EXPORT-IMPORT 

BANK

Monitoring of DualUse Exports Should 

Be Improved

Report to Congressional Committees

August 2014

GAO-14-719

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-719, a report to 

congressional committees

August 2014

EXPORT-IMPORT BANK

Monitoring of Dual-Use Exports Should Be Improved

Why GAO Did This Study

Since 1994, Ex-Im has had the 

authority to facilitate the financing of 

U.S. exports of defense articles and 

services, provided that it determines 

these items are nonlethal and primarily 

meant for civilian use. These “dualuse” exports include aircraft that are 

used by foreign militaries mainly for

humanitarian purposes. After a 9-year 

hiatus, Ex-Im financed three dual-use 

exports in fiscal year 2012. These 

three transactions account for $1.03 

billion, or just under 3 percent of ExIm’s $35.8 billion financing for that 

year. Federal law requires GAO to 

report annually on the end uses of 

dual-use exports financed by Ex-Im

during the second preceding fiscal 

year. This report (1) examines how ExIm has complied with its requirements 

for monitoring the end uses of the dualuse exports it financed in fiscal year 

2012 and (2) identifies what dual-use 

exports, if any, Ex-Im financed in fiscal 

year 2013.

What GAO Recommends

To improve oversight for monitoring 

dual-use items, Ex-Im should 

strengthen its guidance for monitoring 

end use in cases where borrowers do 

not submit required documentation 

within specified time frames. Ex-Im 

agreed with GAO’s recommendation 

and said it would revise its guidance. 

What GAO Found 

The Export-Import Bank of the United States (Ex-Im) has policies for monitoring 

the end use of defense articles and services it finances, including documentation 

requirements that are reflected in its financing agreements with borrowers. 

However, these policies do not specify what actions Ex-Im officials should take if 

the bank does not receive the required dual-use-related documents. The 

requirements for each transaction vary, but may include (1) progress reports on 

construction and delivery, (2) technical operating reports, and (3) an annual 

certification and report on end use. As of July 31, 2014, Ex-Im had received most 

of the information it required in its credit agreements regarding the three dual-use 

transactions it financed in fiscal year 2012, but some of the information it 

received was late (see figure). For example, Ex-Im received 

• some but not all of the progress reports required for the satellite transactions 

with Eutelsat and the Mexican government, and some information from the 

government of Mexico was more than a year late;

• the required technical operating report from Eutelsat, but only one of the two 

required reports from the Mexican government; and

• the annual certification and reports required from the governments of Mexico 

and Cameroon late.

Ex-Im officials told GAO they made efforts to obtain missing documentation for all 

three transactions, and, because of their prior vetting of the transactions and the 

details they had received, they did not think the missing documentation risked the 

exports being used in a lethal manner or for primarily military purposes. However, 

GAO found these efforts were often not timely or documented. Ex-Im therefore 

did not have complete and timely information about whether the items were 

actually being used in accordance with the terms of the agreements and Ex-Im 

policy.

Ex-Im did not finance any exports under its dual-use authority in fiscal year 2013, 

according to Ex-Im officials and Ex-Im authorizations data. 

Status of Ex-Im’s Fiscal Year 2012 Dual-Use Export Transactions

View GAO-14-719. For more information, 

contact Kimberly Gianopoulos at (202) 512-

8612 or GianopoulosK@gao.gov.
Page i GAO-14-719 Export-Import Bank

Letter 1

Background 2

Ex-Im End-Use Monitoring Requirements in Credit Agreements 

Are Not Being Fully Met 3

Ex-Im Did Not Finance Any Dual-Use Export Transactions in 

2013, Based on Application Data and Ex-Im Reviews 12

Conclusion 12

Recommendation for Executive Action 13

Agency Comments and Our Evaluation 13

Appendix I Objectives, Scope, and Methodology 17

Appendix II Comments from the U.S. Export-Import Bank 18

Appendix III GAO Contacts and Staff Acknowledgments 20

Related GAO Products 21

Figure

Figure 1: Status and End-Use Monitoring of the Three Fiscal Year 

2012 Export Transactions, as of July 31, 2014 4

Contents

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-14-719 Export-Import Bank

441 G St. N.W.

Washington, DC 20548

August 28, 2014

Congressional Committees

Since October 1994, the Export-Import Bank of the United States (Ex-Im) 

has had the authority to facilitate the financing of U.S. exports of defense 

articles and services, provided that Ex-Im determines that these items are 

nonlethal and primarily meant for civilian use.1 These “dual-use” exports 

include items such as aircraft that are used by foreign militaries mainly for 

civilian or humanitarian purposes. As of July 2014, Ex-Im has financed a 

total of $1.67 billion in dual-use exports, with several transactions 

financed each year through fiscal year 2002. After a 9-year hiatus, it 

financed three more exports in fiscal year 2012: a geosynchronous 

satellite for a French company, Eutelsat S.A. (Eutelsat), manufactured by 

Space Systems/Loral, Inc.;2

Federal law requires GAO to report annually on the end uses of dual-use 

exports financed by Ex-Im during the second preceding fiscal year.

