series of computers called Param, which are based

on U.S. microprocessors and are believed by U.S. DOE officials to be

capable of performing at about 2,000 MTOPS. These officials were denied

access to test the computers’ performance.

• Over the past 3 decades Russia has endeavored to develop commercially

viable HPCs using both indigenously developed and U.S. microprocessors,

but has suffered economic problems and lacks customers. According to

one DOE official, Russia has never built a computer running better than

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B-280321 

2,000 MTOPS, and various observers believe Russia to be 3 to 10 years

behind the West in developing computers.

Agency Comments

and Our Evaluation

Commerce and DOD each provided one set of general written comments for

both this report and our report entitled, Export Controls: Information On

The Decision to Revise High Performance Computer Controls

(GAO/NSIAD-98-196, Sept. 16, 1998). Some of those general comments do not

relate to this report. Therefore, we respond to them in the other report.

General comments relevant to this report are addressed below. Additional

specific comments provided by Commerce on this report are addressed in

appendix II.

In its written comments, Commerce said that the report’s scope should be

expanded to better reflect the rationale that led to the decision to change

computer export control policy “from a relic of the Cold War to one more

in tune with today’s technology and international security environment.”

This report responds to the scope of work required by Public Law 105-85

(Nov. 18, 1997), that we evaluate the current foreign availability of HPCs

and their national security implications. Therefore, this report does not

focus on the 1995 decisions by the Department of Commerce. Our

companion report, referred to above, assesses the basis for the executive

branch’s revision of HPC export controls.

Commerce commented that our analysis of foreign availability as an

element of the controllability of HPCs was too narrow, stating that foreign

availability is not an adequate measure of the problem. Commerce stated

that this “Cold War concept” makes little sense today, given the

permeability and increased globalization of markets. We agree that rapid

technological advancements in the computer industry have made the

controllability of HPC exports a more difficult problem. However, we

disagree that foreign availability is an outdated Cold War concept that has

no relevance in today’s environment. While threats to U.S. security may

have changed, they have not been eliminated. Commerce itself recognized

this in its March 1998 annual report to the Congress, which stated that “the

key to effective export controls is setting control levels above foreign

availability.” Moreover, the concept of foreign availability, as opposed to

Commerce’s notion of “worldwide” availability, is still described in EAA and

Export Administration Regulations as a factor to be considered in export

control policy.

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Commerce also commented that the need to control the export of HPCs

because of their importance for national security applications is limited. It

stated that many national security applications can be performed

satisfactorily on uncontrollable low-level technology, and that computers

are not a “choke point” for military production. Commerce said that

having access to HPCs alone will not improve a country’s military-industrial

capabilities. Commerce asserted that the 1995 decision was based on a

variety of research leading to the conclusion that computing power is a

secondary consideration for many applications of national security

concern. We asked Commerce for its research evidence, but it cited only a

1995 Stanford study used in the decision to revise HPC export controls.

Moreover, Commerce’s position on this matter is not consistent with that

of DOD. DOD, in its Militarily Critical Technologies List,7

 has determined that

high performance computing is an enabling technology for modern tactical

and strategic warfare and is also important in the development,

deployment, and use of weapons of mass destruction. High performance

computing has also played a major role in the ability of the United States

to maintain and increase the technological superiority of its war-fighting

support systems. DOD has noted in its High Performance Computing

Modernization Program8

 annual plan that the use of HPC technology has led

to lower costs for system deployment and improved the effectiveness of

complex weapon systems. DOD further stated that as it transitions its

weapons system design and test process to rely more heavily on modeling

and simulation, the nation can expect many more examples of the

profound effects that the HPC capability has on both military and civilian

applications. Furthermore, we note that the concept of choke point is not

a standard established in U.S. law or regulation for reviewing dual-use

exports to sensitive end users for proliferation reasons.

