GAO

United States General Accounting Office

Report to the Chairman and Ranking 

Minority Member, Committee on Armed 

Services, House of Representatives

September 1999 EXPORT CONTROLS

1998 Legislative 

Mandate for High 

Performance 

Computers

GAO/NSIAD-99-208

Page 1 GAO/NSIAD-99-208 Export Controls

Contents

Letter 2

Appendixes Appendix I NDAA Notifications and License Actions, 

February 3, 1998 - March 19, 1999 16

Appendix II Decisions for HPC License Applications Submitted 

Directly to the Commerce Department, January 1, 1998 - 

March 19, 1999 18

Appendix III Reasons Why NDAA Post-Shipment Verifications 

Were Not Completed 19

Appendix IV Comments From the Department of Commerce 20

Appendix V Comments From the Department of Defense 23

Tables Table 1: NDAA Post-Shipment Verifications on High Performance 

Computer Exports to Tier 3 Countries, November 18, 1997 - 

November 17, 1998 11

Abbreviations

ACDA Arms Control and Disarmament Agency

HPC high performance computer

MOFTEC Ministry of Foreign Trade and Economic Cooperation

MTOPS millions of theoretical operations per second

NDAA National Defense Authorization Act

PSV post-shipment verification
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-283584 Letr

September 24, 1999

The Honorable Floyd D. Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

In 1996, the executive branch streamlined its export controls for high 

performance computers by removing licensing requirements for most 

exports to civilian end-users while focusing control on military and 

proliferation-related end-users. This streamlined process made exporters 

responsible for determining if they needed to apply for an export license 

because they were selling a computer to a military or proliferation-related 

end-user. In 1997, however, several high performance computers were 

exported to Russian nuclear weapons laboratories and to a military 

end-user in China without a license. Concerned that exporters may not be 

aware of the activities of the end-users they sell to, Congress included a 

provision in the fiscal year 1998 National Defense Authorization Act 

(P.L. 105-85) to require exporters to notify the Commerce Department of 

any proposed high performance exports to countries that pose a concern 

for military or proliferation reasons1

 to determine if these exports need a 

license. The act also requires Commerce to verify that high performance 

computers exported to countries of concern are being used by the 

appropriate end-user for the intended purpose. 

In response to your request, we determined (1) whether exporter 

notification to Commerce of proposed sales of high performance 

computers to countries of concern has resulted in license applications and 

what final action was taken on these licenses and (2) how Commerce is 

conducting post-shipment verifications of the use of high performance 

computers after their export to these countries. 

1

Countries that pose such a concern include China, Russia, India, Pakistan, Israel, and 

Egypt.
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Results in Brief Under the review process required by the National Defense Authorization 

Act, most of the 938 proposed exports of high performance computers to 

what were believed to be civilian end-users in countries of concern have 

generally been allowed to continue without export licenses. Specifically, 

from February 3, 1998, when procedures implementing the new National 

Defense Authorization Act became effective, to March 19, 1999, reviewing 

agencies2

 allowed 828 proposed high performance computer exports to 

continue without a license, but they required license applications for 

101 proposed exports because of military, proliferation, or foreign policy 

reasons such as human rights violations.3

 The majority of the objections 

made by reviewing agencies to the 101 proposed exports were based on 

concerns that the proposed end-users of the high performance computers 

might have been involved in military or proliferation-related activity. 

Subsequently, of the 101 license applications required by the National 

Defense Authorization Act review, 16 were approved and 6 were denied. 

The remaining 79 were returned to the exporter without action.4

 Licenses 

that were approved had additional conditions placed on the reexport or 

end-use of the high performance computers. The majority of these 

applications involved China, India, and Israel. After the National Defense 

Authorization Act procedures were implemented, licenses were required 

for nine exports of high performance computers to end-users of concern 

who had previously received high performance computer exports without a 

license. 

Post-shipment verifications confirm the physical location of the high 

performance computers and, to the extent practical, verify if they are being 

used as intended. However, there are limitations to determining end-use. 

While the National Defense Authorization Act contains no time limit for 

completing post-shipment verifications, Commerce has completed 

verifications on 104 high performance computer exports, or about 

2

The reviewing agencies include the Departments of Commerce, Defense, Energy, and State. 