a fleet of three geosynchronous 

telecommunications satellites and related equipment and services from 

Boeing Satellite Systems and Orbital Sciences Corporation for the 

government of Mexico; and 150 pieces of new and used construction 

equipment from U.S. manufacturers exported by Hoffman International, 

Inc., for the government of Cameroon. These three transactions account 

for $1.03 billion in Ex-Im financing, or just under 3 percent of Ex-Im’s 

financing for that year of $35.8 billion. The Mexico satellite transaction is 

the bank’s single largest dual-use financing transaction to date, with a 

loan guarantee of $922 million.

3

 1

12 U.S.C. § 635(b)(6). The Export-Import Bank Reauthorization Act of 2012 extended 

through September 30, 2014, the authority for Ex-Im to finance certain dual-use exports, 

which was first established in 1994 (Pub. L. No. 103-428, § 1(c) (Oct. 31, 1994), as 

amended by Pub. L. No. 109-438, § 4 (Dec. 20, 2006); Pub. L. No. 112-122, § 24 (May 

30, 2012)). Ex-Im is authorized to use up to 10 percent of its total annual loan, guarantee, 

and insurance authority to support the sale of these dual-use exports. 

This 

report (1) examines how Ex-Im has complied with its requirements for 

monitoring the end uses of the dual-use exports it financed in fiscal year 

2

A geosynchronous satellite orbits the earth at the same rate as the earth’s rotation. 

3

See the Related GAO Products section at the end of this report for a list of previous GAO 

reports on this topic.
Page 2 GAO-14-719 Export-Import Bank

2012, and (2) identifies what dual-use exports, if any, Ex-Im financed in 

fiscal year 2013.

To examine Ex-Im’s compliance with its requirements for monitoring the 

end uses of the dual-use exports it financed in fiscal year 2012, and to 

identify what dual-use exports, if any, Ex-Im financed in fiscal year 2013, 

we reviewed Ex-Im documentation and interviewed Ex-Im officials in 

Washington, D.C. We conducted this performance audit from March to 

August 2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. For more information on 

our scope and methodology, see appendix I.

Ex-Im is an independent agency operating under the Export-Import Bank 

Act of 1945, as amended. Its mission is to support the export of U.S. 

goods and services overseas, through the provision of loans, loan 

guarantees, and insurance, thereby supporting U.S. jobs. Ex-Im is 

generally prohibited by law from financing any credit sale of defense 

articles and services for any country. However, in an exception to this 

rule, Ex-Im was granted authority to facilitate the financing of U.S. exports 

of defense articles and services, provided that it determines that these 

items are nonlethal and primarily meant for civilian end use. Such items 

are known as dual-use exports.4

Ex-Im’s Engineering and Environment Division, with assistance from the 

General Counsel, Congressional and External Affairs Division, and the 

Policy and Planning Division, is responsible for implementing the dual-use 

authority. According to Ex-Im’s Military Policy, its definitions of “defense 

articles” and “defense services” are based on who the end user is, and 

then by the nature of the item and the use to which it will be put. In 

 4

According to a senior Ex-Im official, “defense articles and services” is not defined in the 

law for purposes of Ex-Im’s authority to finance dual-use exports, unlike other provisions 

of law in the Arms Export Control Act that define “defense articles and services” with 

specific reference to items listed on the United States Munitions List. Under Ex-Im’s 

definition of “defense articles and services” for dual-use purposes, any article or service 

that is being sold to a military organization is automatically considered to be a defense 

article until proven otherwise. 

Background
Page 3 GAO-14-719 Export-Import Bank

addition, if the item is designed primarily for military use, it is presumed to 

be a defense article. For example, according to Ex-Im, furniture sold to a 

military organization for military use (e.g., for offices or homes occupied 

by military personnel) is deemed a defense article. However, according to 

Ex-Im, helicopters sold to a private firm or civilian police force are not 

defense articles. According to Ex-Im policy, an export is eligible for 

financing as a dual-use item if convincing evidence exists that the export 

is nonlethal in nature and will be used mainly for civilian activities. The 

determination of eligibility for dual-use financing may require applicants 

for Ex-Im financing to provide additional information beyond the contract 

and transaction data the bank normally requires for a loan or guarantee. 

