GAO

United States General Accounting Office

Report to the Chairmen, Committee on 

International Relations and Committee 

on Armed Services, House of 

Representatives

August 2000 DEFENSE TRADE

Analysis of Support 

for Recent Initiatives

GAO/NSIAD-00-191

Page 1 GAO/NSIAD-00-191 Defense Trade

Contents

Letter 3

Appendixes Appendix I: Examples of Export Control Problems 22

Appendix II: The Defense Trade Security Initiative 27

Appendix III: Comments From the Department of Defense 30

Appendix IV: Comments From the Department of State 31

Appendix V: GAO Contacts and Staff Acknowledgments 36

Tables Table 1: Summary of DOD’s 81 Defense Cooperation Initiatives 7

Table 2: DOD’s Export Control Examples and GAO’s Analysis 23

Abbreviations

DOD Department of Defense
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-285761 Letr

August 31, 2000

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

The Honorable Floyd D. Spence

Chairman, Committee on Armed Services

House of Representatives

Last year, the Department of Defense (DOD) compiled a list of 81 defense 

cooperation initiatives in an effort to enhance cross-border defense trade 

and investment. Thirty-four of these initiatives were part of an ongoing 

effort to reinvent the Foreign Military Sales Program.1

 Forty-seven of the 

initiatives were intended to streamline processes and/or change policies in 

several areas considered important for defense cooperation, including 

export controls, release of classified information to foreign countries, 

procurement from domestic and foreign companies, and industrial security. 

DOD senior officials saw these defense cooperation initiatives as necessary 

to achieving three desired outcomes: to improve interoperability in 

coalition warfare scenarios, to reduce a gap in military capabilities 

between the United States and North Atlantic Treaty Organization allies, 

and to ensure that U.S. defense companies successfully compete abroad.

Since the initial compilation of these initiatives, most of DOD’s attention 

has been focused on export controls. Because the State Department has 

primary responsibility for controlling the export of defense articles and 

services, the State Department and DOD formed a working group to 

develop proposals to change the export control process. As a result of State 

Department and DOD discussions, on May 24, 2000, the administration 

announced 17 proposals, known as the Defense Trade Security Initiative, to 

adjust the U.S. defense export control system. As with DOD’s initiatives, 

these proposals are intended to achieve the three desired outcomes 

identified above.

1

The Foreign Military Sales Program facilitates the purchase of defense articles and services 

from the U.S. government by eligible foreign governments and international organizations. 
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Because of your concern about the potential national security implications 

of DOD’s efforts to modify policies and procedures for regulating defense 

trade and investment, we reviewed as requested the status and basis for 

DOD’s defense cooperation initiatives. In July 2000, we provided a 

description and status of the 81 initiatives.2

 As agreed with your offices, in 

this report we have focused on the basis for DOD’s 47 initiatives dealing 

with defense trade and investment. Specifically, we examined (1) the data 

and analysis supporting the 47 initiatives and (2) the likelihood that the 

initiatives will achieve DOD’s desired outcomes. Since the administration’s 

Defense Trade Security Initiative was developed in response to industry 

and foreign government concerns (as were DOD’s initiatives), we are also 

providing information for you to use in upcoming deliberations on the 

potential effects of the administration’s modifications to the U.S. export 

control system.

Results in Brief To develop its defense cooperation initiatives, DOD largely relied on 

incomplete data and did not perform the analysis necessary to determine 

the underlying causes for problems it identified. Some of the initiatives 

addressed known problems, such as those that had been identified through 

efforts to modernize DOD’s existing computer systems. However, for 

others DOD had very little data or analysis demonstrating the underlying 

problems and how best to resolve them. For example, the Department 

identified initiatives to reduce the time it takes to process export licenses. 

To streamline the process, DOD largely relied on data collected on the 

average processing time to develop timesaving initiatives, but it did not 

examine the reasons for lengthy processing time on particular cases. As a 

result, the initiatives to shorten the processing time may not address any 

underlying problems in the decision-making process. In addition, DOD 

justified its initiatives using examples of situations depicting problems with 

the export control system, but many of the examples were either not 

accurate or did not include information needed to understand the reasons 

the situation arose.

