United States General Accounting Office

GAO Testimony

Before the Subcommittee on International Security,

Proliferation, and Federal Services, Committee on

Governmental Affairs, U.S. Senate

For Release on Delivery

Expected at

2:00 p.m., EDT

Wednesday,

September 16, 1998

EXPORT CONTROLS

Changes in Controls

Applied to the Export of

High Performance

Computers

Statement of Harold J. Johnson, Associate Director,

International Relations and Trade Issues, National

Security and International Affairs Division

GAO/T-NSIAD-98-250

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss export controls on high

performance computers (HPC). Since January 1996, when the executive

branch raised the thresholds of computer performance for which

exporters must obtain a license, several unlicensed HPCs were exported to

Russia and China, including some sent illegally to a Russian nuclear

weapons laboratory. You expressed concern about these sales, and asked

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

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

enforcement requirements resulting from the revision. You also asked that

we determine the current foreign availability of HPCs, particularly for

countries of national security concern. Because the unlicensed exports to

Russia and China were under investigation by the Departments of

Commerce and Justice and the Customs Service, we did not specifically

address this matter during our assessment. Also, it is important to note

that we did not determine the appropriate thresholds for controlling HPC

exports, but instead, as you requested, we evaluated the process by which

the executive branch made its decisions and the adequacy of the

information it had available for this purpose.

Our report on the decision to revise HPC export controls is being released

today,1

 as is our companion report responding to Section 1214 of the

Fiscal Year 1998 National Defense Authorization Act;2

 therefore, my

prepared statement will summarize our principal findings. However, to

facilitate an understanding of the issues, I believe that a brief background

may be useful.

Background As we have stated in previous testimony,3

 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.

The President has the responsibility and authority to control and require

licenses for the export of items that may pose a national security or

foreign policy concern, and he may remove or revise export controls as

1

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

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

2

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

Exports (GAO/NSIAD-98-200, Sept. 16, 1998).

3

Export Controls: Issues Related to Commercial Communications Satellites (GAO/T-NSIAD-98-208,

June 10, 1998).

Page 1 GAO/T-NSIAD-98-250 Export Controls
U.S. concerns and interests change.4

 It should be noted that the law does

not require that a foreign availability5

 analysis be performed when

deciding to remove or relax export controls.

In 1995, the executive branch conducted a review of export controls on

computer exports to determine how changes in computer technology and

its military applications should affect U.S. export control regulations. This

review was the continuation of a process begun in the 1980s to take into

account the technological advancements in the computer industry. It may

be useful to note that as recently as 1993, the export of computers with a

composite theoretical performance of 195 millions of theoretical

operations per second (MTOPS)6

 were controlled. This was raised to 1,500

MTOPS in February 1994.

A key element of the executive branch review was a Stanford University

study, jointly commissioned by the Departments of Commerce and

Defense (DOD).7

 Among other things, the study concluded that

(1) U.S.-manufactured computer technology with a composite theoretical

performance of up to 4,000 to 5,000 MTOPS were currently widely available

and uncontrollable worldwide, (2) computers with a performance level of

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 exports of computing

systems with performance below 7,000 MTOPS, and that attempts to control

HPC exports below this level would become increasingly ineffectual, and

would unreasonably burden a vital sector of the computer industry.

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

4

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

countries based on the performance levels of HPCs.

5

The Export Administration Act of 1979, as amended, 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.

6

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.

7

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).

Page 2 GAO/T-NSIAD-98-250 Export Controls
national security or proliferation risk posed at a specific destination. The

revised 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. 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. 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.

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, and

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

performance levels of 2,000 MTOPS.

8

 The Fiscal Year 1998 National Defense

Authorization Act (P.L. 105-85) modified the 1996 revisions by requiring

exporters to notify the Department of Commerce of any planned sales of

computers with performance levels greater than 2,000 MTOPS to 

tier 3 countries. The government has 10 days to assess and object to a

proposed HPC sale without a license. 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.9

Summary As I indicated, one focus of our work was to assess whether the empirical

evidence presented in the Stanford study—a key element in the decision to

revise HPC export controls—supports its conclusions. Our analysis 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

8

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

9

The Commerce Department promulgated regulations implementing the law on February 3, 1998.

Page 3 GAO/T-NSIAD-98-250 Export Controls
such an assessment, and the study recommended that better data be

gathered so that such an analysis could be done in the future.

