United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on International Security, Proliferation,

and Federal Services, Committee on

Governmental Affairs, U.S. Senate

September 1998 EXPORT CONTROLS

Information on the

Decision to Revise

High Performance

Computer Controls

GAO/NSIAD-98-196

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280320 

September 16, 1998

The Honorable Thad Cochran

Chairman, Subcommittee on International Security,

 Proliferation, and Federal Services

Committee on Governmental Affairs

United States Senate

Dear Mr. Chairman:

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. Subsequently, several unlicensed HPCs were exported to both

China and Russia, including 17 computers illegally sent to a Russian

nuclear weapons lab. You expressed concerns that U.S. national security

interests may have been compromised by such sales1

 and requested that

we (1) assess the basis for the executive branch’s revision of HPC export

controls and (2) identify changes in licensing activities and the

implementation of certain U.S. licensing and export enforcement

requirements since the revision. You also asked us to determine the

current foreign availability of HPCs, particularly for certain countries of

national security concern.

We are also issuing a related report entitled, Export Controls: National

Security Issues and Foreign Availability for High Performance Computers

(GAO/NSIAD-98-200, Sept. 16, 1998), pursuant to section 1214 of the Fiscal Year

1998 National Defense Authorization Act (P.L. 105-85).

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 U.S. 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

1

The circumstances surrounding these specific exports are being investigated by the U.S. Departments

of Justice and Commerce and the Customs Service. On July 31, 1998, the Department of Justice

announced that IBM East Europe/Asia Ltd. entered a guilty plea and received the maximum allowable

fine of $8.5 million for violating 17 counts of U.S. export laws.

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interests change.2 In doing so, the President is not required under U.S. law

to conduct a foreign availability analysis.

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

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.

A key element of the executive branch review of HPC export controls was a

Stanford University study, jointly commissioned by the Commerce and

Defense Departments.3

 Among other things, the study was tasked to

provide an assessment of the availability of HPCs in selected countries and

the capabilities of those countries to use HPCs for military and other

national security applications. The study concluded that

(1) U.S.-manufactured computer technology between 4,000 and

5,000 millions of theoretical operations per second (MTOPS)4

 was widely

available and uncontrollable worldwide, (2) U.S.-manufactured computer

technology up to 7,000 MTOPS would become widely available and

uncontrollable worldwide by 1997, and (3) many HPC applications used in

U.S. national security programs occur at about 7,000 MTOPS and at or above

10,000 MTOPS. The study also concluded that it would be too expensive for

government and industry to effectively control the international diffusion

of computing systems with performance below 7,000 MTOPS, and that

attempts to control computer exports below this level would become

increasingly ineffectual, would harm the credibility of export controls, and

would unreasonably burden a vital sector of the computer industry. The

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.

3

Building on the Basics: An Examination of High-Performance Computing Export Control Policy in the

1990’s, Seymour Goodman, Peter Wolcott, and Grey Burkhart (Center for International Security and

Arms Control, Stanford University, November 1995).

4

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.

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study also raised concerns about the ability to control HPC exports in the

future in light of advances in computing technology.5

The export control policy implemented in January 1996 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. The

policy also organized countries 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 those in Western Europe 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. (See appendix II for details

on the four-tier system of export controls.)

The January 1996 regulation also made other changes. It specified that

exporters would be responsible for (1) determining whether an export

license is required, based on the MTOPS level of the computer; (2) screening

end users and end uses for military or proliferation concerns;6

 and

(3) keeping records and reporting on exports of computers with

performance levels of 2,000 MTOPS. In addition to the standard

record-keeping requirements, the regulation added requirements for the

date of the shipment, the name and address of the end user and of each

intermediate consignee, and the end use of each exported computer. The

Fiscal Year 1998 National Defense Authorization Act (P.L.

105-85) modified the policy for determining whether an individual license

is required and now requires exporters to notify the Commerce

Department of any planned sales of computers with performance levels

5

In April 1998, authors of the 1995 Stanford study published a follow-on discussion paper,

High-performance Computing, National Security Applications, and Export Control Policy at the Close

of the 20th Century, as a contribution to the periodic review of HPC export controls. This paper noted

(1) that rapid advances in computer technology were continuing but (2) that a proposed change in

licensing procedure—to review each HPC at its highest attainable level, rather than its configuration at

time of export—would remove the concern of HPCs being upgraded without the knowledge of

exporters or the U.S. government. We did not evaluate the adequacy of the analysis and support of the

second study.

6

End-use screening is the process exporters follow to evaluate whether a transaction involves an

unacceptable risk of use in, or diversion to, a proliferator or military end user.

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greater than 2,000 MTOPS to tier 3 countries. The government has 10 days to

assess and object to a proposed HPC sale. The law also now requires

Commerce to perform post-shipment verifications (PSV) on all HPC exports

with performance levels over 2,000 MTOPS to tier 3 countries.7

 The

Commerce Department promulgated regulations implementing the law on

February 3, 1998.

Results in Brief The Stanford University study was a key element in the decision to revise

HPC export controls. However, our analysis of the study showed that it had

two significant limitations. First, the study lacked empirical evidence or

analysis to support its conclusion that HPCs were uncontrollable based on

(1) worldwide availability and (2) insufficient resources to control them.

Second, the study did not assess the capabilities of countries of concern to

use HPCs for military and other national security applications, as required

by its tasking. The study’s principal author said that U.S. government data

was insufficient to make such an assessment, and the study recommended

that better data be gathered so that such an analysis could be done in the

future. In addition, the executive branch did not undertake a threat

analysis of providing HPCs to countries of concern. Nonetheless, based on

its undocumented view of the worldwide availability of computing power

and on the technological advancements in this area, the executive branch

raised the MTOPS thresholds for HPC export controls and established the

four-tier control structure. Although the Stanford study had limitations, it

made some observations regarding the potential to upgrade HPCs and the

export control challenge this will present in the future. For example, it

noted that the technological trend toward upgrading computer

performance without vendor support or knowledge is reducing the

effectiveness of U.S. export controls.

The 1996 revision to HPC export controls had three key consequences.

First, the number of computer export licenses issued declined from 395 in

fiscal year 1995 to 42 in 1997. Second, U.S. HPC exporters were charged

with responsibilities previously conducted by the government. New U.S.

HPC exporters’ responsibilities included screening and reporting on the end

use and end user of HPCs. In essence, the exporters had to decide whether

a license was required since the decision is made on the basis of the end

use, the end user, and the computer performance capability. This decision

could be particularly difficult for exports to tier 3 countries, such as China,

where identifying the distinction between a civilian and military end user

7

PSVs are on-site visits, generally by U.S. government officials, to locations where goods are shipped.