It is unclear whether DOD’s initiatives will achieve the desired outcomes of 

improving U.S. and foreign forces ability to operate together in coalition 

warfare scenarios, reducing a gap in military capabilities between the 

United States and its allies, and ensuring that U.S. companies successfully 

2

Defense Trade: Status of the Department of Defense’s Initiatives on Defense Cooperation 

(GAO/NSIAD-00-190R, July 19, 2000).
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compete in overseas markets. DOD has not clearly demonstrated how its 

defense cooperation initiatives, for instance, will improve interoperability 

between U.S. and foreign forces. In fact, the after action report on the 

recent Kosovo coalition operation did not identify U.S. export controls, 

which were a major focus of the Department’s initiatives, as a major 

impediment to interoperability. While the DOD’s initiatives may help some 

companies share technology or successfully compete in overseas markets, 

they do not address many relevant factors that fall outside of the 

Department’s sphere of influence and control. For example, national 

governments have traditionally tended to purchase major defense 

equipment from their domestic companies or when buying foreign 

products require domestic production as a condition of sale. A preference 

for domestic production appeared to influence a recent competition 

involving a European and a U.S. product. The European government 

selected the European product even though the U.S. government provided 

assurances that access to U.S. technology would not be inhibited. 

The effects on desired outcomes of the administration’s Defense Trade 

Security Initiative proposals remain uncertain. The Departments of State 

and Defense have not agreed on how to implement some proposals such as 

exempting exports to certain allies from licensing requirements. For 

example, the Departments have not agreed on criteria or parameters for 

assessing comparability of allied countries’ export control regimes. Once 

the Departments agree, the administration will have to negotiate changes 

to the export control systems of the affected countries. In addition, the 

Departments of State and Defense have agreed in principle on the need to 

enhance computer interconnectivity between the departments but have not 

agreed on how best to accomplish this objective.

In commenting on a draft of this report, DOD disagreed with our findings 

because the Department believes it performed adequate analysis of the 

underlying problems. The State Department agreed with our critique of 

DOD’s export control examples. However, the State Department disagreed 

with our characterization of the computer enhancement proposal because 

it believes that the Departments have already agreed that the 

implementation of the proposal is limited to improving communications 

and data exchange connectivity between the State Department and DOD. 

Because the Departments did not provide any additional supporting 

information, we did not revise our report.
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Background International defense cooperation has become increasingly important to 

governments and defense companies since the end of the Cold War. The 

U.S. government has identified international cooperation as a major part of 

its national security strategy for the 21st century since many security 

challenges can no longer be addressed by a single nation. Further, 

shrinking defense budgets and rapid technological changes have changed 

the current business environment for defense companies. Looking to 

replace declining domestic sales, defense companies have been motivated 

to seek cross-border industrial partnerships to gain access to each other’s 

markets. However, companies and foreign customers are concerned about 

some U.S. government restrictions that they believe have impeded 

industry’s ability to partner and cooperate internationally. DOD’s 

identification of its initiatives was an attempt to improve conditions for 

cross-border defense cooperation.

DOD identified several outcomes it wants to achieve with its defense 

cooperation initiatives, including improving interoperability, reducing the 

military capabilities gap, and ensuring that U.S. defense companies 

successfully compete abroad. These desired outcomes are not new, but 

DOD leadership has determined that addressing them in a post-Cold War 

era requires greater cross-border defense industrial cooperation and 

increased interaction with U.S. allies. DOD officials recognize that 

promoting a global defense market presents both benefits (such as 

increased interaction with allies) and security risks (such as the loss of the 

U.S. technological edge or the potential spread of weapons). As a result, in 

1998, DOD commissioned several studies on these benefits and risks, and 

in the following year formed a senior-level working group to identify 

initiatives to facilitate cross-border cooperation among defense companies 

while protecting U.S. security interests. 

The working group compiled a list of 81 defense cooperation initiatives. 

Table 1 provides a summary of the initiatives and their overall objectives. 

Thirty-four of the initiatives were part of an ongoing effort to reinvent the 

Foreign Military Sales Program and have not been fully implemented. 

Forty-seven of the initiatives were intended to streamline processes and/or 

change policies in several areas, including export controls, release of 

classified information to foreign countries, procurement from domestic 

and foreign companies, and industrial security. DOD has completed 

implementing about one-third of its 47 initiatives, but the majority are 

ongoing, with no established timetable for completion.
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Table 1: Summary of DOD’s 81 Defense Cooperation Initiatives

a

The disclosure initiatives cover the approval of foreign customers’ visits and/or access to classified 

information.

b

Surcharges are authorized charges included in Foreign Military Sales agreements, which are 

calculated as a percentage of the basic cost of the item or service to recover costs that have been 

incurred by the U.S. government.

Source: GAO analysis of DOD initiatives.

DOD’s defense cooperation initiatives prompted additional discussions on 

the U.S. export control system. In December 1999, the Departments of 

State and Defense established a new working group to develop proposals 

Categories of initiatives and selected examples Objectives

Thirteen Foreign Disclosure Initiatives,a

 such as

• establishing guidelines for training in international security and disclosure and 

• initiating reviews to decrease time to approve foreign visits and/or access to 

classified information. 