Ex-Im may also seek to corroborate the information submitted by 

applicants by contacting other U.S. government agencies, such as the 

Department of State. For example, prior to approving the three fiscal year 

2012 dual-use transactions, Ex-Im obtained written certification from each 

borrower that the items to be exported were nonlethal and would be 

primarily for civilian use. In addition, Ex-Im vetted the Eutelsat and 

Cameroon transactions with the Department of State, and vetted the 

Mexico transaction with the U.S. embassy military attaché in Mexico.

Ex-Im has policies and procedures for monitoring end use, including 

various documentation requirements, which are reflected in its financing 

agreements with each of these borrowers. The documentation 

requirements for each transaction vary, but there are three types: (1) 

progress reports on construction and delivery of the exported item, (2) 

technical operating reports once the item is in use, and (3) an annual 

certification and report on end use. Ex-Im may also conduct end-use 

inspections, according to the terms of its credit agreements. As of July 31, 

2014, Ex-Im had received most of the information required in its credit 

agreements regarding the status and end use of the exported items from 

the three borrowers approved for financing in fiscal year 2012 under the 

bank’s dual-use authority, but some information was received more than 

a year late. Figure 1 shows the status of each of these transactions and 

the end-use monitoring of the exported items. Ex-Im officials told us they 

made efforts to obtain missing documentation for all three transactions. 

They also said that because of their prior vetting of the transactions with 

the Department of State or Defense and the details they had received 

about the transactions, they did not think the missing documentation 

risked the exports being used in a lethal manner or for primarily military 

purposes. However, we found these efforts were often not timely or 

documented. Ex-Im therefore did not have complete and timely 

Ex-Im End-Use 

Monitoring 

Requirements in 

Credit Agreements 

Are Not Being Fully 

Met
Page 4 GAO-14-719 Export-Import Bank

information about whether the items were actually being used in 

accordance with the terms of the credit agreements and Ex-Im policy.

Figure 1: Status and End-Use Monitoring of the Three Fiscal Year 2012 Export Transactions, as of July 31, 2014

a

Ex-Im did not finance the parts of the satellite owned and operated by the government of Qatar’s 

state-owned telecommunications operator, ictQatar.
Page 5 GAO-14-719 Export-Import Bank

b

Required in the credit agreement.

c

These reports were dated July 30, 2012, and January 11, 2013.

d

Ex-Im requires progress and technical operating reports when supporting the construction of a 

specific project or asset. The Cameroon transaction was an equipment sale and did not involve the 

fabrication of any assets.

e

The second report was due by the end of July 2014.

f

There is no annual certification requirement in the Eutelsat agreement; Eutelsat is a private 

commercial entity with no military end use.

g

According to the credit agreement, Ex-Im officials may inspect records regarding the end use of the 

satellites, provided the government of Mexico does not consider the inspection a breach of Mexico’s 

national security.

Ex-Im has a detailed 1997 staff memorandum on dual-use policy for 

military applications, and Ex-Im officials confirmed that there have been 

no changes or updates to this policy. This memorandum tasks the Ex-Im 

engineers assigned to monitor dual-use transactions with “determining a 

reasonable and effective method to meet this monitoring requirement”

that generally includes submission of periodic reports on end use, 

certified as accurate by the buyer, until the loan or guarantee is repaid, 

and could include periodic site visits by Ex-Im officials. In addition, the 

memorandum states that credit and guarantee agreements for dual-use 

transactions should include provisions for “progress reports” and 

“technical operating reports” to monitor the status and usage of dual-use 

items. Such information helps inform bank officials and provides them 

greater assurance about the exports’ end use. The memorandum also 

includes provisions for action should Ex-Im find a violation of the dual-use 

policy.5 However, the memorandum does not specify what actions Ex-Im 

officials should take if the bank does not receive the documents required 

in the agreements.

 5

According to the memorandum, “If the engineer determines that the buyer 

misrepresented the intended use, he/she should communicate this immediately to the 

Vice President of the Engineering and Environment Division and to the Office of the 

General Counsel so that appropriate action can be taken which may include accelerating 

repayment of the transaction, administrative actions or sanctions according to the nature 

of the loan and/or suspension of the buyer from access to future Ex-Im Bank financing.”

Ex-Im Has Policies and 

Procedures for Monitoring 

End Use
Page 6 GAO-14-719 Export-Import Bank

According to Ex-Im officials, each of the credit agreements was 

negotiated on a case-by-case basis to incorporate the specific 

circumstances related to the borrower and the item(s) being exported. 