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can be difficult without information that is sometimes available only to the

U.S. government. This situation was partly reversed by the Fiscal Year

1998 National Defense Authorization Act, which requires exporters to

notify the Commerce Department of all HPC sales over 2,000 MTOPS to tier 3

countries prior to their export. Third, the regulation required HPC

manufacturers to keep records of the end users of all their HPC exports

over 2,000 MTOPS. To date, information on these exports reported to the

government has been incomplete. Responsibility for PSV checks remained

with the government. However, because of how PSVs for computers are

implemented, their value is reduced because they verify the physical

location of an HPC, but not how it is used. Also, some governments, such as

China, have not allowed the United States to conduct them.

With regard to foreign availability of HPCs,8

 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. Russia, China, and India have

developed HPCs, but the capabilities of their computers are believed to be

limited. Thus, our analysis suggests that HPCs over 2,000 MTOPS are not

readily available to tier 3 countries from foreign sources without

restrictions.

Key Study Used as

Basis for Changing

HPC Controls Had

Limitations

The Stanford study, used as a key element by the executive branch in its

decision to revise HPC export controls, had significant limitations. It lacked

empirical evidence or analysis regarding its conclusion that HPCs were

uncontrollable and, although tasked with doing so, it did not assess the

capabilities of countries of concern to use HPCs for military and other

national security applications. The study itself identified as a major

limitation, its inability to assess capabilities of countries of concern to use

HPCs for their military programs or national security applications, on the

basis that such information was not available, and recommended that such

8

We used a description of foreign availability in the Export Administration Act (EAA) of 1979, as

amended, as our criteria.

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an assessment be done. The study noted that trends in HPC technology

development could affect U.S. security and the ability to control HPC

exports in the future and need to be further studied. Despite the study’s

limitations, the executive branch decided to relax HPC export controls.

The Stanford Study Lacked

Evidence of HPC

Uncontrollability

The Stanford study accumulated information from computer companies

on U.S. HPC market characteristics and concluded—without empirical

evidence or analysis—that computers between 4,000 and 5,000 MTOPS were

already available worldwide and uncontrollable and that computers at

about 7,000 MTOPS would be widely available and uncontrollable by 1997.9

Using the findings from the Stanford study, executive branch officials set

the computer performance control thresholds for each tier. However,

these officials could not explain nor provide documentation as to how the

executive branch arrived at the decision to set the license requirements for

exports of HPCs to tier 3 countries for military or proliferation end users at

2,000 MTOPS, even though the study concluded that computing power

below 4,000 or 5,000 MTOPS was already “uncontrollable.”

The study identified the following six factors as affecting controllability of

HPCs: computer power, ease of upgrading, physical size, numbers of units

manufactured and sold, sources of sales (direct sales or through resellers),

and the cost of entry level systems. It described uncontrollability as the

relationship between the difficulty of controlling computers and the

willingness of government and industry to meet the costs of tracking and

controlling them. The study asserted that as U.S. HPCs were sold openly for

2 years, their export would become uncontrollable. Part of the study’s

rationale was that, as older HPCs are replaced by newer models 2 years

after product introduction, original vendors may no longer have

information on where replaced HPCs are relocated. The study also

presumed a level of “leakage” of computers to countries of concern from

U.S. HPC sources and asserted that costs of controlling such leakage were

no longer tolerable. However, the study did not attempt to calculate or

specify those costs. In addition, the study suggested only vague thresholds

for these six factors to determine “uncontrollability.” For example, it

noted that the threshold at which it becomes difficult to track numbers of

units could vary from 200 to several thousand. The study did not provide

analysis or empirical evidence to support its assumptions or conclusions.

9

The Commerce Department stated that Department of Defense (DOD) information, which showed

that a number of significant military applications are run at performance levels above 7,000 MTOPS,

also supported the Stanford study’s conclusion that an HPC control threshold at this level could be

justifiable.

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National Security and

Proliferation Risks of

HPCs Not Assessed

Although the Stanford study was tasked with assessing the capabilities of

countries of concern to use HPCs for military and other national security

applications, it did not do so. The study discussed only U.S. applications of

HPCs for military purposes. According to the study’s principal author, data

on other countries’ use of HPCs for military and other national security

purposes was insufficient to make such assessments because the U.S.

government does not gather such data in a systematic fashion. The report

recommended that such an analysis be done.

Despite the study’s limitations and recommendations to gather better data

in the future on other countries’ use of HPCs for military and other national

security purposes, the executive branch raised the MTOPS thresholds for

HPC export controls and established the four-tier export control structure.

The former Deputy Assistant Secretary of Defense for

Counterproliferation Policy explained that because DOD was not tasked to

conduct a threat assessment, it did not do so. Instead, the executive

branch assessed countries on the basis of six criteria and assigned them to

a particular tier. The six criteria were (1) evidence of on-going programs of

national security concern, including proliferation of weapons of mass

destruction with associated delivery systems and regional stability and

conventional threats; (2) membership in or adherence to non-proliferation

and export control regimes; (3) an effective export control system,

including enforcement and compliance programs and an associated

assessment of diversion risks; (4) overall relations with the United States;

(5) whether U.N. sanctions had been imposed; and (6) prior licensing

history.

Prior to the executive branch’s decision to change computer thresholds,

scientists at Department of Energy (DOE) national laboratories and other

U.S. government officials had accumulated information to show how

countries of concern could use HPCs to facilitate the design of nuclear

weapons and to improve advanced nuclear weapons in the absence of

tests of nuclear explosives. However, this information was not used as

part of the decisionmaking process for revising HPC export controls,

according to the Commerce Department. In December 1997 the House

Committee on National Security directed the DOE and DOD to assess the

national security impacts of exporting HPCs with performance levels

between 2,000 and 7,000 MTOPS to tier 3 countries. In June 1998, 2 and

1/2 years after the executive branch revised HPC export controls, DOE

concluded its study on how countries like China, India, and Pakistan can

use HPCs to improve their nuclear programs.

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According to the DOE 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, the study indicated that 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. 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 of national security impacts

had not been completed as of September 1, 1998, in part because the

Department had not received requested information from the Commerce

Department until after July 1.

Advances in Computing

Technology May Pose

Long-Term Security

Challenges

The Stanford study noted that trends in HPC technology development may

pose security and export control challenges and recommended further

study to determine their implications for national security and export

controls.