To reduce the time associated with releasing 

classified information to foreign entities and to 

ensure that personnel have training and guidelines 

to release information only when it is appropriate 

and authorized.

Eleven Automation Initiatives such as

• replacing several systems and databases, such as the Foreign Disclosure 

System Classified Military Information Database and the Technology Protection 

System Munitions Database and

• developing a new computer system for the Departments of Defense, State, 

Commerce, and other federal agencies involved in the export control process. 

To facilitate expedited license processing; protect 

agency sensitive information; reduce repetitive 

submission of technical data; provide a standard 

user interface for the submission and review of 

supporting documentation; and comply with the 

Government Paperwork Elimination Act and the 

Clinger-Cohen Act.

Twelve Export Control Initiatives such as

• developing a DOD plan to improve effectiveness of the export licensing review 

process,

• expanding the International Traffic in Arms Regulations export licensing 

exemptions to other countries—similar to the historical exemption provided to 

Canada, and 

• establishing an ombudsman to give exporters an avenue to the licensing system. 

To improve the timeliness and quality of the export 

review process; facilitate cooperation with trusted 

allies by reducing burdens for obtaining export 

licenses; and assist industry by providing insight into 

the licensing process for foreign military sales and 

direct commercial sales.

Eight Defense Industrial Base Initiatives such as 

• concluding the Declaration of Principles with the United Kingdom, 

• documenting DOD’s utilization of foreign sources, and

• starting industrial base discussions with other countries. 

To improve the bilateral framework for cooperation 

and facilitate a more integrated industrial base; 

improve the quality of information on U.S. reliance on 

foreign sources; and identify common areas to 

improve cooperation.

Three Defense Industrial Security Initiatives such as

• proposing changes to the National Industrial Security Program Operating 

Manual. 

To eliminate unnecessary requirements that do not 

enhance national security.

Thirty-four Foreign Military Sales Reinvention Initiatives such as

• developing policies for U.S. government and industry cooperation and for Foreign 

Military Sales agreements,

• adjusting Foreign Military Sales surcharges,b

 and

• reimbursing U.S. government for support of direct commercial sales and foreign 

military financing/direct commercial contracts. 

To establish a better working relationship between 

the U.S. government and industry to provide 

accurate information on requirements and pricing to 

meet customer’s needs; provide foreign customers 

greater visibility and participation in the development 

of agreements; and increase U.S. government 

partnering with U.S. industry in the area of direct 

commercial sales opportunities.
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to change the export control process. The State Department is responsible 

for controlling the export of defense items but refers export license 

applications to DOD and other agencies when technical or policy reviews 

are needed before making a licensing decision. By March 2000, the 

Departments of State and Defense had agreed to 15 proposals intended to 

streamline the export control process. The proposals ranged from 

improving the use of existing regulatory exemptions to creating new types 

of export licenses. The White House, the National Security Council, and the 

Department of Justice joined the discussions, and the parties reached final 

agreement on these and two additional proposals that were announced on 

May 24, 2000, as the Defense Trade Security Initiative. 

DOD Selected Many of 

Its Initiatives Without

Sufficiently Analyzing 

the Underlying 

Problems

To improve defense cooperation, DOD compiled a list of initiatives, 47 of 

which were intended to address problems with the Department’s internal 

export control and procurement processes and policies. Although some 

initiatives were intended to correct deficiencies previously identified 

through audit reports, DOD proposed many of the 47 initiatives without 

first analyzing the reasons for the problems. For these initiatives, DOD had 

very little data or analysis demonstrating the underlying problems and how 

best to resolve them. In addition, DOD justified some of its initiatives using 

examples to demonstrate problems with the export control process. 

However, the information provided on the examples was often incomplete 

and in many cases, the reports on the incidents contained factual errors. 

Without a full understanding of the underlying problems, it is unclear 

whether DOD’s initiatives will correct problems that may exist.

Some Initiatives Were 

Intended to Address Known 

Deficiencies, but Many Were 

Based on Limited Analysis 

of the Problems

Thirteen of the 47 initiatives were supported by audit recommendations or 

based on the need to modernize existing computer systems. For example, 

certain initiatives cited the need to establish training, guidance, and 

communication processes to improve efficiency within the export licensing 

process that DOD uses to provide technical reviews to the State 

Department. The Department of Defense Inspector General, in a 1999 audit 

report, identified deficiencies in these areas and recommended changes to 

address these problems. DOD identified other initiatives that were part of 

its ongoing modernization efforts to replace a variety of internal software 

programs or databases pertaining to classified information, export licenses, 

and foreign visits. For example, one of these databases had not been 

upgraded for about 20 years, and another required changes to make the 

system Y2K compliant.
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The remaining 34 initiatives were largely based on limited data or analysis 