In its comments, DOD stated that our report inaccurately characterized DOD

as not considering the threats associated with HPC exports. DOD said that in

1995 it “considered” the security risks associated with the export of HPCs

to countries of national security and proliferation concern. What our

7

The Militarily Critical Technologies List, required by EAA, is a compendium of the technologies DOD

assesses as critical to maintaining superior U.S. military capabilities. According to DOD, it should be

used as a reference for evaluating potential technology transfers and to determine if the proposed

transaction would permit potential adversaries access to technologies with specific performance levels

at or above the characteristics identified as militarily critical.

8

The High Performance Computing Modernization Program is the major force designed to improve

DOD’s ability to exploit the computation necessary to sustain technological superiority on the

battlefield. Managed by the Director, Defense Research and Engineering, the program is intended to

establish a nationwide integrated infrastructure to support the defense research, development, test,

and evaluation communities.

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report actually states is that (1) except for nuclear weapons, the executive

branch has not identified how and at what performance levels specific

countries of concern may use HPCs for national security applications and

(2) the executive branch did not undertake a threat analysis of providing

HPCs to countries of concern. DOD provided no new documentation to

demonstrate how it “considered” these risks. As DOD officials stated during

our review, no threat assessment or assessment of the national security

impact of allowing HPCs to go to particular countries of concern and of

what military advantages such countries could achieve had been done in

1995. In fact, an April 1998 Stanford study on HPC export controls also

noted that identifying which countries could use HPCs to pursue which

military applications remained a critical issue on which the executive

branch provided little information.

The Arms Control and Disarmament Agency (ACDA) provided oral

comments on this report and generally agreed with it. However, it

disagreed with the statement that “according to the Commerce

Department, the key to effective export controls is setting control levels

above the level of foreign availability of materials of concern.” ACDA

stressed that this is Commerce’s position only and not the view of the

entire executive branch. ACDA said that in its view (1) it is difficult to

determine the foreign availability of HPCs and (2) the United States helps

create foreign availability through the transfer of computers and computer

parts.

The Departments of State and Energy had no comments on a draft of this

report.

Our scope and methodology are in appendix I. Commerce’s and DOD’s

comments are reprinted in appendixes II and III, respectively, along with

an evaluation of each.

We conducted our review between December 1997 and June 1998 in

accordance with generally accepted government auditing standards.

Page 9 GAO/NSIAD-98-200 Export Controls
B-280321 

Please contact me on (202) 512-4128 if you or your staff have any

questions concerning this report. Major contributors to this report are

listed in appendix IV.

Harold J. Johnson, Associate Director

International Relations and Trade Issues

Page 10 GAO/NSIAD-98-200 Export Controls
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List of Recipients

The Honorable Alfonse M. D’Amato

Chairman

The Honorable Paul Sarbanes

Ranking Minority Member

Committee on Banking, Housing and Urban Affairs

United States Senate

The Honorable Strom Thurmond

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Benjamin A. Gilman

Chairman

The Honorable Lee Hamilton

Ranking Minority Member

Committee on International Relations

House of Representatives

The Honorable Floyd D. Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on National Security

House of Representatives

Page 11 GAO/NSIAD-98-200 Export Controls
Contents

Letter 1

Appendix I 

Scope and

Methodology

14

Appendix II 

Comments From the

Department of

Commerce

16

Appendix III 

Comments From the

Department of

Defense

24

Appendix IV 

Major Contributors to

This Report

27

Abbreviations

ACDA Arms Control and Disarmament Agency

DOD Department of Defense

DOE Department of Energy

EAA Export Administration Act

HPC high performance computer

MTOPS millions theoretical operations per second

Page 12 GAO/NSIAD-98-200 Export Controls
Page 13 GAO/NSIAD-98-200 Export Controls
Appendix I 

Scope and Methodology

Section 1214 of the Fiscal Year 1998 National Defense Authorization Act

(P.L. 105-85) required that we review the national security risks relating to

the sale of computers with a composite theoretical performance of

between 2,000 and 7,000 millions of theoretical operations per second

(MTOPS) to end users in tier 3 countries. Accordingly, we examined the

executive branch’s actions to assess the risks of these sales. As required

by the act, we also reviewed the foreign availability of computers with

performance levels at 2,000 to 7,000 MTOPS and the impact on U.S.

exporters of foreign sales of these computers to tier 3 countries.