The technology trends of concern include other countries’ ability (1) to

upgrade the performance of individual computers and (2) to link

individual computers to achieve higher performance levels. The Stanford

study team reviewed the computer industry’s technological advances in

parallel processing and concluded that such advances as “scalability” and

“clustering” contributed to the uncontrollability of high performance

computing worldwide and are inevitably reducing the effectiveness of U.S.

export controls.10 “Scalability” refers to the capability to increase

computer performance levels of a system by adding processor boards or

by acquiring increasingly powerful microprocessors. “Clustering” refers to

connecting many personal computers or workstations to achieve higher

computing performance in a network of interconnected systems, working

cooperatively and concurrently on one or several tasks.

10Parallel processing means breaking computational problems into many separate parts and having a

large number of processors tackle those parts simultaneously. Greatly increased processing speed is

achieved largely through the sheer number of processors operating simultaneously, rather than

through any exceptional power in each processor.

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Scalability and clustering offer opportunities to increase computer power

without the need to develop custom-built single processors traditionally

used in HPCs. Some types of HPCs are designed today to allow scalability

without the need for vendor support or even knowledge.11 As a result,

some HPCs could be exported below MTOPS thresholds without an

individual license, and, in theory, later covertly scaled up to levels that

exceed the threshold. We asked government agencies for information

about diversions and violations of U.S. HPC export controls, but they

provided no evidence that countries of concern have increased the

computing power of U.S. exported machines in violation of export

restrictions.

We found no U.S. government reviews of alternatives to address these

security concerns, although authors of the Stanford study and others with

whom we spoke identified various options that could be assessed. These

include (1) requiring government review and consideration of machines at

their highest scalable MTOPS performance levels and (2) requiring that HPCs

exported to tier 3 countries be physically modified to prevent upgrades

beyond the allowed levels.

Changes in U.S.

Licensing and Export

Enforcement Since

the Revision

The executive branch’s January 1996 export control revision (1) increased

thresholds for requiring licenses, which resulted in a reduction in the

numbers of licensed HPCs; (2) shifted some of the government’s end-use

screening responsibility from the government to the computer industry,

until this policy was revised in 1998; and (3) required HPC manufacturers to

keep records of the end users of their HPC exports. The government

continued to have responsibility for post-shipment verifications for HPCs,

which have reduced value as traditionally conducted.

License Applications Have

Decreased Since Revision

Since the export controls for computers were revised in 1996, HPC export

license applications have declined from 459 applications in fiscal year 1995

to 125 applications in fiscal year 1997. In fiscal year 1995, the Commerce

Department approved 395 license applications for HPC exports, and denied

1. In fiscal year 1997, Commerce approved 42 license applications for HPC

exports, and denied 6. The remainder of the applications in each year were

withdrawn without action. Changes in the numbers of both licensed and

unlicensed exports might not be attributed entirely to the change in export

controls. However, we did note some characteristics of U.S. HPC exports

11Many HPC designs use commercial, off-the-shelf processors, such as those found in personal

computers or scientific workstations, and may include hundreds or even thousands of processors.

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since the revision. For example, while HPC exports increased to each tier

from January 1996 through September 1997, 72 percent of machines were

sold to tier 1 countries. Also during this period, 77 HPCs were exported to

China and 19 were exported to India, all without individual licenses. Most

U.S. HPCs exported in this period (about 85 percent) had performance

levels between 2,000 and 5,000 MTOPS. (See appendix III for details on HPC

exports.)

End-Use Screening

Responsibility Shifted to

Computer Industry

The executive branch shifted some government oversight responsibility to

the computer industry, especially for tier 3 countries. Exporters became

responsible for determining whether exports required a license by

screening end users and end uses for military or proliferation concerns

(end-use screening).12 However, some industry and government officials

concluded that the computer industry lacked the necessary information to

distinguish between military and civilian end users in some tier 3

countries—particularly China.

Because of concerns about U.S. HPCs being obtained by countries of

proliferation concern for possible use in weapons-related activities, the

Congress enacted a provision in Public Law 105-85 that required exporters

to notify the Commerce Department of all proposed HPC sales over

2,000 MTOPS to tier 3 countries. The law gives the government an

opportunity to assess these exports within 10 days to determine the need

for a license and it can use information that may not be available to the

exporter.

U.S. Companies’ Records

on Resales of HPCs Are

Incomplete

Pursuant to the Export Administration Regulations, exporters are required

to keep accurate records of each licensed and unlicensed export of a

computer over 2,000 MTOPS to any destination. These records are to include

names and addresses of each end user and each “intermediate consignee”

(resellers or distributors). Exporters must also provide quarterly reports to

Commerce on license-exempt exports—almost 96 percent of the total HPC

exports in the past 2 years.

The government relies on the exporters’ data for end-use information, but

we found that companies had reported inconsistent and incomplete data

12To aid exporters in making end user determinations, Commerce created specific guidance to educate

exporters about signs they need to be aware of that can be of concern to the government. Companies

also were urged to contact the Commerce Department when in doubt about an end user’s activities.

According to Commerce, the end user could then be researched by the government and the exporter

advised to seek a license if any strategic concerns were present.

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for intermediate consignees (resellers or distributors) as end users. For

example, one company reported data for only one intermediate consignee,

even though company officials told us that the company uses multiple

resellers. Company officials noted that the company sells computers to

companies in other countries, which then sell the computers to other,

unknown end users. A second company provided “end-use statements”

from its resellers, rather than the actual end users, and identified

computers’ end use for several overseas sales as “resale.” In contrast, a

third company shows its resellers as resellers, rather than as end users.

Company officials said that the company contractually requires its

resellers to identify and provide end-use statements from the ultimate

end-users.

Safeguards Procedures for

Verifying the End Use of

HPCs Are Limited

The revision of HPC export controls did not reduce the government’s

responsibility for certain safeguards procedures, notably conducting PSVs.

Under current law, Commerce is required to conduct PSVs for all HPC

exports over 2,000 MTOPS to tier 3 countries. While PSVs are important for

detecting and deterring physical diversions of HPCs, PSVs, as traditionally

conducted, do not verify computer end use. Also, some countries do not

allow the United States to conduct them. China, for example, had not

allowed PSVs,13 but in June 1998, it reportedly agreed to do so.

U.S. government officials agreed that the way PSVs of computers have been

traditionally conducted have reduced their value because such PSVs

establish only the physical presence of an HPC. However, this step assures

the U.S. government that the computer has not been physically diverted.

According to DOE laboratory officials, it is easy to conceal how a computer

is being used. They believed that the U.S. government officials performing

the verifications cannot make such a determination, partly because they

have received no computer-specific training. Although it is possible to

verify how an HPC is being used through such actions as reviewing internal

computer data, this would be costly and intrusive, and require experts’

sophisticated computer analysis.