of the underlying problems. For example, 14 of DOD’s initiatives to change 

the processes for controlling exports and release of classified data were 

consistent with recommendations in a white paper prepared by the 

Defense Security Cooperation Agency in 1999.3

 The white paper, however, 

was largely based on concerns from customers and industry, and DOD did 

not verify the information provided or assess the basis for the concerns 

before undertaking the initiatives. In addition, a 1999 Defense Science 

Board report on globalization and security also contained 

recommendations consistent with 14 of DOD’s initiatives.4

 Some

senior-level officials who worked on this report told us that limited 

empirical data existed to support the report’s recommendations. When we 

examined the report’s list of source documents, we found that 70 percent 

were taken from newspapers and periodicals; no original data were 

collected. Finally, the remaining initiatives were based on anecdotal 

evidence collected during meetings with allies and industry and from an 

informal survey of several major defense companies. However, DOD often 

did not validate whether the problems existed nor examine the underlying 

reasons for problems identified by allies and industry.

Without examining the underlying reasons for problems that may exist, 

DOD has no assurance that many of its initiatives will resolve the problems. 

For example, DOD has several initiatives intended to reduce lengthy 

license processing time by including time limits for reviewing licenses and 

reducing the number of review levels. In examining processing time, DOD 

collected data on the average time it takes to review export licenses. While 

reducing processing time is a worthy objective, concentrating on average 

time may obscure reasons for lengthy processing times on particular cases 

or obscure the factors that contributed to a speedy licensing decision. Data 

could be collected on the export control licensing process that may provide 

indications of where problems lie in the process. In fact, a recent law stated 

that the State Department should perform such a study and report to 

congressional committees on the munitions licensing process.5

 Among 

3

The Defense Security Cooperation Agency (in cooperation with the Office of Policy 

Support within the Office of the Secretary of Defense and the Defense Threat Reduction 

Agency as well as industry organizations) prepared a white paper entitled Arms 

Transfer/Technology Transfer White Paper in 1999. 

4

Nine recommendations were found in both the white paper and the Defense Science Board 

report. 

5

P.L. 106-113, Nov. 29, 1999, sec. 1310.
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other things, the Department’s study is to analyze the processing time for 

each major category of licenses and include a breakdown of licenses by 

country. The State Department was to submit this report by the end of May 

2000 but has not done so because of scarce resources and other demands, 

according to a senior State Department official. When the study is 

performed, it may contribute to an understanding of the reasons for various 

processing times.

Further, the Principal Deputy Under Secretary of Defense for Acquisition, 

Technology, and Logistics told us that while the average processing time 

has been reduced, it does not appear to be the fundamental problem with 

the U.S. export control process. This official said that the major problem is 

not the time it takes to review an export license application but rather that 

the outcome of the review process is often not satisfactory. In other words, 

when reviewing license applications for national security concerns, DOD 

officials may decide to deny the application or place terms and conditions 

on the application. Such conditions may be so stringent that they hinder the 

export of the defense article or service. Some senior officials from defense 

companies also told us that the rules governing license approvals are not 

consistently applied.

Many of DOD’s Examples of 

Export Control Problems 

Lacked Key Information or 

Contained Factual Errors

To justify its export control-related initiatives, DOD prepared a list of 

20 examples to illustrate situations where the export control process takes 

too long, is outdated, and hampers U.S. companies from competing abroad. 

DOD compiled the list from news sources, e-mails, congressional testimony 

by a U.S. company president, and company and embassy officials. Of the 

20 examples, 6 pertained to comments made by or opinions expressed by 

foreign company and government officials about the U.S. export control 

process that did not involve an export license. In addition, one example 

involved a company and export license that DOD officials could not 

identify because the DOD official who provided the example did not 

specify the name of the company and has since left the Department.

Of the 13 examples where licensing information was available, several 

examples indicated inefficiencies in the export licensing process. 

Specifically, in one instance the State Department was slow in determining 

if it needed to notify Congress about an export, and in another instance an 

unexplained error in DOD and State Department records caused a delay in 

approving a license application. However, in 9 of 13 examples, DOD did not 

include information needed to understand the reasons that the situation 

arose or the examples contained factual errors. Appendix I provides DOD’s 
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description and our analysis of 10 of DOD’s examples. The remaining three 

examples are discussed below.