These credit agreements are legally binding on Ex-Im and the borrower, 

and each includes different provisions to ensure that end use could be 

monitored. The credit agreements for the two satellite transactions require 

the borrower (Eutelsat or the Mexican Ministry of Finance) to submit to 

Ex-Im (1) periodic progress reports covering the satellite(s)’ construction, 

launch, and in-orbit testing; and (2) technical operating reports that 

include information concerning the operation and maintenance of the 

satellite(s) and related telemetry, tracking and command stations, and 

transponder capacity and use.6

The credit agreements with the governments of Mexico and Cameroon 

require an “Annual Certification and Report.” Specifically, the borrower is 

to have the end user (the Mexican Secretariat of Communications and 

Transportation, and the Cameroon Directorate of Military Engineering) 

certify that the exported items have been and are being used primarily for 

civilian purposes.7 This certification is to occur within 3 months after the 

end of each calendar year, starting by April after the year in which a first

use is made. For the government of Mexico, this means that since one 

satellite was launched and became operational in 2013, the first report 

was due by April 2014. The report accompanying this certification is to 

include a list and description of tasks for which the satellite was used, 

including a summary of the civilian and military uses and the number of 

terminals allocated to and in use by any military organization or division of 

the government of Mexico.8

 6

A transponder is a device that transmits signals automatically when it receives certain 

predetermined signals. Each transponder handles a particular frequency range (also 

referred to as bandwidth). There are multiple transponders on a satellite, each capable of 

supporting one or more communication channels.

For the government of Cameroon, the first 

report was also due by April 2014, since the equipment was shipped and 

put to use in 2013. This report is to include a list and description of tasks 

for which the equipment was used, the duration of each task, and a 

summary of their civilian and military uses, including the respective 

percentages of civilian and military use.

7

The Cameroon Directorate of Military Engineering is analogous to the U.S. Army Corps 

of Engineers, according to Ex-Im officials.

8

Access to the satellite is controlled through terminals on the ground.

Ex-Im’s Policies and 

Procedures Are Reflected 

in the Financing 

Agreements for Each 

Dual-Use Export 

Transaction
Page 7 GAO-14-719 Export-Import Bank

All three agreements call for the borrower to permit Ex-Im officials to 

make “reasonable inspections” of books and records regarding the use of 

the exported items, though no inspections have occurred because Ex-Im 

officials determined that due to the timing and nature of the transactions, 

conducting a physical monitoring trip prior to significant use would not be 

an efficient nor a justified use of taxpayer money.

9 All three agreements 

also say that failure to comply with the provisions set forth in the 

agreement (if not remedied within a specified grace period) shall be 

considered grounds for default.10 In addition, the agreements with the 

governments of Mexico and Cameroon state that any false or misleading 

information submitted to Ex-Im shall be grounds for default. The 

agreement with Eutelsat states that any information “proven to be 

incorrect” shall be grounds for default if not remedied within 60 days.

Officials noted that while the bank does have the option to declare a 

default and accelerate payments, this is not usually the best option, 

especially with sovereign governments, for issues such as late reporting.

Ex-Im provided a direct loan to Eutelsat to finance 45.5 percent of the 

purchase and launch of a satellite. The remaining 54.5 percent was 

purchased independently by Qatar’s state-owned telecommunications 

operator, ictQatar.11

 9

In the Eutelsat agreement, this applies only to the financed portion of the satellite.

The credit agreement with Eutelsat required monthly 

progress reports on the construction, planned launch, and in-orbit testing 

of the satellite, beginning June 30, 2012. These reports help officials 

determine when the satellite will go into use. However, Ex-Im received 

10The specified grace period is 30 days, according to the respective agreements with the 

governments of Mexico and Cameroon, and 45 days, according to the agreement with 

Eutelsat.

11Ex-Im’s Board of Directors’ approval memorandum for the Eutelsat transaction indicated 

that of the 46 total transponders on the satellite, 40 were designated for civilian use—23 

by Eutelsat and 17 by ictQatar. Ex-Im only supported the 23 Eutelsat transponders. The 

remaining 6 transponders, purchased by ictQatar and not related to Ex-Im support, were 

designated for military communication purposes. 