Another limitation of PSVs concerns sovereignty issues. Host governments

in some countries of greatest concern, notably China, have precluded or

restricted the U.S. government’s ability to conduct PSVs. Three European

countries that we visited—United Kingdom, Germany, and France—also

13In the last 3 calendar years, U.S embassy officials conducted 20 PSVs of digital computers. In

addition, during 1997, Commerce officials on special teams from headquarters also conducted 19 visits

to HPC locations.

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do not allow U.S. government officials to do PSVs. However, they perform

the checks themselves and provide the results to the U.S. government.

The government makes limited efforts to monitor exporters’ and end

users’ compliance with explicit conditions attached to export licenses. It

relies largely on HPC exporters for end use monitoring and may require

them or the end users to safeguard the exports by limiting access to the

computers or inspecting computer logs and outputs. The end user may

also be required to agree to on-site inspections, even on short notice, by

U.S. government or exporting company officials, who would review

programs and software used on the computer, or to remote electronic

monitoring of the computer. Commerce officials stated that they may have

reviewed computer logs in the past, but do not do so anymore, and said

that they have not conducted any short notice visits, and that they do not

do remote monitoring. They said that, ultimately, monitoring safeguards

plans is the exporter’s responsibility.

Current Foreign

Availability of HPCs

As requested, we evaluated the current foreign availability of HPCs. Using

the EAA’s general description of foreign availability as our criteria, our

analysis showed that subsidiaries of U.S. companies dominate the

overseas sales of HPCs. These companies 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 in the

capability to produce machines in comparable quantity, quality, and power

as the major HPC-supplier countries.

The EAA describes foreign availability as goods or technology available

without restriction to controlled destinations from sources outside the

United States in sufficient quantities and comparable quality to those

produced in the United States so as to render the controls ineffective in

achieving their purposes. We found that 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 HPC exports to tier 3 countries, while the third company

reported some exports on a regional, rather than country, basis. One

German company sells HPCs primarily in Europe and has reported several

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.

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A 1995 Commerce Department study of the HPC global market showed that

American dominance had 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.

The other countries that are HPC suppliers to countries outside Europe also

restrict their exports. The United States and Japan since 1984 have been

parties to a bilateral arrangement, referred to as the “Supercomputer

Regime,” to coordinate their export controls on HPCs. Also, both Japan14

and Germany, like the United States, are signatories to the Wassenaar

Arrangement, which has membership criteria of adherence to

non-proliferation regimes and effective export controls.15 Each country

also has national 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 destinations, according to

German and Japanese government officials. However, foreign government

officials said that they do not enforce U.S. reexport controls on unlicensed

U.S. HPCs. In fact, a study of German export controls noted that regulatory

provisions specify that Germany has no special provisions on 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.

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. Available information

indicates that the capabilities of China, India, and Russia to build their

own HPCs still lag well behind that 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 and studies

showed that each country still produces machines in small quantities and

of lower quality and power compared to U.S., Japanese, and European

computers. For example,

14We also obtained information from the Japanese government and HPC vendors. We identified

controls in force, but did not assess their implementation.

15The 1996 Wassenaar Arrangement of Export Controls for Conventional Arms and Dual-Use Goods

and Technologies is an arrangement to exchange export information between 33 states with the

purpose of contributing to regional and international security by enhancing cooperation among export

control systems and international regimes.

Page 13 GAO/NSIAD-98-196 Export Controls
B-280320 

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

and Dawning series, based on U.S. technology and they are believed to

have a performance level of about 2,500 MTOPS. Although China has

announced its latest Galaxy at 13,000 MTOPS, U.S. government officials have

no confirmation of 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 rated

at about 2,000 MTOPS. These officials were denied access to test the

computer’s performance.

• Russia’s efforts over the past three decades to develop commercially

viable HPCs have used both indigenously-developed and U.S.

microprocessors, but have suffered from economic problems and a lack of

customers. According to one DOE official, Russia has never built a

computer running better than 2,000 MTOPS, and various observers believe

Russia to be 3 to 10 years behind the West in developing computers.

Conclusions A key element in the 1996 decision to revise HPC export controls was the

findings of the Stanford study which did not have adequate analyses of

critical issues. In particular, the study used to justify the decision did not

assemble empirical data or analysis to support the conclusion that HPCs

below specific performance levels were uncontrollable and widely

available worldwide. Moreover, the study did not analyze the capabilities

of countries of concern to use HPCs to further their military programs or

engage in nuclear proliferation, but rather recommended that such data be

gathered and such analysis be made. Despite the limitations of the study,

the executive branch revised the HPC export controls. Since the executive

branch’s stated goals for the revised HPC export controls included tailoring

control levels to security and proliferation risks of specific destinations, it

becomes a vital factor to determine how and at what performance levels

specific countries would use HPCs for military and other national security

applications and how such uses would threaten U.S. national security

interests in specific areas. In addition, the Stanford study identified trends

in HPC technology development which may pose security and export

control challenges for national security and export controls. Some

alternatives to address these security challenges have been identified by

authors of the Stanford study and others with whom we spoke, and could

be assessed.

Recommendations To complement the studies undertaken by DOD and DOE for the House

Committee on National Security, we recommend that the Secretary of

Page 14 GAO/NSIAD-98-196 Export Controls
B-280320 

Defense assess and report on the national security threat and proliferation

impact of U.S. exports of HPCs to countries of national security and

proliferation concern. This assessment, at a minimum, should address

(1) how and at what performance levels countries of concern use HPCs for

military modernization and proliferation activities; (2) the threat of such

uses to U.S. national security interests; and (3) the extent to which such

HPCs are controllable.

We also recommend that the Secretary of Commerce, with the support of

the Secretaries of Defense, Energy, and State, and the Director of the U.S.

Arms Control and Disarmament Agency, jointly evaluate and report on

options to safeguard U.S. national security interests regarding HPCs. Such

options should include, but not be limited to, (1) requiring government

review and control of the export of computers at their highest scalable

MTOPS performance levels and (2) requiring that HPCs destined for tier 3

countries be physically modified to prevent upgrades beyond the allowed

levels.

Agency Comments

and Our Evaluation

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

a draft of this and a companion report16 and the Departments of State and

Energy and the Arms Control and Disarmament Agency provided oral

comments. Commerce, Defense, and State raised issues about various

matters discussed in the report. The Department of Energy had no

comments on the report but said it deferred to Commerce and Defense to

comment on the Stanford study. The Arms Control and Disarmament

Agency agreed with the substance of the report. Commerce, State, Energy,

and the Arms Control and Disarmament Agency did not comment on our

recommendations, but Defense did. Defense said that our

recommendation concerning the assessment of national security threats

and proliferation impact of U.S. exports to countries of concern was done

in connection with the 1995 decision to revise HPC export controls, and

that it would consider additional options to safeguard exports of HPCs as

part of its ongoing review of export controls. As noted below, we believe

the question of how countries of concern could use HPCs to further their

military and nuclear programs was not addressed as part of the executive

branch’s 1995 decision.