• One example, based on a company’s press release, stated that a 

Singapore-based consortium (two-thirds owned by a Chinese affiliate) 

terminated its contract with a U.S. aerospace company because this 

company was unable to secure necessary U.S. export licenses in a 

timely manner. Under this contract, the U.S. company was to build a 

$450 million satellite-based mobile telephone system. However, we 

found that the Department of Commerce—responsible for controlling 

the export of items with both civil and military applications—denied the 

U.S. company’s license application. The Department, in consultation 

with other federal agencies, decided to deny the export application 

because of concerns of possible Chinese military involvement, questions 

about the company’s dealings with China, and its hiring of a foreign 

national—the son of the Chinese general overseeing China’s military 

satellite program. DOD’s example indicates that lengthy processing time 

caused the company to lose the contract when, in fact, the company was 

denied the license because of concerns with the export.

• In a second example, based on an aviation publication, a U.S. company 

is still waiting for the State Department to complete a review of its 

Technical Assistance Agreement to build a Chinese communications 

satellite.6

 According to DOD’s example, the U.S. government approved 

the agreement (in February 1998) and then temporarily suspended it in 

December 1998 to make sure it was in compliance with new export 

regulations. However, we found that the State Department suspended 

the agreement principally because of an ongoing criminal investigation 

of the company. Section 1512 of the Strom Thurmond National Defense 

Authorization Act for Fiscal Year 1999 (P.L. 105-261, Oct.17, 1998) 

requires the President to certify that any export to the People’s Republic 

of China of missile equipment or technology will not be detrimental to 

the U.S. space launch industry or will not measurably improve the 

missile or space launch capabilities of the People’s Republic of China. 

Since the company’s agreement involved missile technology, the State 

Department was required to suspend the agreement to review the case 

for the purpose of such a certification. After the review, the State 

6

A Technical Assistance Agreement is an agreement for the performance of defense services 

or the release of technical data that is subject to the review and approval of the State 

Department.
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Department determined that it was not prepared to recommend such a 

certification because the company was under grand jury investigation 

for possible export violations; consequently, the suspension remained. 

In June 1999, the company asked the State Department to lift the 

suspension. The State Department responded in August 1999 that the 

suspension should not be terminated, but it did not disclose the reason 

for its decision. However, 5 days later, a State Department spokesman 

publicly stated that the Department was concerned about the company 

being investigated for allegedly breaking export control laws. DOD’s 

example indicates that the company had not received a response from 

the State Department when, in fact, the Department had completed the 

review and communicated the response to the company. 

• A third example, based on a DOD e-mail, stated that in June 1999 a U.S. 

company could not perform inspection and repair work on aircraft 

purchased by the Royal Thai Navy under the Foreign Military Sales 

Program because the State Department required the company to first 

obtain a signed Technical Assistance Agreement, which the Royal Thai 

Navy refused to sign. The example stated that the State Department had 

not previously required a signed agreement for such work under its 

export control regulations. We found that the State Department had not 

changed its requirement. In fact, the State Department issued guidance 

in March 1997 to the contractors stating that a Technical Assistance 

Agreement is needed when providing defense services under a Foreign 

Military Sales agreement. In this particular case, the company had 

already obtained an approved agreement from the State Department in 

anticipation of this work. According to an e-mail sent by a DOD official 

in Thailand, the Royal Thai Navy refused to sign the agreement because 

it believed its contract was with the U.S. government and not the U.S. 

company. However, according to a company official, the Royal Thai 

Navy refused to sign the agreement because a DOD official advised 

against signing. Therefore, while DOD’s example stated that the problem 

was a new State Department requirement for a Technical Assistance 

Agreement, in fact, the problem was a disagreement between the 

company and the Royal Thai Navy on the need for an agreement. DOD 

officials at the U.S. Embassy in Thailand sided with the Royal Thai Navy.

These examples demonstrate the complexities of the export control system 

and the need to understand the underlying reasons for problems that may 

exist. Without a full appreciation of the problem, it is unclear whether 

DOD’s initiatives will resolve existing problems.
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The Extent to Which 

DOD’s Initiatives Will 

Achieve Desired 

Outcomes Is Unclear

DOD has several desired outcomes it wants to achieve from its defense 

cooperation initiatives, including (1) improving interoperability in coalition 

warfare scenarios, (2) reducing a gap in military capabilities between the 

United States and North Atlantic Treaty Organization allies, and 

(3) ensuring that U.S. defense companies successfully compete abroad. 

Senior DOD officials have stated that the defense cooperation initiatives 

are an approach to achieving these desired outcomes in addition to efforts 

under way with the North Atlantic Treaty Organization member nations. 

However, DOD has not clearly demonstrated how its initiatives will achieve 

these three outcomes, especially since other factors can influence these 

desired outcomes.

DOD has asserted that its initiatives will help achieve one of its desired 

outcomes—interoperability—but has not clearly demonstrated how these 

initiatives might result in this outcome. For example, regarding one recent 

conflict, the Kosovo/Operation Allied Force After-Action Report did not 

identify U.S. export controls as a major impediment.7

 Instead, the report 

identified failures in communications and logistics and certain 

shortcomings in the Allies’ capabilities as impediments to interoperability. 