Ex-Im Has Received 

Some Required 

Information More than a 

Year Late or Not at All

Ex-Im Did Not Receive All 

Progress Reports from 

Eutelsat within Required Time 

Frames but Received the 

Technical Operating Report on 

Time
Page 8 GAO-14-719 Export-Import Bank

only two of more than a dozen required progress reports. These reports 

were dated July 30, 2012, and January 11, 2013, and were not received 

until July 2013. They were titled “Monthly Progress Reports” and included 

detailed information on completed and planned activities, such as 

anticipated launch and in-orbit testing time frames. Ex-Im officials told us 

they determined that despite the requirement in the loan agreement, 

monthly reports were not necessary and they did not believe the missing 

information posed a risk. An Ex-Im official stated that detailed reports, 

such as these, which summarize information over a several-month period, 

are more useful than a series of monthly reports. However, Ex-Im officials 

could not provide us documentation of this decision or of their efforts to 

obtain late (or missing) reports. The official said that when the credit 

agreement was being drafted, representatives from the satellite’s 

manufacturer told the bank they prepare monthly reports for clients; 

according to him, this is why the monthly reporting requirement was 

incorporated into the credit agreement. Once the satellite was constructed 

and launched and its in-orbit testing was completed, in November 2013, 

progress reports were no longer required.

Once the satellite is in use, the credit agreement with Eutelsat requires 

the company to submit semiannual technical operating reports. The first 

technical operating report is to be submitted 3 months after the satellite’s 

“in-orbit acceptance date” (the date on which testing of the satellite in 

orbit is completed). According to a January 2014 letter from Eutelsat, the 

in-orbit acceptance date was November 4, 2013; Eutelsat submitted its 

first technical operating report on time, in February 2014. Thereafter, 

these reports are due by the end of January and the end of July each 

year, until the loan has been repaid (just over 10 years). Eutelsat also 

submitted documentation certifying that (1) the majority of the satellite’s 

46 transponders are for civilian use (meaning that Ex-Im can finance 

them); (2) the remaining 6 transponders dedicated to military use for the 

government of Qatar are nonlethal and, now that the satellite is airborne, 

cannot be modified to change their use; and (3) the bandwidth, or 

capacity, of these 6 transponders is less than half of the satellite’s total 

transponder capacity. Ex-Im officials said that this information, together 

with prior vetting of the transaction by the Department of State, gave them 

confidence that this satellite is nonlethal and will be used primarily for 

civilian purposes. However, there was no formal documentation of this 

determination. Ex-Im officials noted that they only needed to look at the 

23 transponders financed by the bank and that their support did not 

extend to any of the military transponders.
Page 9 GAO-14-719 Export-Import Bank

Ex-Im received only a few of the reports from the government of Mexico 

required in the July 2012 credit agreement, and some of the information 

in a report it did receive was more than a year late. Ex-Im officials 

received these reports only after contacting Mexican government officials 

in April, May, and June 2014—after we began our review—to obtain 

missing documentation regarding the status and end use of the 

satellites.12

The credit agreement calls for the borrower to submit both progress 

reports and technical operating reports. However, since the launched 

satellite’s final in-orbit acceptance date of February 14, 2013, Ex-Im has 

received only one combined report, dated June 20, 2014.

An Ex-Im official said that the Mexican government 

acknowledged that it has been delinquent in submitting the required 

documentation and that the government is working with Ex-Im to make 

sure that it fulfills the agreement’s documentation requirements.

13

• at least two progress reports covering all three satellites prior to the 

February 14, 2013, in-orbit acceptance date for the launched satellite 

(in the third quarter of 2012 and January 2013);

According to 

the agreement, the borrower should have already provided to Ex-Im

• two more progress reports (in mid-2013 and early 2014) covering the 

remaining two satellites, which have not yet been launched;14

• two technical operating reports for the launched satellite, in April 2013 

and April 2014, that were due 60 days after the satellite’s in-orbit 

acceptance date, and annually thereafter until the loan guaranteed by 

the agreement is paid in full.

and

The combined June 2014 report lists dates for various stages of 

construction, testing, and launch/planned launch for each of the three 

satellites (one fixed service satellite and two mobile service satellites).15

 12An Ex-Im official said there were other Ex-Im communications with the Mexican 

government, but could not readily locate any documentation of these communications.

It 

states that the fixed service satellite was launched 18 months earlier, on 

December 19, 2012; completed in-orbit testing (in-orbit acceptance) on 

13The combined report incorporates information contained in a May 21, 2014, draft 

progress report received by Ex-Im on or shortly before May 30, 2014. 

14Another report was due by the end of July 2014.

15Fixed service satellites provide service to a geographically fixed end user, such as a TV 

station. According to an Ex-Im official, mobile service satellites are of greater concern 

because they provide service to mobile end users, such as military personnel in vehicles.