The Arms Control and Disarmament Agency also reviewed cases until March 31, 1999, when 

the Agency was merged with the State Department.

3

Nine additional proposed exports were classified as “incomplete” and returned to the 

exporter without action. 

4

Commerce will return license applications “without action” to exporters at their request or 

because the required documentation has not been submitted to proceed with the 

application. Because reviewing agencies have determined that a license is needed to export, 

returning license applications without action in effect blocks the export. 
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27 percent of those verifications required on the 390 high performance 

computers exported during fiscal year 1998. In a report to Congress, 

Commerce stated that all 104 post-shipment verifications were favorable, 

meaning that the computer had been seen during an on-site visit and that 

nothing was inconsistent with the license or the license exception. 

However, verification conducted by Commerce but not yet completed 

detected the possible diversion of two computers to a military end-user, in 

apparent violation of U.S. export control regulations. The Commerce 

Department has opened an investigation of these diversions. Of the 286 

high performance computer exports that have not yet been verified, almost 

two-thirds (187) involve exports to China. According to Commerce, the 

main reasons why these post-shipment verifications were not conducted 

were that (1) Chinese policy prior to June 1998 did not permit 

post-shipment verifications to be made or (2) the exports did not meet the 

requirements agreed upon in a June 1998 memorandum of understanding 

between the Department of Commerce and China’s Ministry of Foreign 

Trade and Economic Cooperation. Although the National Defense 

Authorization Act requires post-shipment verifications on all high 

performance computers exported since November 18, 1997, whether 

licensed or not, Commerce believes that it is futile to seek to visit high 

performance computers exported to China before the end-use visit 

arrangement or without end-user certificates. In addition, they believe it 

would not be the most effective use of Commerce’s limited resources. 
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Background In 1996, the executive branch revised export controls and licensing 

conditions for high performance computers (HPC) based on the risks 

specific countries and end-users posed to U.S. national security. The 

executive branch organized countries into four tiers, with each tier after 

tier 1 representing a successively higher level of concern to U.S. security 

interests. Tier 3 contains 50 countries of concern for military or 

proliferation reasons. The executive branch also established separate 

control levels for different types of end-users in tier 3. For end-users of 

military or proliferation concern, the controls require a license to export 

HPCs performing over 2,000 millions of theoretical operations per second 

(MTOPS). For civilian end-users in tier 3, the controls require a license to 

export HPCs that perform over 7,000 MTOPS. For exports of HPCs 

performing between 2,000 and 7,000 MTOPS, an exporter could ship the 

computers without a license,5

 provided the exporter determined that the 

end-user was involved only in civilian activities.6 The revision did not affect 

export licensing requirements to the seven countries in tier 4 countries, for 

which the United States has a virtual embargo on all computer exports.7

The fiscal year 1998 National Defense Authorization Act requires an 

exporter to notify Commerce in advance that it proposes to export or 

reexport HPCs that perform between 2,000 and 7,000 MTOPS to civilian 

users in tier 3 countries. During a 10-day period, Commerce circulates the 

notifications to the Departments of Defense, State and Energy, and the 

Arms Control and Disarmament Agency (ACDA)8

 for review. The NDAA 

requires a license to export if any of these agencies raises a written 

objection to the export without a license. According to National Security 

Council guidance, agency objections shall state whether the proposed 

5

Under 15 C.F.R. Part 740 of the Export Administration regulations.

6

On July 1, 1999, the executive branch further revised licensing levels for tier 3 countries. 

The levels for civilian end-users were raised from 7,000 MTOPS to 12,300 MTOPS effective 

immediately, and for military end-users from 2,000 MTOPS to 6,500 MTOPS effective in 

6 months. The executive branch also raised the National Defense Authorization Act (NDAA) 

notification levels from 2,000 MTOPS to 6,500 MTOPS. By law, this change will take effect 

6 months after the executive branch reports the changes to Congress. The revision does not 

affect the NDAA requirement to conduct post-shipment verifications on all exported 

computers over 2,000 MTOPS to tier 3 countries. 

7

The seven countries are Iraq, Iran, Libya, North Korea, Cuba, Syria, and Sudan.