To determine the executive branch’s actions to assess or analyze the

national security risks of allowing high performance computers (HPC) to be

provided to countries of proliferation and military concern, we reviewed

the Department of Defense (DOD) and the Department of Energy (DOE)

documents on how HPCs are being used for nuclear and military

applications. We discussed high performance computing for both U.S. and

foreign nuclear weapons programs with DOE officials in Washington, D.C.,

and at the Lawrence Livermore, Los Alamos, and Sandia National

Laboratories. We also met with officials of the DOD HPC Modernization

Office and other officials within the Under Secretary of Defense for

Acquisition and Technology, the Office of the Secretary of Defense, the

Joint Chiefs of Staff, and the intelligence community to discuss how HPCs

are being utilized for weapons design, testing and evaluation, and other

military applications. Additionally, we met with DOD and Institute of

Defense Analyses officials to discuss the basis for identifying high

performance computing on the Militarily Critical Technologies List, a

compendium of technologies identified by DOD as critical for maintaining

U.S. military and technological superiority. We also reviewed intelligence

reports on the use of high performance computing for developing weapons

of mass destruction.

To determine foreign availability of HPCs, we reviewed the Export

Administration Act (EAA) and the Export Administration Regulations for

criteria and a description of the meaning of the term. We then reviewed

market research data from an independent computer research

organization. We also reviewed lists, brochures, and marketing

information from major U.S. and foreign HPC manufacturers in France

(Bull, SA), Germany (Siemens Nixdorf Informationssysteme AG and

Parsytec Computer GmbH), and the United Kingdom (Quadrics

Supercomputers World, Limited), and met with them to discuss their

existing and projected product lines. We also obtained market data, as

available, from three Japanese HPC manufacturers. Furthermore, we met

Page 14 GAO/NSIAD-98-200 Export Controls
Appendix I 

Scope and Methodology

with government officials in China, France, Germany, Singapore, South

Korea, and the United Kingdom to discuss each country’s indigenous

capability to produce HPCs. We also obtained information from the

Japanese government on its export control policies. In addition, we

obtained and analyzed from two Commerce Department databases

(1) worldwide export licensing application data for fiscal years 1994-97

and (2) export data from computer exporters provided to the Department

for all American HPC exports between January 1996 and October 1997. We

also reviewed a 1995 Commerce Department study on the worldwide

computer market to identify foreign competition in the HPC market prior to

the export control revision.1

 To identify similarities and differences

between U.S. and foreign government HPC export controls, we discussed

with officials of the U.S. embassies and host governments information on

foreign government export controls for HPCs and the extent of cooperation

between U.S. and host government authorities on investigations of export

control violations and any HPC diversions of HPCs to sensitive end users.

We also reviewed foreign government regulations, where available, and

both foreign government and independent reports on each country’s

export control system. To obtain information on the impact of HPC sales on

U.S. exporters, we interviewed officials of American HPC firms and their

subsidiaries and U.S. and foreign government officials.

1

Part III, Global Supercomputer Industry and Market Assessment, June 2, 1995, Department of

Commerce, Bureau of Export Administration, Office of Strategic Industries and Economic Security,

Economic Analysis Division.

Page 15 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 16 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

Page 17 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

Page 18 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

See comment 1.

Now on p. 8.

Page 19 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

See comment 2.

See comment 2.

Page 20 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

See comment 3.

See comment 4.

See comment 2.

Page 21 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

The following are GAO’s comments on the Department of Commerce’s

letter, dated August 7, 1998. Commerce provided one set of written

comments for this report and for a companion report, in which we discuss

our analysis of the basis for the 1995 executive branch decision to revise

export controls for HPCs.1

 We addressed Commerce’s general comments

relevant to this report on page 9 and its specific comments below.

GAO Comments 1. Commerce stated that one key to effective export controls is setting

control limits of items of concern above that which is widely available

throughout the world. However, this wording is a change that contrasts

with documentary evidence previously provided to us and to the Congress.