Ex-Im Did Not Receive All of 

the Required Reports from the 

Government of Mexico, and 

Some Information Was More 

than a Year Late
Page 10 GAO-14-719 Export-Import Bank

February 14, 2013; and was handed over to the Mexican government on 

February 24, 2013. The ground equipment for this satellite, which is 

necessary for satellite use, was handed over to the Mexican government 

on December 5, 2013. According to the report, the satellite is currently 

operating as expected at about 19 percent of capacity. The report also 

states that both mobile service satellites have been built and are in 

storage awaiting launch; one has an expected launch period of February 

14 to March 15, 2015, and the other a contracted launch period of 

October 1, 2015, to March 15, 2016. Since these satellites have not yet 

been launched, they are not yet in use, and therefore do not yet need to 

be monitored for end use. Nevertheless, prior to receiving the June 2014 

combined report, Ex-Im had no documented information regarding the 

status of the three satellites since the Ex-Im board approved the Mexico 

satellite transaction in May 2012, and none regarding the launch and 

operation of one of the satellites.

Finally, with regard to the third type of requirement, Ex-Im received the 

first required annual certification and report in May 2014, about a month 

after it was due. This document, dated April 28, 2014, consists of a twoparagraph letter and a two-page annex listing the terminals for use by the 

satellites. The letter states that the percentage of terminals for military 

and civilian use continues to remain the same (40 percent and 60 

percent, respectively), as noted in a March 2012 Mexican government 

letter to Ex-Im, submitted prior to the Ex-Im board approval of the 

transaction.

An Ex-Im official said that despite the late or missing reports, he does not 

consider there to be a risk of violating the bank’s military policy under its 

dual-use authority because he is confident that the satellites are nonlethal 

and will be used primarily for civilian purposes. He said this is because 

the Mexican Secretariat of Communications and Transportation—and not 

the Mexican military—is operating the satellites, and the military will be 

using less than half of the terminals. The official also noted that this 

transaction was vetted by the U.S. military attaché in Mexico prior to 

board approval.16

 16The U.S. military attaché noted that the satellite system is unsecured and thus is 

inappropriate for use in tactical and strategic missions. He also specified that the satellites 

will be used for primarily civilian purposes, which include activities such as drug 

interdiction, search and rescue missions, and communications in rural areas.

However, Ex-Im did not document that missing or late 

reports posed no risk.
Page 11 GAO-14-719 Export-Import Bank

According to the credit agreement, the first annual certification and report 

on end use of the construction equipment exported to Cameroon was due 

by April 2014. Ex-Im received this required documentation several 

months late, in July 2014. Ex-Im officials received the certification and 

report after reaching out, with reminders regarding the credit agreement 

language, to the bank whose loan Ex-Im is guaranteeing; the U.S. 

embassy in Cameroon; and the Cameroon Ministry of Finance. An Ex-Im 

official said he had also spoken informally with the exporter. In addition, 

the report is missing information. The credit agreement requires the 

borrower to provide the respective percentages of civilian and military use 

of the equipment, but these percentages are lacking. The report simply 

notes that some of the equipment (e.g., trucks) “have been used very little 

for military purposes” to transport military items to the north of the 

country.17

An Ex-Im official said that the equipment arrived in Cameroon in several 

shipments during 2013 and was put to use on a rolling basis between 

March and December of that year. Ex-Im received evidence of delivery in 

the form of photos of the equipment on site and in use during operator 

training, as well as the transcript of a speech marking the acceptance of 

the final shipment. Officials noted that Ex-Im could conduct a site visit to 

verify the presence and use of the equipment for this project, but, given 

the photos, speech, and prior vetting of the transaction by the Department 

of State, there have been no indications of issues that suggest a special 

trip is needed. Nevertheless, an official stated that Ex-Im is discussing a 

potential visit to Cameroon within the next year to visit other (nonmilitary) 

projects involving road and bridge construction, and that if this trip takes 

place, Ex-Im officials may take the opportunity to visit the headquarters of 

the Cameroon Directorate of Military Engineering to inspect records of the 

maintenance and use of the equipment, as well as a list of sites where it 

is being used. If some of the sites are close by, officials may visit them.

There are references to additional military uses of the 

equipment, but Ex-Im officials reviewed the documents and other 

information and determined that the end user had demonstrated that use 

has been primarily civilian in nature, despite the lack of a formal 

percentage. Nevertheless, Ex-Im officials said they will continue to follow 

up on the information in the report as part of their ongoing end-use 

monitoring.

 17The northern part of Cameroon is subject to a State Department travel advisory because 

the Boko Haram terrorist group is active in the Far North of the country and there is a 

continuing threat of kidnappings and other armed attacks in the area.