Commerce commented that the President’s decision was intended to

change the computer export policy from what it referred to as “a relic of

16Export Controls: National Security Issues and Foreign Availability for High Performance Computer

Exports (GAO/NSIAD-98-200, September 1998)

Page 15 GAO/NSIAD-98-196 Export Controls
B-280320 

the Cold War to one more in tune with today’s technology and

international security environment.” Commerce said the decision was

based on (1) rapid technological changes in the computer industry,

(2) wide availability, (3) limited controllability, and (4) limited national

security applications for HPCs. Commerce provided additional views about

each of these factors. Commerce commented that our report focused on

how countries might use HPCs for proliferation or military purposes and on

what it called an outdated Cold War concept of “foreign availability,”

rather than these factors.

Our report specifically addresses the four factors Commerce said it

considered in 1995. These four factors are considered in the Stanford

University study upon which the executive branch heavily relied in making

its decision to revise HPC export controls. Our report agreed with the

study’s treatment of technological changes in the computing industry and

that advances in computing technology may pose long-term security and

controllability challenges.

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

the Export Administration Regulations as a factor to be considered in

export control policy.

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

Page 16 GAO/NSIAD-98-196 Export Controls
B-280320 

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 none was forthcoming. The

only evidence that Commerce cited was contained in the Stanford study.

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

of DOD. DOD, in its Militarily Critical Technologies List,17 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 Program18 annual plan that the use of HPC technology has

led to lower costs for system deployment and improved the effectiveness

of complex weapons 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 said that the Stanford study was just one of many

sources of information and analysis used in the 1996 executive branch

decision. We reviewed all of the four sources of information identified to

us by DOD, DOE, State, Commerce, and Arms Control and Disarmament

Agency (ACDA) officials as contributing to their assessment of computer

export controls. However, the Stanford study was a key analytical study

used in the decision-making process and the only source whose findings

were consistently and repeatedly cited by the executive branch in official

announcements, briefings, congressional testimony, and discussions with

us in support of the HPC export control revision.

17The 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.

18The 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.

Page 17 GAO/NSIAD-98-196 Export Controls
B-280320 

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

report actually states is that (1) the Stanford study did not assess the

capabilities of countries of concern to use HPCs for military and other

national security applications, as required by its tasking 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 the principal author of the Stanford

study and 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, the April 1998

Stanford study on HPC export controls by the same principal author 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.

In its comments, the Department of State disagreed with our presenting

combined data on HPC exports to China and Hong Kong in appendix III

because the U.S.-Hong Kong Policy Act of 1992 calls for the U.S.

government to treat Hong Kong as a separate territory regarding economic

and trade matters. While, in principle, we do not disagree with State, it

should be noted that we reported in May 1997 that given the decision to

continue current U.S. policy toward Hong Kong, monitoring various

indicators of Hong Kong’s continued autonomy in export controls

becomes critical to assessing the risk to U.S. nonproliferation interests.19

Our presentation of the combined HPC export data for China and Hong

Kong is intended to help illustrate a potential risk to U.S. nonproliferation

interests regarding HPCs should Hong Kong’s continued autonomy in

export controls be weakened. We believe that monitoring data on HPC

exports to Hong Kong becomes all the more important since Hong Kong is

treated as a tier 2 country, whereas China is a tier 3 country.

Commerce also provided technical comments which we have incorporated

as appropriate. Commerce and DOD written comments are reprinted in

appendixes IV and V, respectively, along with our evaluation of them.

19Hong Kong’s Reversion To China: Effective Monitoring Critical to Assess U.S. Nonproliferation Risks

(GAO/NSIAD-97-149, May 1997).

Page 18 GAO/NSIAD-98-196 Export Controls
B-280320 

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.

Our scope and methodology are in appendix I. Appendix II contains details

on the four-tier system of export controls and appendix III shows

characteristics of HPC exports since the revision.

We conducted our review between August 1997 and June 1998 in

accordance with generally accepted government auditing standards.

We will provide copies of this report to other congressional committees;

the Secretaries of Commerce, Defense, Energy, and State; the Director,

U.S. Arms Control and Disarmament Agency; and the Director, Office of

Management and Budget. Copies will be provided to others upon request.

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.

Sincerely yours,

Harold J. Johnson, Associate Director

International Relations and Trade Issues

Page 19 GAO/NSIAD-98-196 Export Controls
Contents

Letter 1

Appendix I 

Scope and

Methodology

22

Appendix II 

Current Export

Licensing

Requirements for

High Performance

Computers

25

The Revised Controls 25

Appendix III 

U.S. High

Performance

Computer Exports

Since the 1996 Export

Control Revision

27

Appendix IV 

Comments From the

Department of

Commerce

35

Appendix V 

Comments From the

Department of

Defense

44

Page 20 GAO/NSIAD-98-196 Export Controls
Contents

Appendix VI 

Major Contributors to

This Report

48

Tables Table II.1: Current Export Licensing Requirements for High

Performance Computers

25

Table III.1: Largest importers of U.S. HPCs, Fiscal Years 1996 -

1997, ranked by Total MTOPS Exported

30

Table III.2: Numbers of Machines Exported To Top Five Tier 3

Recipients, January 1996-September 1997

32

Figures Figure III.1: Numbers of U.S. High Performance Computers

Exported to All Tiers, Fiscal Years 1994 through 1997

28

Figure III.2: Quantity and Percent of U.S. HPC Exports to Each

Tier, January 1996 -September 1997

31

Figure III.3: Quantity and Percent of Total Machines Purchased

by Five Largest Customers for U.S. HPCs, from January 1996 -

September 1997

32

Figure III.4: Quantity and Percentage of U.S. HPC Exports by

MTOPS Levels, January 1996-September 1997

34

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

PSV post-shipment verification

Page 21 GAO/NSIAD-98-196 Export Controls
Appendix I 

Scope and Methodology

To assess the basis for the U.S. government’s 1996 decision to change HPC

controls, we reviewed a 1995 Stanford University study on high

performance computing and export control policy commissioned by the

Commerce and Defense Departments and evaluated the executive

branch’s assessment of national security risks of HPCs. We reviewed

several classified charts and briefing slides prepared by the intelligence

community and DOD that were identified as important support for the

revision of controls. We also talked with the Stanford study’s principal

authors to discuss their methodology, evidence, conclusions, and

recommendations. In addition, we met with the Department of Defense

(DOD), the Department of Energy (DOE), State and Commerce Department

officials to discuss the interagency process used leading up to the decision

to revise controls on HPCs. We also requested, but were denied access to,

information from the National Security Council on data and analyses that

were used in the interagency forum to reach the final decision to revise

controls.