8

On March 31, 1999, ACDA was terminated as an independent entity, and its arms control 

and nonproliferation functions were merged with those of the State Department. ACDA 

therefore did not have a role in the NDAA process as a reviewing agency after March 31, 

1999.
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export represents a risk of diversion to a military or proliferation end-use 

or end-user of concern. If no objection is raised during the 10-day period, 

the exporter may ship the HPCs without a license. Exporters that want to 

ship HPCs to known military end-users or end-users of proliferation 

concern must directly apply to Commerce for a license; they do not go 

through the notification process. In addition, the NDAA requires 

Commerce to conduct post-shipment verifications on all licensed and 

unlicensed HPCs above 2,000 MTOPS exported to tier 3 countries. This 

requirement applies to all HPCs exported from the United States on or after 

November 18, 1997, the date of enactment of the NDAA.

NDAA’s Effect on HPC 

Exports

Of 938 HPC export notifications to tier 3 countries that were reviewed by 

Commerce between February 3, 1998, and March 19, 1999, the executive 

branch agencies objected to 101 notifications and, as a result, these 

notifications were converted to license applications. (App. I contains a 

detailed breakdown of NDAA notifications, licenses, and license actions.) 

During this same time period, HPC manufacturers submitted 146 license 

applications directly to the Department of Commerce. (App. II contains a 

country breakout of license applications submitted directly to Commerce.) 

The Arms Control and Disarmament Agency and the Department of 

Defense raised most of the NDAA objections. Most of the license 

applications for which objections were raised were returned to the 

exporter without action, either at the exporter’s request or because 

Commerce had not received additional documentation to act on the 

application. 

Executive Branch Agencies’ 

Objections to Exports

Of the 101 objections raised regarding the proposed HPC exports, ACDA 

and the Department of Defense submitted 59 and 55, respectively; the State 

Department submitted 14; and Commerce submitted 3. The Department of 

Energy raised no objections. According to Commerce, an agency will often 

not object if an objection has already been raised by another agency. 

The majority of the objections were based on concerns that the proposed 

end-users of the HPCs might have been involved in some military or 

proliferation-related activity. This was particularly evident in ACDA’s 

objections to telecommunications end-users in China. Of ACDA’s 59 

objections, 39 were for exports to China and 29 of those involved 

telecommunications end-users, which, according to ACDA officials, have 

close ties with China’s military. The HPCs could therefore contribute to the 

military’s command and control capability. The Defense Department had 
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similar concerns with several other civil entities in China about the risk of 

diversion of HPCs to military end-users/uses.

State, ACDA, and Defense also raised objections based on proliferation 

concerns: they raised 21 objections over HPC exports to India, primarily 

because of sanctions imposed on India and Pakistan for the nuclear testing 

both countries had conducted in May 1998.9

 Before the sanctions took 

place, objections had been made on proposed HPC exports to research 

institutes and government entities in India because of the risk of diversion 

to proliferation end-users/uses, such as missiles or nuclear weapons.

State objected to two HPC exports to Chinese public security entities and 

one HPC export involving an intermediate consignee in Serbia based on 

foreign policy and human rights concerns. According to State Department 

officials, although National Security Council guidance requires that 

objections state whether proposed HPC exports represent a risk of 

diversion to military or proliferation end-users or end-uses, it does not rule 

out the use of foreign policy reasons other than proliferation as grounds for 

objections. However, Commerce disagrees with State on this matter.

We found that from the NDAA review process, objections were made to 

nine proposed HPC exports to end-users that had previously received HPCs 

without a license.10 Of the nine proposed exports, four were for end-users 

in China, four were for India, and one was for Israel. The agencies raised 

objections on the four proposed HPC exports to China based on their 

potential diversion from telecommunication and university end-users to 

military and proliferation-related activities. Objections to the four 

proposed HPC exports to India were based on the sanctions imposed due 

to proliferation concerns. One objection to a proposed HPC export to Israel 

involved an Israeli university that might have had connections to 

proliferation-related activities. Commerce approved a license for one 

export and returned the remaining eight applications to the exporters 

without action.

9

The President imposed sanctions on June 18, 1998, under the authority of the Arms Export 

Control Act (22 U.S.C. section 2799aa-1). 