Ex-Im Received Required EndUse Documentation from the 

Government of Cameroon Late
Page 12 GAO-14-719 Export-Import Bank

Ex-Im did not finance any exports under its dual-use authority in fiscal 

year 2013, according to Ex-Im officials and our review of relevant data on 

Ex-Im authorizations. According to Ex-Im officials, each application for 

financing requires the entry of numerous data elements for the application 

record. Several of these elements relate to whether there are any military 

implications in the application, and one field relates to whether or not the 

application would go forward under the bank’s dual-use authority. The 

Engineering and Environment Division, which administers the bank’s 

military policy and consequently its dual-use policy, is responsible for 

filling in this data field.

According to Ex-Im officials, Ex-Im’s Engineering and Environment 

Division finds that roughly 70 percent of all requests for financing of 

military items under the dual-use authority have no credible civilian 

application; the division therefore deems these requests ineligible for 

financing. The remaining requests, those that the division formally 

identifies as eligible under the dual-use authority, are considered for 

approval by the board, which serves as an additional level of review. After 

preliminary board approval, the House Committees on Appropriations and

Financial Services and the Senate Committees on Appropriations and 

Banking, Housing, and Urban Development are notified 15 days before 

the dual-use transaction is returned to the board for final approval.

This is the first time in almost a decade that Ex-Im has financed dual-use 

defense articles and therefore been required to monitor the end use of 

these exports. Ex-Im vetted these dual-use transactions before approving 

them and incorporated its policies and procedures for monitoring end use 

in its credit agreements. These requirements in the credit agreements

include submitting periodic technical and annual reports documenting the 

status and end use of the items being financed in order to help officials 

determine whether these items are nonlethal and are being used primarily 

for civilian purposes. However, we found that some of these reports were 

missing or late. Moreover, we found Ex-Im’s attempts to obtain missing 

documents were often not timely, and records of these efforts were 

sometimes lacking. Ex-Im officials did not think the missing or late 

documentation posed a threat that the exports would be used in a lethal 

manner or for primarily military purposes, based on prior vetting and other 

information. Nevertheless, this determination was not documented, and 

Ex-Im did not promptly and consistently ensure that the terms of its credit 

agreements were being followed with respect to end-use monitoring. 

Ex-Im’s policies and procedures for monitoring end use do not specify 

what steps bank officials should take when borrowers do not comply with 

Ex-Im Did Not 

Finance Any DualUse Export 

Transactions in 2013, 

Based on Application 

Data and Ex-Im 

Reviews

Conclusion
Page 13 GAO-14-719 Export-Import Bank

the end-use documentation requirements in their credit agreements and 

risk being found in default. Without specifying such steps and following 

them consistently, Ex-Im risks not having reasonable assurance that the 

items it is financing are actually being used in accordance with the terms 

of the agreements and Ex-Im policy.

To ensure adequate and consistent oversight for monitoring the end use 

of dual-use items, the Chairman of the Export-Import Bank of the United 

States should strengthen Ex-Im guidance for monitoring end use. 

Specifically, Ex-Im should establish steps staff should take in cases 

where borrowers do not submit required end-use documentation within 

the time frames specified in their financing agreements and ensure that 

these efforts are well documented.

We provided Ex-Im a draft of this report for review and comment. In 

written comments on the draft, which are reprinted in appendix II, Ex-Im 

agreed with our recommendation and stated that it would revise its 

guidance by adding specific instructions about monitoring end-use 

activity, documenting related communications, and actions to be taken if 

reports are not received in a timely fashon. GAO also received technical 

comments from Ex-Im officials. Ex-Im officials updated information on the 

Cameroon transaction and clarified information about the terms of the 

loan agreements and their responsibilities. We made changes to our 

report in response to these comments where appropriate.

We are sending copies of this report to interested congressional 

committees. We will also send copies to the President and Chairman of 

Ex-Im, the Secretary of Defense, and the Secretary of State. In addition, 

this report is available at no charge on the GAO website at 

http://www.gao.gov.

Recommendation for 

Executive Action

Agency Comments

and Our Evaluation
Page 14 GAO-14-719 Export-Import Bank

If you or your staff have any questions about this report, please contact 

me at (202) 512-8612 or GianopoulosK@gao.gov.