To determine how the government assessed the national security risks of

allowing the high performance computers (HPC) to be provided to

countries of proliferation and military concern as part of the basis for the

decision to revise the controls, we reviewed DOD and 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 Acquisition and

Technology, 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.

Furthermore, to understand the trends occurring in computer technology,

we analyzed HPC model descriptions and technical means for increasing

computing performance.

To identify changes in licensing activities and the implementation of

certain U.S. licensing and export enforcement requirements since the

revision:

• We reviewed two sets of data from the Commerce Department, as noted

above, in order to determine trends in American HPC exports since the

1996 revision of controls. We examined all U.S. high performance

computer-related license applications worldwide. We analyzed the data for

Page 22 GAO/NSIAD-98-196 Export Controls
Appendix I 

Scope and Methodology

trends and changes in MTOPS levels of HPC exports before and after revision

of controls, numbers of licenses approved, denied, and withdrawn without

action, and HPC exports by countries and country tiers. We did not review

the data for completeness, accuracy, and consistency.

• We reviewed the end user and end-use screening systems of major

American HPC manufacturers, Commerce Department implementation of

the revised regulations, and selected foreign government export controls

in order to determine licensing changes affecting U.S. HPC exporters since

the revision of controls. We also reviewed applicable U.S. laws and

regulations governing HPC export licensing and enforcement and discussed

these laws and regulations with Commerce Department officials. We

obtained Commerce Department procedures on end use and end user

determinations as well as records on HPC vendor inquiries to Commerce on

end users. In addition, we reviewed information on intelligence

community assessments of foreign end users receiving HPC exports. We

also discussed end user and end use screening procedures with officials

from major U.S. HPC manufacturers—Digital Equipment Corporation,

Hewlett Packard/Convex, International Business Machines, and Sun

Microsystems—at their corporate offices in the United States and sales

offices overseas. We also visited representatives of these companies’

foreign subsidiary offices from China, Germany, Russia, Singapore, South

Korea, and the United Kingdom to review end use screening procedures

and documentation for selected exports. In addition, we visited selected

HPC sites in China and Russia. However, the Chinese government refused

us permission to visit one of three requested sites in Beijing. The Russian

government, while not denying us permission to visit one site in-country,

required an extended period of notification that went beyond our

timeframes. Silicon Graphics, Inc./Cray refused to meet with us pending

the outcome of an ongoing criminal investigation.

• We reviewed Commerce Department data on pre-license and

post-shipment verification (PSV) checks on HPCs and related technology

and safeguards security plans associated with HPC export licenses in order

to examine affects of licensing changes on government oversight. We

discussed the implementation and utility of these checks with officials of

the U.S. government, American computer companies, and host

governments in the countries we visited.

To determine foreign availability of HPCs, we reviewed the Export

Administration Act (EAA) and 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

Page 23 GAO/NSIAD-98-196 Export Controls
Appendix I 

Scope and Methodology

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

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.

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 24 GAO/NSIAD-98-196 Export Controls
Appendix II 

Current Export Licensing Requirements for

High Performance Computers

Table II.1 and the description that follows summarize the terms of the

revised export controls for HPCs and according to their MTOPS levels and

destinations.

Table II.1: Current Export Licensing Requirements for High Performance Computersa

MTOPS Tier 1 Tier 2 Tier 3 Tier 4

20,000 and up No license required

under license exceptionb

License and additional

safeguards may be

required

License required License required 

Presumption of denial

Various terrorist and

boycott restrictions apply

10,000 to 20,000 License required

up to 10, 000 No license required

under license exception

2,000 to 7,000 License required for

military or proliferation

end users or end use

No license required for

civilian end user under

license exception

Ten-day review period

for government review

Up to 2,000 No license required

under license exception

License required to

Sudan & Syria at or over

6 MTOPS

and for any MTOPS to

rest of tier

a For each tier, exporters must maintain and provide records to the Commerce Department and

reexport and retransfer restrictions apply.

bA license exception for HPCs is a regulatory authorization that allows exporters to export or

reexport, based on MTOPS levels and destination, computers that otherwise would require a

license.

The Revised Controls The revised controls announced by the President divide into four country

groups, as follows:

• Tier 1 (28 countries: Western Europe, Japan, Canada, Mexico, Australia,

New Zealand). No prior government review (license exception) for all

computers, but companies must keep records on higher performance

shipments that will be provided to the U.S. government, as directed.

Page 25 GAO/NSIAD-98-196 Export Controls
Appendix II 

Current Export Licensing Requirements for

High Performance Computers

• Tier 2 (106 countries: Latin America, South Korea, Association of

Southeast Asian Nations or ASEAN, Hungary, Poland, Czech Republic,

Slovak Republic, Slovenia, South Africa). No prior government review

(license exception) up to 10,000 MTOPS with record-keeping and reporting,

as directed; individual license (requiring prior government review) above

10,000 MTOPS. Above 20,000 MTOPS, the government may require certain

safeguards at the end-user location.

• Tier 3 (50 countries: India, Pakistan, all Middle East/Maghreb, the former

Soviet Union, China, Vietnam, rest of Eastern Europe). No prior

government review (license exception) up to 2,000 MTOPS. Individual

license for military and proliferation-related end uses and end users and

license exception for civil end users between 2,000 MTOPS and 7,000 MTOPS,

with exporter record-keeping and reporting, as directed. Individual license

for all end users above 7,000 MTOPS. Above 10,000 MTOPS, additional

safeguards may be required at the end-user location.

• Tier 4 (7 countries: Iraq, Iran, Libya, North Korea, Cuba, Sudan, and Syria).

Current policies continue to apply (i.e., virtual embargo on computer

exports).

For all these groups, reexport and retransfer provisions continue to apply.

The government continues to implement the Enhanced Proliferation

Control Initiative, which provides authority for the government to block

exports of computers of any level in cases involving exports to end uses or

end users of proliferation concern or risks of diversion to proliferation

activities. Criminal as well as civil penalties apply to violators of the

Initiative.

Page 26 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

HPC exports have increased significantly since the 1996 export control

revision. Figure III.1 shows the numbers of U.S. HPCs exported to all tiers

from fiscal year 1994 through fiscal year 1997. In fiscal year 1996, U.S.

computer vendors exported almost twice as many HPCs as they had in

fiscal years 1994 and 1995 together. In fiscal year 1997, U.S. exports of

HPCs more than quadrupled the fiscal year 1996 level. Figure III.1 also

shows that growth in export volume was strong for tier 1 countries.