Except for nuclear weapons, the executive branch has not completed an

assessment of the national security risks of exporting HPCs to tier 3

countries, and the nuclear weapons assessment was completed by the

Department of Energy (DOE) in June 1998, more than 2 years after the

export control policies for HPCs were revised. 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.

In December 1997, the House Committee on National Security directed

DOE and DOD to assess the national security impacts of HPC sales to tier 3

countries. DOE’s study on nuclear weapons 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 not yet finished identifying how specific countries of concern

would use HPCs for nonnuclear national defense applications.

Nonetheless, based on its view of the worldwide availability of computing

power and the technological advancements in this area, the executive

branch raised the MTOPS thresholds for HPC export controls. The 1996

revision to HPC export controls had three key consequences.

• First, by increasing the performance thresholds for computers that require

a license, the 1996 revisions decreased the number of license applications

from 459 in fiscal year 1995 to 125 in 1997 and of approved export license

applications for HPCs from 395 in fiscal year 1995 to 42 in 1997.

• Second, the revision shifted some of the government’s end use screening

responsibilities from the government to the computer industry. 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 a tier 3 country, like China, where identifying the

distinction between a civilian and military end user can be very difficult. In

response to several allegations of improper sales to Russia and China,

Congress partly reversed this situation by passing the Fiscal Year 1998

National Defense Authorization Act, which requires exporters to notify the

Page 4 GAO/T-NSIAD-98-250 Export Controls
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. Based on our review of

records provided by the manufacturers to the Commerce Department from

January 1996 through September 1997, we noted that China ranked first in

the number of HPCs acquired by tier 3 countries, having purchased a total

of 77 HPCs during this period. These exports were all made without an

individual license being required. Examining how these machines are

being used was beyond the scope of this review.

Responsibility for PSV checks on exports remained with the government,

but information on these exports reported to the government has been

incomplete. PSVs for computers generally have been of reduced value

because of how this process is implemented. First, PSVs 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 PSVs.

With regard to foreign availability of HPCs,10 we found that subsidiaries of

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

must comply with U.S. controls. Russia, China, and India have developed

HPCs, but their capabilities 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 restriction.

The report contains two recommendations: one that requires action by the

Secretary of Defense, and one that requires action by the Secretary of

Commerce with support from DOD, DOE, the Department of State, and the

Arms Control and Disarmament Agency (ACDA).

First, we recommended that to complement the studies undertaken by DOD

and DOE for the House Committee on National Security, the Secretary of

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) whether such uses

are a threat to U.S. national security interests, and (3) the extent to which

such HPCs are controllable.

10We used the description of foreign availability described in footnote 5 as our criteria.

Page 5 GAO/T-NSIAD-98-250 Export Controls
Second, upon completion of the analysis suggested in our first

recommendation, we also recommended that the Secretary of Commerce,

in conjunction with the other agencies I mentioned, 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.

I would also like to comment just briefly on the agencies’ response to our

report. In addition to Commerce and DOD, DOE, the Department of State,

and ACDA offered their views.

Commerce said that the President’s decision was intended to change the

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

to one more in tune with today’s technology and international security

environment,” and 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 further

stated that our report focused too much on how countries might use HPCs

for proliferation or military purposes and on what it called an outdated

Cold War concept of “foreign availability”. The Commerce said that our

analysis of foreign availability was too narrow and that foreign availability

is not an adequate measure of the problem.

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 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 the Export Administration Act and 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

Page 6 GAO/T-NSIAD-98-250 Export Controls
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 offered no specific evidence to support this point of view;

moreover, its view seems to be inconsistent with the requirement for DOD

to identify militarily critical technologies. In assessing these militarily

critical technologies, DOD 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 Program

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.

In its comments on our report, DOD said that it had considered the threats

associated with HPC exports to countries of national security and

proliferation concern. In this context, DOD referred to its identification of

how HPCs in the United States are used for national security applications.

While our report recognized that such an assessment of domestic uses had

been done, this did not address our concern. We reported that (1) the

Stanford study did not assess the capabilities of countries of concern, such

as China, Russia, India, or Pakistan, 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

such countries of concern. As we reported, the principal author of the

Stanford study noted that no assessment had been done of the national

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

and of what military advantages such countries could achieve. 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.

The Department of State, DOE, and ACDA generally agreed with our report.

Page 7 GAO/T-NSIAD-98-250 Export Controls
Mr. Chairman, that concludes our prepared testimony. My colleagues and I

would be happy to respond to any questions you or other members may

have.

(711383) Page 8 GAO/T-NSIAD-98-250 Export Controls
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