Kimberly Gianopoulos

Acting Director, International Affairs and Trade
Page 15 GAO-14-719 Export-Import Bank

List of Committees

The Honorable Tim Johnson

Chairman

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Mike Crapo

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Patrick J. Leahy

Chairman

Subcommittee on State, Foreign Operations, and Related Programs

Committee on Appropriations

United States Senate

The Honorable Lindsey Graham

Ranking Member

Subcommittee on State, Foreign Operations, and Related Programs

Committee on Appropriations

United States Senate

The Honorable Jeb Hensarling

Chairman

Committee on Financial Services

House of Representatives

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

House of Representatives

The Honorable Kay Granger

Chairman

Subcommittee on State, Foreign Operations, and Related Programs

Committee on Appropriations

House of Representatives
Page 16 GAO-14-719 Export-Import Bank

The Honorable Nita Lowey

Ranking Member

Subcommittee on State, Foreign Operations, and Related Programs

Committee on Appropriations

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 17 GAO-14-719 Export-Import Bank

To examine Ex-Im’s compliance with its requirements for monitoring the 

end uses of the dual-use exports it financed in fiscal year 2012, and to 

identify what dual-use exports, if any, Ex-Im financed in fiscal year 2013, 

we reviewed Ex-Im documentation regarding its dual-use policy, including 

a 1997 memorandum on implementing that policy; Ex-Im documentation 

associated with each of the three dual-use transactions Ex-Im financed in 

fiscal year 2012; and data on dual-use determinations. In addition, we 

interviewed Ex-Im officials in Washington, D.C., who review applications 

for the financing of dual-use exports and monitor end-user compliance 

with dual-use requirements, including the Vice-President of the 

Engineering and Environment Division. We did not independently verify 

the information provided to Ex-Im. Through interviews with cognizant 

agency officials about Ex-Im’s procedures for identifying and categorizing 

dual-use transactions in its Application Processing System, we 

determined that Ex-Im data were sufficiently reliable for the purpose of 

identifying the dual-use exports financed under Ex-Im’s dual-use authority 

in fiscal years 2012 and 2013.

We conducted this performance audit from March to August 2014 in 

accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Appendix I: Objectives, Scope, and 

Methodology
Appendix II: Comments from the U.S. ExportImport Bank

Page 18 GAO-14-719 Export-Import Bank

Appendix II: Comments from the U.S. 

Export-Import Bank
Appendix II: Comments from the U.S. ExportImport Bank

Page 19 GAO-14-719 Export-Import Bank
Appendix III: GAO Contacts and Staff 

Acknowledgments

Page 20 GAO-14-719 Export-Import Bank

Kimberly Gianopoulos, (202) 512-8612, or Gianopoulosk@gao.gov.

In addition to the contact named above, Adam Cowles, Assistant Director, 

and Kay Halpern made key contributions to this report. In addition, Ashley 

Alley, Martin De Alteriis, Karen Deans, Etana Finkler, and Hai Tran 

provided technical assistance and other support.

Appendix III: GAO Contacts and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 21 GAO-14-719 Export-Import Bank

Export-Import Bank: Financing of Dual-Use Exports. GAO-13-628R. 

Washington, D.C.: May 29, 2013.

Export Promotion: The Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-12-628R. Washington, D.C.: April 12, 2012.

Export Promotion: The Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-10-1052R. Washington, D.C.: September 15, 2010.

Export-Import Bank: Financing of Dual-Use Exports. GAO-13-628R. 

Washington, D.C.: May 29, 2013.

Export Promotion: The Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-12-628R. Washington, D.C.: April 12, 2012.

Export Promotion: The Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-10-1052R. Washington, D.C.: September 15, 2010.

Export Promotion: The Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-08-1182R. Washington, D.C.: September 30, 2008.

Ex-Im Bank: The U.S. Export-Import Bank’s Financing of Dual-Use 

Exports. GAO-07-1234R. Washington, D.C.: September 27, 2007.

Export-Import Bank: The U.S. Export-Import Bank’s Financing of DualUse Exports. GAO-01-1110R. Washington, D.C.: August 31, 2001.

Export-Import Bank: The U.S. Export-Import Bank’s Financing of DualUse Exports. NSIAD-00-231R. Washington, D.C.: September 1, 2000.

International Affairs: U.S. Export-Import Bank’s Financing of Dual-Use 

Exports. NSIAD-99-241R. Washington, D.C.: September 1, 1999.

International Affairs: U.S. Export-Import Bank’s Financing of Dual-Use 

Exports. NSIAD-98-244R. Washington, D.C.: September 1, 1998.

U.S. Export-Import Bank: Process in Place to Ensure Compliance With 

Dual-Use Export Requirements. NSIAD-97-211. Washington, D.C.: 

July17, 1997.

Related GAO Products

(321019)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.

Visit GAO on the web at www.gao.gov.

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.