10These HPC exports, completed prior to NDAA review procedures, did not require a license 

under the regulations at that time, if the HPC was between 2,000 and 7,000 MTOPS and if the 

exporter believed the HPC was going to a civilian end-user.
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Outcome of NDAA 

Notifications Converted to 

License Applications for 

Tier 3 Countries 

Of the 101 license applications required by the NDAA review, 16 were 

approved and 6 were denied. The remaining 79 were returned to the 

exporter without action. The 16 applications for licenses that were 

approved included additional licensing conditions. The conditions, which 

were the same for all 16 licenses, were that (1) no reexport or retransfer of 

the HPCs could be made without prior Commerce Department approval, 

(2) the end-user must comply with Security Safeguard Plans,11 and (3) the 

exporter must verify delivery and installation of the HPCs. 

Six licenses were denied for foreign policy, military, and proliferation 

reasons. For example, license denials of HPC exports destined for China 

involved research institutes that were reportedly engaged in military or 

proliferation activities, and license denials of HPC exports to India 

involved end-users that were engaged in missile proliferation activities.

As previously mentioned, the majority of license applications required due 

to NDAA objections (79 of the 101) were returned without action. One 

reason that applications were returned without action was that the time 

period for exporters to submit additional information to process the 

applications (30 days) had expired. Typically, additional information is 

needed on end-users, remote access end-users, or the entity that will install 

and/or service the HPCs. The exporter must resubmit a regular export 

license application if it obtains the required information after the first 

application has been returned. Applications were also returned at the 

exporters’ requests for various other reasons: the end-user sometimes 

canceled the order, changed the HPC’s MTOPS level to a higher or lower 

capability, or changed the proposed end-use. For example, in some cases, 

the exporter canceled the license application and substituted exports of 

HPCs that performed below 2,000 MTOPS and therefore did not require a 

license.

Commerce has no system for tracking resubmissions of license 

applications that were returned without action. The Department instead 

depends on the memory of its licensing officers or on exporters to inform 

the Department that they are resubmitting an application. According to a 

Commerce licensing officer, the Department received very few 

11Commerce may require that the exporter submit a Security Safeguard Plan signed by the 

end-user and, sometimes, also certified by the export control authorities of the importing 

country. The plan identifies a range of safeguards required by Commerce, which the 

end-user agrees to implement as a condition for receiving a license.
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resubmissions of applications returned without action that were originally 

converted to a license application. 

Implementation of 

Post-Shipment 

Verifications Is 

Incomplete and Has 

Several Limitations

Section 1213 of the NDAA requires the Secretary of Commerce to conduct 

post-shipment verifications (PSV) on each HPC exported over 2,000 

MTOPS from the United States to a tier 3 country, whether licensed or 

unlicensed, on or after the date of the statute’s enactment, which was 

November 18, 1997.12 Commerce uses either export enforcement officers 

sent from the United States or Foreign Commercial Service officers from 

U.S. embassies or consulates to perform the PSVs. The PSVs confirm the 

physical location of the HPC and, to the extent practical, verify if it is being 

used as intended. However, there are limitations to determining end-use. 

While the NDAA contains no time limit for completing PSVs, Commerce 

has completed PSVs on 104 HPC exports, or about 27 percent of those 

verifications required for the HPCs exported during fiscal year 1998. 

Commerce reported that all 104 PSVs were favorable. However, a PSV 

conducted by Commerce that has yet to be completed detected the 

possible diversion of two computers to a military end-user, in apparent 

violation of U.S. export control regulations. The Commerce Department 

has opened an investigation. 

How Commerce Conducts 

NDAA-Mandated PostShipment Verifications

The Commerce Department uses U.S. personnel from its Bureau of Export 

Administration or its U.S. and Foreign Commercial Service officers located 

at U.S. embassies and consulates to conduct NDAA-mandated 

post-shipment verifications on the use of HPCs. Export Administration 

teams, which typically comprise two agents, go to a country or a group of 

countries for a 2- to 3-week period to conduct PSVs and pre-license checks 

and to meet with businesses to educate them on U.S. export control 

regulations. During fiscal year 1998, Export Administration teams took two 

trips to Russia, one trip each to Israel and Egypt, and one trip to India to 

conduct PSVs. No trips were made to China. Commerce’s guidelines 

instruct the PSV officials to determine

• what the serial number of the HPC is and, if possible, whether the 

machine has been upgraded;