The report also cited some concerns about the release of classified 

information to the allies and suggested the need to refine the policy and 

process for releasing such information. Although the report stated that the 

United States must carefully review its policy regarding licensing 

requirements for the allies, it provided no specific examples to support this 

suggestion. Further, officials responsible for supporting Kosovo operations 

from the U.S. European Command, as well as DOD and State Department 

arms transfer officials, told us that the U.S. export control system was not 

an impediment to interoperability in Kosovo. In fact, the State Department 

had established an expedited review process for export licenses designated 

to support the Kosovo operations. Additional resources were devoted to 

reviewing these export licenses, which were given priority over routine 

licenses that companies submitted. Also, some officials from major U.S. 

defense companies told us that DOD’s export control initiatives are 

unlikely to help achieve interoperability because other factors may have a 

more direct impact on interoperability than DOD’s initiatives.

7

Kosovo/Operation Allied Force After-Action Report to Congress, DOD (Jan. 31, 2000).
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DOD’s initiatives may facilitate greater technology sharing between U.S. 

and European companies that, in turn, could affect the Department’s 

second desired outcome of closing the transatlantic military and 

technology gap. Nonetheless, other factors, beyond DOD’s influence, could 

more directly impact this outcome. For example, the Secretary General of 

the North Atlantic Treaty Organization and U.S. government officials have 

stated that European nations are not investing sufficient resources in 

developing military and technological capabilities and, in fact, European 

investment in defense research and development has been significantly 

below U.S. levels. According to some European officials, the gap in defense 

spending results from different spending priorities and different threat 

perceptions. In addition, whereas the United States has a global military 

threat and interest, European countries generally have focused on 

European security.8

Finally, DOD’s initiatives may increase opportunities for some U.S. 

companies to compete in European and other overseas defense markets. 

However, like the United States, European countries tend to purchase 

major defense equipment from their domestic companies when such 

options exist. For example, in the United Kingdom’s recent competition for 

the Beyond Visual Range Air to Air Missile, the U.K. government chose a 

European missile that is still in development over a U.S. product that DOD 

officials advocated was proven and less expensive. DOD also assured the 

U.K. government that access to U.S. technology would not be a problem. 

However, according to the U.K. Ministry of Defense, it selected the 

European option because it would provide superior military capability. 

Further, even when importing major weapon systems, many European 

countries have obtained benefits to their domestic economies by requiring 

subcontract awards to firms in their own countries.9

DOD’s defense cooperation initiatives may encourage the formation of 

“global” defense alliances that can help achieve some of its desired 

outcomes, but this may not affect other countries’ procurement decisions, 

policies, and practices. In addition, if defense budgets remain constant, 

defense companies will compete in a limited global defense market, 

8

NATO: Implications of European Integration for Allies’ Defense Spending

(GAO/NSIAD-99-185, June 30, 1999).

9

For more information on this practice, see Defense Trade: U.S. Contractors Employ Diverse 

Activities to Meet Offset Obligations (GAO/NSIAD-99-35, Dec. 18, 1998).
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thereby creating a situation where all companies may not be able to 

survive.

Effect of the 

Administration’s 

Export Control 

Proposals Is Uncertain

On May 24, 2000, the administration unveiled 17 proposals to expedite and 

reform the U.S. export control system, which it characterized as the first 

major post-Cold War adjustment to the U.S. system. However, it is 

uncertain what effects the proposals will have. In a press statement, the 

State Department said that the proposals are intended to increase mutual 

security by (1) increasing interoperability, (2) enhancing defense 

capabilities, and (3) promoting transatlantic defense industrial cooperation 

and competition. As with DOD’s cooperation initiatives, the administration 

has not demonstrated how its proposals will achieve these identified 

outcomes. Further, State Department officials told us that there was no 

analysis of existing problems. As a result, there is little assurance that the 

underlying problems with the U.S. export control system have been 

sufficiently analyzed to determine what the causes of the problems are and 

that the 17 proposals will remedy problems that may exist. Appendix II 

provides a description of the proposals, which are collectively known as 

the Defense Trade Security Initiative.

The effects of the proposals on desired outcomes cannot be assessed until 

the Departments of State and Defense issue regulations covering key 

proposals and gain some experience in their implementation. Some of the 

proposals call for fine-tuning regulatory procedures and practices and do 

not require significant changes to implement. However, the Departments 

have not agreed on the criteria or parameters for other proposals, such as 

granting exemptions to certain countries and/or foreign companies from 

export licensing requirements. The U.S. government has experience with 

exemptions of this nature, but according to the State Department, 

problems have arisen when the regulatory exemption was misused. 