Although tier 2 growth remained ahead of tier 1 for the whole period, the

greatest volume of U.S. exports has been with the tier 1 countries. 

Table III.1 shows the largest importers of U.S. HPCs. U.S. allies and friends

remained the largest market for U.S. HPC exports, but tier 2 countries were

the fastest growing market. Figure III.2 summarizes the share of U.S. HPC

exports that each tier took in this period. Figure III.3 shows the top five

customers for U.S. HPCs and the portion of the exports they received.

Finally figure III.4 shows that most HPCs exported in the past 2 years were

rated between 2,000 and 3,000 MTOPS.

Page 27 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Figure III.1: Numbers of U.S. High Performance Computers Exported to All Tiers, Fiscal Years 1994 Through 1997

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Tier I

Tier 2

Tier 3

Annual Total

FY94 FY95 FY96 FY97

115 231 594 2,398

7 45 161 761

1 25 60 171

123 301 815 3,330

Note: This shows the number of items licensed for export rated at above 1,500 MTOPS for fiscal

years 1994 and 1995, as well as the number of items at or above 2,000 MTOPS for fiscal years

1996 and 1997 reported as exported. The regulations changed in January 1996, so that first

quarter fiscal year 1996 data includes HPCs at above 1,500 MTOPS and the second quarter

includes 18 machines rated at between 1,500 and 2,000 MTOPS licensed for export in

January 1996.

Page 28 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Since the January 1996 revision, 68 countries worldwide, out of 193 in the

tier system, purchased 3,967 U.S. HPCs,2

 as of September 1997. These

machines represent a total HPC computing power, as calculated in MTOPS, of

over 15 million MTOPS. Twenty-six countries lead the world as the dominant

customers for U.S. HPCs. These countries purchased 91 percent of all HPCs

sold worldwide. Together they purchased over 14 million MTOPS,

representing 93 percent of the HPC computing power exported from the

U.S. in the period. Table III.1 ranks the countries by the quantities of MTOPS

they purchased. It also shows the number of HPCs they purchased. The

countries that purchased the most machines also purchased relatively

more powerful machines as rated by MTOPS. (See table III.1.)

2

Depending on a personal computer’s configuration, a PC with an Intel Pentium II 350 megahertz chip

is rated at 408.33 MTOPS. Each of the 3,967 HPC machines is rated at least 2,000 MTOPS. The 3,967

HPCs shipped from the United States are equivalent to about 37,000 Pentium II computers in terms of

MTOPs.

Page 29 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Table III.1: Largest Importers of U.S.

HPCs, Fiscal Years 1996 - 1997,

Ranked by Total MTOPS Exported

Country

FY96

Machines

FY97

Machines

Total

Machines

for FY96-97

Total MTOPS

Exported to

Country

FY96-97 Tier

Germany 111 488 599 2,600,949 1

United Kingdom 87 489 576 2,359,761 1

Japan 74 233 307 1,667,745 1

South Korea 62 269 331 1,128,945 2

France 29 229 258 1,070,385 1

Italy 16 142 158 601,979 1

Switzerland 23 147 170 500,327 1

Spain 10 123 133 484,862 1

Sweden 20 77 97 441,541 1

Australia 32 88 120 398,198 1

Netherlands 10 95 105 321,352 1

Belgium 12 88 100 288,194 1

Hong Kong 9 73 82 259,072 2

China 23 54 77 239,037 3

Brazil 2 68 70 214,350 2

Israel 7 41 48 200,177 3

Mexico 12 45 57 199,133 1

Malaysia 23 53 76 194,805 2

Singapore 5 60 65 189,729 2

South Africa 8 28 36 132,675 2

Thailand 2 35 37 110,536 2

Austria 6 25 31 108,449 1

Norway 1 15 16 107,388 1

Indonesia 0 27 27 91,561 2

Russia 7 21 28 84,961 3

Finland 1 23 24 81,571 1

Total 588 3,040 3,628 14,077,682

As table III.1 shows, tier 1 countries, mainly U.S. friends and allies, were

by far the largest market for U.S. HPCs. Figure III.2 summarizes the share of

U.S. HPC exports that each tier received in the past 2 years.

Page 30 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Figure III.2: Quantity and Percent of

U.S. HPC Exports to Each Tier,

January 1996 -September 1997 Tier I

Tier II

Tier III

2,862

885

220

72.1%

22.3%

5.5%

Source: Department of Commerce and GAO Analysis.

Since the export controls were revised, HPCs have been sold to more

countries, but 26 countries account for 91 percent of all U.S. HPCs sold

worldwide. Not only have the Tier 1 countries dominated as U.S. HPC

customers, five U.S. allies were the largest customers for U.S. HPCs:

Germany, the United Kingdom, Japan, South Korea, and France. As 

figure III.3 shows, these five countries together received over 52 percent of

the machines exported. These countries also bought the most powerful

machines, purchasing 58.36 percent of the MTOPS exported in HPCs.

Page 31 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Figure III.3: Quantity and Percent of Total Machines Purchased by Five Largest Customers for U.S. HPCs, From

January 1996 - September 1997

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A

A

A

A

A

A

A

A

A

A

A

Germany

United Kingdom

Japan

South Korea

France

Remaining World

599

576

307

331

258

1,896

15.1%

14.5%

7.7%

8.3%

6.5%

47.8%

Source: U.S. Department of Commerce and GAO Analysis.

The large majority of U.S. HPCs exported since the revision and the largest

number of most powerful computers were sent to tier 1 and 2 countries.

For example, 50, 5, and 1 HPCs with computing power greater than 

13,000 MTOPS went to tiers 1, 2, and 3, respectively. Of the 50 countries in

tier 3, five—China, Israel, Russia, India, and Saudi Arabia—account for

about 84 percent of the computers exported to tier 3. Table III.2 shows the

numbers of computers each country has received.

Table III.2: Numbers of Machines

Exported to Top Five Tier 3 Recipients,

January 1996-September 1997a Country 1996 1997 Total

Percent

of total

China 23 54 77 35.0

Israel 7 41 48 21.8

Russia 7 21 28 12.7

India 6 13 19 8.6

Saudi Arabia 2 11 13 5.9

Other Tier 3 4 31 35 15.9

Total 49 171 220 100

aHPCs to China and India were exported with no individual licenses. Russia and Saudi Arabia

received 1 licensed HPC each, while Israel received 18 licensed machines.

Page 32 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

China, which ranks first in the number of HPCs received by a tier 3 country,

would have received even higher numbers of HPCs if its HPC totals were

combined with those of its Hong Kong Special Administrative Region.