12The July 1, 1999, revision of licensing levels does not affect the NDAA requirement to 

conduct post-shipment verifications on all exported computers over 2,000 MTOPS to tier 3 

countries.
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• what the location of the HPC is, including a complete address, telephone 

number, fax number, and the name of a contact person, if the HPC has 

been resold or retransferred;

• whether the HPC is being used in a manner consistent with the stated 

purpose;

• whether anyone has remote access to the computer and, if so, who does 

and for what purpose;

• whether the HPC is located in a secure area and whether the level of 

security seems consistent with the function performed or seems overly 

strict for a commercial facility; and

• whether any activities seem inconsistent with the stated end-use, 

including indications of ownership or operations by a military 

organization or involvement of an organization in the design, 

manufacture, storage, use, or testing of nuclear, chemical, or biological 

weapons. 

When conducting a PSV, officials confirm that the computer has arrived at 

the intended location and either qualifies for a license exception (if it has 

been exported without a license) or is being used under the terms of the 

license. According to an Export Administration official, a favorable PSV 

means that an HPC has been seen during an on-site visit and that nothing 

was inconsistent with the license or the license exception. An unfavorable 

PSV means that an inconsistency was found between the actual end-use 

and the end-use intended for the export. The Export Administration’s 

Office of Export Enforcement may investigate the inconsistency, 

depending on its seriousness. In its report to Congress, Commerce said that 

two HPCs sent to a distributor had been sold to a military end-user in 

apparent violation of U.S. export control regulations and the matter is 

under investigation. 

A Significant Number of 

Post-Shipment Verifications 

Have Not Been Completed

During the first year after enactment of the NDAA (Nov. 18, 1997, to 

Nov. 17, 1998), 390 HPC exports were reported to Congress. PSVs had been 

completed on 104 (27 percent) of the total, and 286 (73 percent) had not 

been completed (see table 1). Also, appendix III has a country-by-country 

breakdown of the reasons why PSVs were not conducted.
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Table 1: NDAA Post-Shipment Verifications on High Performance Computer Exports 

to Tier 3 Countries, November 18, 1997 − November 17, 1998

Source: Fiscal year 1998 National Defense Authorization Act section 1213 annual report.

Two-thirds of the HPCs that have not yet been verified involved exports to 

China. According to the Commerce Department, the main reasons why 

these PSVs were not conducted were that (1) Chinese policy prior to June 

1998 did not permit PSVs or (2) the exports did not conform to the June 

1998 memorandum of understanding between Commerce and China’s 

Ministry of Foreign Trade and Economic Cooperation (MOFTEC), which is 

not legally binding. As shown in appendix III, 105 HPCs were exported to 

China after enactment of the NDAA in November 1997, but before June 

1998, when the Commerce−MOFTEC arrangement went into effect. 

Chinese authorities would not allow PSVs to be conducted on HPCs 

shipped before June 1998 because of sovereignty concerns. Under the June 

Country

Number of

HPCs exported

Number of PSVs

completed

Number of PSVs

not completed

Percent not

completed

China 191 1 190 99.5

Israel 82 42 40 48.8

Russia 33 21 12 36.4

India 29 20 9 31.0

UAE 20 11 9 45

Egypt 11 2 9 81.8

Saudi 

Arabia

8 2 6 75

Croatia 3 2 1 33.3

Kuwait 2 0 2 100

Ukraine 2 0 2 100

Algeria 1 0 1 100

Angola 1 0 1 100

Bahrain 1 0 1 100

Lebanon 1 0 1 100

Oman 1 0 1 100

Pakistan 1 0 1 100

Azerbaijan 1 1 0 0

Kazakstan 1 1 0 0

Serbia 1 1 0 0

Total 390 104 286 73
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1998 arrangement, the Chinese government now allows the United States 

to conduct PSVs on HPC exports under certain conditions. However, PSVs 

could not be conducted on 82 HPCs shipped after the June 1998 

arrangement because the exports did not conform to the arrangement. 