Specifically, the U.S. government has long granted an export exemption 

enabling many controlled defense articles to be exported to Canada 

without licenses. However, the scope of that exemption was limited in
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April 1999 because the State Department concluded that some companies 

misunderstood the exemption and unauthorized exports occurred.10

Under the new country exemption proposal, the administration envisions 

that the United Kingdom and Australia are the two countries most ready to 

take advantage of a broad export license exemption. The administration 

started discussions with the United Kingdom first. However, State 

Department and U.K. government officials told us that the United 

Kingdom’s export system is not compatible with that of the United States in 

several areas. For example, U.S. export control laws require restrictions on 

other countries’ ability to transfer U.S.-controlled defense articles to third 

countries. In contrast, according to these officials, the United Kingdom 

does not have the same restrictions. The U.S. and U.K. governments have 

yet to evaluate the compatibility of their export licensing systems and 

determine how enforcement concerns will be addressed. The negotiations 

may lead to a binding agreement between the United States and the United 

Kingdom. Once the agreement is reached, the details of the implementing 

regulatory language are key to avoiding misinterpretation of the exemption 

and possible abuses of the export control system.

The Departments of State and Defense also do not agree on how to 

implement another key proposal to establish an interagency computer 

system to exchange export license application information. Specifically, 

the two Departments have not established up-front what their needs are. 

DOD has allocated funds to establish an interagency database that would 

include interconnectivity not only with the State Department but also with 

industry, the Department of Commerce, and other federal agencies 

involved in the export licensing process. In contrast, the State Department 

would prefer a more limited scope whereby interconnectivity would be 

established between the Departments of State and Defense utilizing 

upgrades of existing systems. 

Many decisions have to be reached and actions taken before the 

administration can implement some of its proposals. In making such 

decisions, a senior State Department official told news reporters in June 

2000 that the State Department is likely to establish strict standards for 

10On June 19, 2000, the U.S. and Canadian governments announced an agreement to 

strengthen their respective export control regimes. As part of this agreement, the Canadian 

government will introduce legislative and regulatory changes to strengthen certain defense 

export controls. The U.S. government, concurrent with these changes, intends to revise its 

regulations to reinstate most of the pre-April 1999 Canadian exemption.
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implementing the proposals, which may take time. Senior DOD officials, 

however, have emphasized the importance of implementing the proposals 

in the near term. In addition, the administration has to determine if it will 

need to establish new monitoring or enforcement procedures to make 

certain that defense articles are properly controlled once exported. While 

the Departments are hiring additional staff, they will need to evaluate 

whether the new resources are sufficient once the proposals are fully 

implemented. Until such decisions are reached, it is uncertain how the U.S. 

export control system will change.

Conclusions The administration, the U.S. defense industry, and foreign governments 

have expressed a high level of concern about current restrictions on

cross-border cooperation. This level of concern indicates that the postCold War environment of declining defense budgets, multinational military 

operations, and rapid technological changes has created the need for a 

reexamination of U.S. defense trade and investment policies. Based on 

work done by DOD, the administration is moving forward to implement 

proposals to change the U.S. export control system. Without a clear and 

common understanding of perceived versus real problems and their 

underlying causes and without an appropriate analytical framework to tie 

changes to desired goals, it will be difficult to anticipate the outcomes of 

changes and to determine whether progress is being made. Such a situation 

will likely require subsequent reexamination. 

Agency Comments In written comments on a draft of this report, DOD stated that it disagreed 

with our findings, which it characterized as assumptions. Specifically, DOD 

said it did not develop its initiatives without first examining the underlying 

causes of the problems and did not rely exclusively on the export control 

examples cited in our report as support. According to DOD, many of its 

initiatives addressed problems raised by contractors and foreign 

governments. In addressing these complaints, DOD said it performed 

extensive analysis of the problems including the formation of a Rapid 

Improvement Team to examine the export license process. DOD also stated 

that the effects of the administration’s export control proposals are not 

uncertain. According to DOD, it has achieved procedural improvements in 

its own export control process resulting in reduced license review times. 