Hong Kong and China rank 13th and 14th, respectively, on the HPC

purchasers’ list. (See table III.1) If Hong Kong and China were treated as

one for purposes of U.S. export controls and statistics3

, the combined

region would have purchased more machines than Italy, which ranked

seventh in U.S. machines exported, and almost as many machines as

Switzerland, which ranked sixth.

The largest numbers of U.S. HPCs exported were less powerful HPCs. HPCs

at the 2,000 to 3,000 MTOPS level made up the bulk of machines exported,

about 58 percent of all HPC exports. HPCs at the 2,000 to 7,000 MTOPS level

constitute the large majority of U.S. HPC exports, about 92 percent of all

U.S. HPC exports, or 3,638 machines exported. The remaining 8 percent of

HPC exports, 329 machines, were above 7,000 MTOPS. Figure III.4 shows

these relationships. (See fig. III.4.)

3

In our report Hong Kong’s Reversion To China: Effective Monitoring Critical to Assess U.S.

Nonproliferation Risks (GAO/NSIAD-97-149, May 1997), we emphasized the need to monitor the

continuation of Hong Kong’s separate and autonomous export controls. U.S. officials agreed that

monitoring Hong Kong’s autonomy in the conduct of export controls is necessary, given the potential

risks involved and the U.S. policy commitment to ensure that exports of sensitive technology to Hong

Kong are protected.

Page 33 GAO/NSIAD-98-196 Export Controls
Appendix III 

U.S. High Performance Computer Exports

Since the 1996 Export Control Revision

Figure III.4: Quantity and Percentage of U.S. HPC Exports by MTOPS Levels, January 1996-September 1997

2,000-2,999 MTOPS

3,000-4,999 MTOPS

5,000-6,999 MTOPS

7,000-9,999 MTOPS

Above 10,000 MTOPS

2,310

1,060

268

157

172

58.2%

26.7%

6.8%

4.0%

4.3%

Source: U.S. Department of Commerce and GAO analysis.

Page 34 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 35 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

Page 36 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

Page 37 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

See comment 1.

Now on p. 3.

See Comment 1.

Now on p. 4.

See comment 1.

Now on p. 4.

See comment 1.

Now on p. 4.

Page 38 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

See comment 1.

Now on p. 10.

See comment 1.

Now on p. 5.

See comment 2.

Page 39 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

See comment 1.

Now on p. 6.

See comment 3.

See comment 4.

Page 40 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

See comment 5.

See comment 2.

Page 41 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

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

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

this report. We addressed Commerce’s general comments relevant to this

report on page 15 and its specific comments below.

GAO Comments 1. We have made the suggested changes, as appropriate.

2. Commerce also commented that a number of foreign manufacturers

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

Evidence cited by Commerce concerning particular countries with HPC

manufacturing capabilities came from 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. 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 we received no

documentary support. In addition, although requested, Commerce did not

provide documentary evidence to confirm its asserted capabilities of

India’s HPCs and uses.

3. Commerce stated that policy makers did not receive DOE information

prior to the revision of the HPC controls in 1995 and, further, there is

current disagreement within DOE over the contribution that HPCs make to

nuclear programs in countries of concern. We agree that Commerce did

not obtain available information on this issue from DOE laboratories,

although such information was available and provided to us upon request.

In addition, we found no dissent or qualification of views identified in

DOE’s official study on this matter.

4. Commerce stated that worldwide availability of computers indicates

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

Page 42 GAO/NSIAD-98-196 Export Controls
Appendix IV 

Comments From the Department of

Commerce

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, 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. Such an analysis was not done by the

executive branch before its 1995 decision. In addition, Commerce

provided no documentary evidence for its statement that there is a large

installed base of HPCs in the millions.

5. 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 (Germany and

United Kingdom) 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 43 GAO/NSIAD-98-196 Export Controls
Appendix V 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

See comment 2.

See comment 3.

Page 44 GAO/NSIAD-98-196 Export Controls
Appendix V 

Comments From the Department of Defense

Page 45 GAO/NSIAD-98-196 Export Controls
Appendix V 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense letter

dated July 16, 1998. DOD provided one set of written comments for this

report. We addressed DOD’s general comments relevant to this report on

page 17. We address DOD’s specific comments below.

GAO Comments 1. DOD stated that the Stanford study was only one of many inputs

considered by the executive branch in its 1995 assessment of computer

export controls. We agree, and our report states, that there were other

inputs to the decision. However, officials at Commerce, DOD, State, DOE,

and ACDA referred us to the Stanford study in explaining the basis for the

executive branch decision to revise the controls. Moreover, in announcing

the 1996 HPC export control changes, the executive branch highlighted two

conclusions of its review: (1) U.S.-manufactured computer technology up

to 7,000 MTOPS would become widely available worldwide by 1997 and

(2) many HPC applications used in U.S. national security programs occur at

or above 10,000 MTOPS. Both conclusions were based on information

provided only in the Stanford study. Also, DOD provided briefing slides on

the HPC export control revision to the House Committee on National

Security dated October 17, 1995, using information drawn almost

exclusively from the Stanford study. Finally, a March 1998 Commerce

Department report on foreign policy export controls noted only one

source—a new Stanford study—as part of a 1998 review of HPC export

controls.

2. DOD stated that it identified numerous national security applications

used by the United States that require various levels of computing power,

which helped to establish the revised licensing policies. We agree, and our

report discusses the fact that DOD identified how the U.S. government uses

HPCs for national security applications. However, this misses the point

because these applications did not refer to particular countries of concern.

As we noted in our report, the principal author of the Stanford study and

DOD officials said that they had not performed a threat assessment or

analysis of other countries’ use of HPCs for military and other national

security purposes. The current DOD analysis of how countries of concern

can use HPCs is being done at the request of the House National Security

Committee and might provide the information needed to perform our

recommended assessment.

3. We disagree that the executive branch fulfilled the intent of our

recommendations. Specifically, it did not have information on how and at

what performance levels countries of concern, such as China, India, and

Page 46 GAO/NSIAD-98-196 Export Controls
Appendix V 

Comments From the Department of Defense

Pakistan, use HPCs for military modernization and nonnuclear proliferation

activities. Regarding the degree of controllability of computers, neither the

Stanford study nor any of the other inputs used in the 1995 computer

export control review provided any empirical evidence or analysis to

support assertions that HPCs with certain performance levels are widely

available and uncontrollable. In fact, the 1998 Stanford study recommends

procedural export licensing changes that would make such HPCs

controllable again.

Page 47 GAO/NSIAD-98-196 Export Controls
Appendix VI 

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

(711296) Page 48 GAO/NSIAD-98-196 Export Controls
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