According to the Commerce Department, the 82 HPCs were shipped 

without a license and the exporters were not required to obtain a Chinese 

end-user certificate. An end-user certificate, issued by China, facilitates 

Commerce’s ability to conduct PSVs in China. It was not until January 14, 

1999, that Commerce’s Bureau of Export Administration published 

regulations requiring exporters to obtain a Chinese end-user certificate for 

any computer over 2,000 MTOPS to China, whether under license or a 

license exception, and report the information to the Bureau. This 

requirement, however, became effective only for HPCs shipped after 

February 11, 1999. Although the National Defense Authorization Act 

requires post-shipment verifications on all high performance computers 

exported since November 18, 1997, whether licensed or not, Commerce 

believes that it is futile to seek to visit high performance computers 

exported to China prior to the end-use arrangement or without end-user 

certificates and also that it would not be the most effective use of 

Commerce’s limited resources. 

According to Commerce, 89 PSVs are planned for fiscal year 1999, or 

requests for these visits are pending at embassies or consulates. Many 

Export Administration trips are scheduled for Saudi Arabia, the United 

Arab Emirates, India, Israel, Jordan, Egypt, Russia, Pakistan, and China. 

Seven other PSVs were not done because in two cases the HPC exports 

were canceled, and in five cases the HPCs were exported to countries for 

which the NDAA does not require a PSV.

Scope and 

Methodology

To determine whether exporter notification to Commerce of proposed 

exports of HPCs to countries of concern have resulted in applications for 

licenses and what final action was taken on these licenses, we obtained 

data on NDAA notifications made by U.S. computer exporters from the 

Commerce Department’s export control database for January 1, 1998, to 

March 19, 1999. From this data, we quantified the number of (1) NDAA 

notifications made since procedures implementing the fiscal year 1998 

NDAA became effective on February 3, 1998, to March 19, 1999; 

(2) objections executive branch agencies raised on these notifications 

during this period; and (3) license applications required from these 

objections and whether these licenses were approved, denied, or returned 

to the exporter without action. We also obtained the basis of agency 
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objections to NDAA notifications by interviewing agency officials, 

reviewing their files on the objections, and reviewing the types of end-users 

and end-uses. Further, using data from the Commerce Department export 

control database, we determined the reasons why licenses were returned 

without action and denied. In addition, we determined whether the 

executive branch is requiring licenses on end-users that previously 

received HPC exports without a license. We compared data on unlicensed 

exports to tier 3 countries from January 1, 1996, to September 30, 1997, 

with NDAA notifications that required a license from February 3, 1998, to 

March 19, 1999.

To assess how the Commerce Department is carrying out the requirement 

to conduct post-shipment verifications on all HPC exports to tier 3 

countries, we interviewed Commerce officials to discuss the various 

methods they use to conduct PSVs and how they assess their results. We 

also reviewed Commerce guidelines for conducting PSVs on HPCs and 

reviewed trip reports submitted by Export Enforcement Special Agents 

conducting PSVs under the Commerce’s safeguards program during 1998. 

To determine to what extent Commerce had complied with the NDAA 

requirement that all HPC exports be verified, we (1) reviewed the legal 

requirements for the PSVs in section 1213 of the fiscal year 1998 National 

Defense Authorization Act and (2) analyzed data presented in the report 

mandated by section 1213 of the NDAA, to determine to what extent HPC 

exports had been verified and the reasons why PSVs had not been 

performed. In addition, we reviewed the June 1998 memorandum of 

understanding between Commerce and China’s MOFTEC concerning PSVs 

conducted in China and discussed its provisions with officials from the 

General Counsel’s Office of Commerce’s Bureau of Export Administration.

We conducted our review between November 1998 and July 1999 in 

accordance with generally accepted government auditing standards.

Agency Comments and 

Our Evaluation

We provided copies of this report to the Departments of Commerce, 

Energy, Defense, and State. Energy did not comment on the report. The 

State Department provided oral technical comments, which we 

incorporated accordingly. The Defense Department reviewed the report 

and had no comments. Commerce said that the report did not acknowledge 

that it had to divert enforcement resources from investigations and other 

preventive enforcement activities to conduct NDAA-mandated 

post-shipment verifications and that it will soon be impossible to perform 

such verifications mandated by the NDAA. Commerce believes it will 
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become impossible to perform PSVs in the future because computer power 

is increasing and prices are declining. Commerce, however, could not 

identify any cases in which PSVs could not be done on non-NDAA cases 

because available resources were used on NDAA cases. In addition, 

Commerce officials provided no supporting analysis showing at what point 

it would be impossible to conduct all mandated verifications. Commerce 

also had some technical changes that we incorporated into the report as 

appropriate.