In successive Export Administration Annual Reports, the Commerce

Department stated that “the key to effective HPC export controls is setting

control levels above foreign availability. . .” In addition, Commerce has

provided us with no empirical evidence to demonstrate the “widespread

availability” of HPCs, either through suppliers in Europe and Asia or a

secondary market.

2. Commerce commented that a number of foreign manufacturers

indigenously produce HPCs that compete with those of the United States.

Our information does not support Commerce’s position on all of these

manufacturers. For example, our visit to government and commercial

sources in Singapore indicated that the country does not now have the

capabilities to produce HPCs. We asked Commerce to provide data to

support its assertion on foreign manufacturers, but it cited studies that

were conducted in 1995 and that did not address or use criteria related to

“foreign availability.” As stated in our report, we gathered data from

multiple government and computer industry sources to find companies in

other countries that met the terms of foreign availability. We met with

major U.S. HPC companies in the United States, as well as with their

overseas subsidiaries in a number of countries we visited in 1998, to

discuss foreign HPC manufacturers that the U.S. companies considered as

providing foreign availability and competition. We found few. Throughout

Europe and Asia, U.S. computer subsidiary officials stated that their

competition is primarily other U.S. computer subsidiaries and, to a lesser

extent, Japanese companies. In addition, although requested, Commerce

did not provide documentary evidence to confirm its asserted capabilities

of India’s HPCs and uses.

1

Export Controls: Information on the Decision to Revise High Performance Computer Controls

(GAO/NSIAD-98-196, Sept. 16, 1998).

Page 22 GAO/NSIAD-98-200 Export Controls
Appendix II 

Comments From the Department of

Commerce

3. Commerce stated that worldwide availability of computers indicates

that there is a large installed base of systems in the tens of thousands or

even millions. Commerce further stated that license requirements will not

prevent diversion of HPCs unless realistic control levels are set that can be

enforced effectively. While we agree, in principle, that increasing numbers

of HPCs makes controllability more difficult, as our recommendation in our

companion report suggests, a realistic assessment of when an item is

“uncontrollable” would require an analysis of (1) actual data, (2) estimated

costs of enforcing controls, and (3) pros and cons of alternatives—such as

revised regulatory procedures—that might be considered to extend

controls. Commerce did not perform such an analysis before revising

export controls in 1995. In addition, although we requested that

Commerce provide documentary evidence for its statement that there is a

large installed base of HPCs in the millions, it did not provide such

evidence.

4. Commerce stated that most European governments do not enforce U.S.

export control restrictions on reexport of U.S.-supplied HPCs. We agree

that at least those European governments that we visited hold this

position. However, although requested, Commerce provided no evidence

to support its statement that the government of the United Kingdom has

instructed its exporters to ignore U.S. reexport controls.

Page 23 GAO/NSIAD-98-200 Export Controls
Appendix III 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 24 GAO/NSIAD-98-200 Export Controls
Appendix III 

Comments From the Department of Defense

Page 25 GAO/NSIAD-98-200 Export Controls
Appendix III 

Comments From the Department of Defense

The following is GAO’s comment on DOD’s letter dated July 16, 1998.

GAO Comment 1. DOD provided one set of written comments for this report and for a

companion report, in which we discuss our analysis of the basis for the

1995 executive branch decision to revise export controls for HPCs.1

 We

addressed DOD’s comments relevant to this report on page 8.

1

Export Controls: Information on the Decision to Revise High Performance Computer Controls

(GAO/NSIAD-98-196, Sept. 16, 1998).

Page 26 GAO/NSIAD-98-200 Export Controls
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Eugene Beye

Jason Fong

Christian Hougen

Jeffrey D. Phillips

Minette Richardson

James Shafer

Pierre Toureille

David Trimble

Office of the General

Counsel, Washington,

D.C.

Richard Seldin

Accounting and

Information

Management Division,

Washington, D.C.

Hai Tran

711355 Page 27 GAO/NSIAD-98-200 Export Controls
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