Commerce also commented that the licenses required from the NDAA 

notification process for HPC exports to nine end-users of concern, who 

previously received HPC exports without a license, represented only 

2.61 percent of those exports previously made without a license before the 

NDAA. We agree that these nine cases represent a small proportion of 

those HPCs exported without a license before the NDAA, but they illustrate 

that the NDAA notification process is working and has been successful in 

identifying suspect end-users.

Commerce stated that most uncompleted PSVs were in China and that 

103 of 200 outside of China were completed. Table 1 and supporting 

narrative shows that most uncompleted PSVs were in China.

Commerce said that it is futile to seek to visit HPCs exported to China prior 

to the end-use visit arrangement or without end-user certificates, 

particularly in view of the proposed changes to control levels for exports to 

tier 3 military end-users. We agree with Commerce that the proposed 

changes to the control levels would remove all future licensing 

requirements for many HPCs that have already been exported to China. 

Nevertheless, the NDAA currently requires Commerce to conduct PSVs on 

all licensed and unlicensed HPCs above 2000 MTOPS exported to tier 3 

countries, including China, notwithstanding the control levels established 

by the executive branch.

Commerce and Defense Department written comments are reprinted in 

appendixes IV and V.

We are sending copies of this report to the Honorable William M. Daley, 

Secretary of Commerce; the Honorable Bill Richardson, Secretary of 

Energy; the Honorable William S. Cohen, Secretary of Defense; and the 

Honorable Madeleine K. Albright, the Secretary of State. We will also make 

copies available to other interested parties on request.
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Please contact me or F. James Shafer on (202) 512-4128 if you or your staff 

have any questions concerning this report. Key contributors to this 

assignment were Charles T. Bolton and Jason Fong.

Harold J. Johnson, Associate Director

International Relations and Trade Issues
Page 16 GAO/NSIAD-99-208 Export Controls

Appendix I

NDAA Notifications and License Actions, Apendxies

February 3, 1998 − March 19, 1999 ApendxiI

NDAA notifications NDAA licenses

Countrya Approved

License

required Incompleteb Total Approved Denied RWA Total

China 442 59 2 503 9 3 47 59

Russia 91 3 0 94 0 1 2 3

Israel 82 10 3 95 0 0 10 10

UAE 29 0 0 29 0 0 0 0

India 18 21 0 39 6 2 13 21

Egypt 17 1 1 19 0 0 1 1

Saudi Arabia 17 4 1 22 1 0 3 4

Kuwait 16 1 0 17 0 0 1 1

Romania 13 0 0 13 0 0 0 0

Norway 11 0 0 11 0 0 0 0

Qatar 10 0 0 10 0 0 0 0

Ukraine 7 0 0 7 0 0 0 0

Kazakhstan 7 0 0 7 0 0 0 0

Croatia 7 0 0 7 0 0 0 0

Lebanon 6 0 0 6 0 0 0 0

Bahrain 5 0 0 5 0 0 0 0

Lithuania 5 0 0 5 0 0 0 0

Estonia 5 0 0 5 0 0 0 0

Jordan 5 0 0 5 0 0 0 0

Serbia 4 0 0 4 0 0 0 0

Latvia 4 0 0 4 0 0 0 0

Oman 4 0 0 4 0 0 0 0

Australia 3 0 0 3 0 0 0 0

Bulgaria 3 0 0 3 0 0 0 0

Hong Kong 3 1 0 4 0 0 1 1

Belgium 2 0 0 2 0 0 0 0

Cyprus 2 0 0 2 0 0 0 0

Singapore 0 0 2 2 0 0 0 0

Morocco 2 0 0 2 0 0 0 0

Azerbaijan 2 0 0 2 0 0 0 0

Angola 2 0 0 2 0 0 0 0

Belarus 2 0 0 2 0 0 0 0

Algeria 1 0 0 1 0 0 0 0
Appendix I

NDAA Notifications and License Actions, 

February 3, 1998 - March 19, 1999

Page 17 GAO/NSIAD-99-208 Export Controls

Legend 

NDAA=National Defense Authorization Act 

RWA=Returned Without Action 

UAE=United Arab Emirates

a

Several NDAA notifications involved tier 1 and 2 countries because the intermediate consignee for the 

export was located in a tier 3 country or the HPC was to be used on a ship going into the territorial 

waters of a tier 3 country.

b

Returned without action to the exporter because incomplete information was submitted or the export 

required a license.

Source: Commerce’s Bureau of Export Administration Export Control Database.

Yemen 1 0 0 1 0 0 0 0

Germany 0 1 0 1 0 0 1 1

Total 828 101 9 938 16 6 79 101

NDAA notifications NDAA licenses

Countrya Approved

License

required Incompleteb Total Approved Denied RWA Total
Page 18 GAO/NSIAD-99-208 Export Controls

Appendix II

Decisions for HPC License Applications 

Submitted Directly to the Commerce 

Department, January 1, 1998 − March 19, 1999 ApendxiI

Legend

RWA=Returned Without Action 

UAE=United Arab Emirates 

Source: Commerce’s Bureau of Export Administration Export Control Database

Country Approved Denied RWA Total

China 12 0 25 37

Russia 12 2 17 31

India 11 5 8 24

Saudi Arabia 7 0 8 15

Oman 2 0 2 4

Romania 0 0 1 1

Switzerland 0 0 1 1

Poland 0 0 1 1

UAE 2 0 11 13

Belarus 0 1 2 3

Syria 2 0 7 9

Bahrain 0 0 1 1

Kazakhstan 2 0 0 2

Australia 2 0 0 2

Bulgaria 1 o 0 1

Pakistan 0 1 0 1

Total 53 9 84 146
Page 19 GAO/NSIAD-99-208 Export Controls

Appendix III

Reasons Why NDAA Post-Shipment 

Verifications Were Not Completed ApendxiI

Legend

 PSV=Post-shipment Verification

 HPC=High performance computer

a

Exports occurred prior to June 1998 arrangement between the United States and China for 

post-shipment checks.

b

Exports shipped without a Chinese end-users certificate, which is required for post-shipment 

verifications.

c

Includes two HPCs located on ships controlled by companies in countries that do not require a PSV 

under the NDAA, three HPCs reexported to countries not requiring a PSV under the NDAA, two HPC 

exports canceled, and a PSV for two HPC exports that has not been completed but is under 

investigation.

Source: Fiscal year 1998 NDAA section 1213 annual report.

Country

Number of PSVs

not completed

Chinese policy prior to

the end-use

arrangement did not

permit such checksa

Transaction does not

conform to U.S.

arrangement with

China for end-use

checksb

Request is

pending at

post

Check is

planned for

coming year Otherc

China 190 105 82 3 0 0

Israel 40 0 0 16 20 4

Russia 12 0 0 11 0 1

India 9 0 0 0 9 0

UAE 9 0 0 0 7 2

Egypt 9 0 0 0 7 2

Saudi Arabia 6 0 0 0 6 0

Croatia 1 0 0 1 0 0

Kuwait 2 0 0 0 2 0

Ukraine 2 0 0 2 0 0

Algeria 1 0 0 0 1 0

Angola 1 0 0 0 1 0

Azerbaijan 0 0 0 0 0 0

Bahrain 1 0 0 0 1 0

Kazakstan 0 0 0 0 0 0

Lebanon 1 0 0 1 0 0

Oman 1 0 0 0 1 0

Pakistan 1 0 0 1 0 0

Serbia 0 0 0 0 0 0

Total 286 105 82 35 55 7
Page 20 GAO/NSIAD-99-208 Export Controls

Appendix IV

Comments From the Department of 

Commerce ApendxiIV
Appendix IV

Comments From the Department of 

Commerce

Page 21 GAO/NSIAD-99-208 Export Controls

Now on p. 3.

Now on p. 3.

Now on p. 4.
Appendix IV

Comments From the Department of 

Commerce

Page 22 GAO/NSIAD-99-208 Export Controls

Now on p. 8.
Page 23 GAO/NSIAD-99-208 Export Controls

Appendix V

Comments From the Department of Defense ApendxiV

(711399) Letr
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