DOD’s comments are reprinted in appendix III. DOD also provided some 

technical comments, which we have incorporated as appropriate. 
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We agree that DOD relied on problems raised by contractors and foreign 

government officials to identify many of its initiatives. Although complaints 

are a means of identifying potential problems, they do not amount to a 

validation of the problems or an assessment of the underlying causes for 

problems that may exist. As stated in our report, some initiatives were 

intended to address known deficiencies such as those previously identified 

in audit reports, but many were based on limited analysis of problems 

identified in white papers, task force reports, and through discussions with 

industry and foreign government representatives. Moreover, the Rapid 

Improvement Team, which DOD established to reengineer the export 

control process, relied on corporate knowledge of its participants and did 

not focus on collecting and analyzing data to validate the problems they 

discussed. Finally, we examined the 20 export control cases provided by 

DOD and found that many did not contain information necessary to 

understand the situation or were inaccurate. DOD has used these examples 

on many occasions to support its initiatives, referring to them in speeches 

and congressional testimony. DOD did not provide any other examples to 

support its position. Because DOD has not provided additional information 

to support its initiatives, we see no need to revise our report.

While DOD states that the effects of the Defense Trade Security Initiative 

are not uncertain, it only provided reductions of the average license review 

times as an example of a known outcome. Although DOD has implemented 

initiatives to increase the timeliness of its review process, this represents 

only one aspect of a broad range of changes to modify the export control 

system. We acknowledge that there is value in reducing processing time. 

However, concentrating on average time may obscure the reasons 

associated with such time frames. As with many of DOD’s initiatives, the 

administration’s proposals are based on limited analysis of the underlying 

causes for existing problems. Therefore, there is no assurance that 

problems are going to be addressed by the proposed solutions. Further, 

decisions still have to be reached on how to implement proposals such as 

computer system improvements and the country licensing exemption. Until 

these decisions are reached, it is not possible to determine their effects. We 

see no reason to revise our report based on DOD’s comments.

In written comments on a draft of this report, the State Department agreed 

with our assessment of DOD’s export control examples and disagreed with 

our characterization of the status of the computer system improvements. 

For example, the State Department has indicated that it already has a 

modern computer system and has been working with the defense industry 

to electronically receive export license applications. While the 
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Departments of Defense and State have agreed in principle to a proposal to 

enhance U.S. government export license computer systems, our 

discussions with agency officials shows that the Departments have not 

agreed on the implementation of this initiative. DOD has requested funding 

to create a new interagency database to improve interconnectivity between 

industry; the Departments of Defense, State, and Commerce; and other 

federal agencies involved in the U.S. export control process. In contrast, 

the State Department has said that the proposal is limited to enhancing 

communications and data exchange connectivity between the State 

Department and DOD. At the time of our review, both Departments have 

been working separately with industry on prototypes for electronic license 

applications, which may result in some duplication of efforts or 

incompatible approaches. Therefore, we believe that the two Departments 

have different goals and expectations as to how to achieve computer 

interconnectivity during the export license review process. We revised our 

report to clarify the different positions held by the two Departments. The 

State Department’s comments are reprinted in appendix IV, along with our 

evaluation of them. The State Department also provided technical 

comments, which we incorporated as appropriate.

Scope and 

Methodology

To determine the analysis and data DOD used to support its initiatives, we 

compared DOD’s specific initiatives with recommendations presented in 

audit reports, studies, and white papers, and we evaluated the sources of 

information used to support the need for the initiatives. We discussed the 

extent of empirical data collected and analyses performed with key 

officials from industry, DOD, and the State Department involved in the 

studies and the initiatives. We examined DOD’s examples of problems with 

the U.S. export control system by reviewing the export licenses and 

government technical assessments of the licenses and discussed the 

circumstances of each case with relevant industry, DOD, and State 

Department officials.

To determine the relationship between DOD’s initiatives and desired 

outcomes, we reviewed DOD documents on global markets and 

international defense cooperation, including white papers, studies, 

speeches, congressional testimony, and DOD’s initiatives. We also reviewed 

reports on interoperability and the European defense market to determine 

factors that could affect DOD’s desired outcomes. We discussed the 

objectives of each initiative and the connection between the initiatives and 

desired outcomes with officials from 10 offices within the Office of the 

Secretary of Defense and with the Defense Threat Reduction Agency, the 
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Defense Intelligence Agency, the Defense Security Cooperation Agency, the 

Defense Security Service, the Joint Chiefs of Staff, the military services, 

and the State Department. 

To examine the potential outcomes of the administration’s proposals that 

make up the Defense Trade Security Initiative, we reviewed position papers 

and other documents on the Initiative. We discussed the Initiative and its 

likely impact on the U.S. export control system with senior DOD and State 

officials involved in its development. 

We performed our review from January through June 2000 in accordance 

with generally accepted government auditing standards.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution of this report until 

30 days after its issue date. At that time, we will send copies of this letter to 

Representative Sam Gejdenson, Ranking Minority Member, House 

International Relations Committee and to Representative Ike Skelton, 

Ranking Minority Member, House Armed Services Committee. We are also 

sending copies to the Honorable William S. Cohen, Secretary of Defense; 

the Honorable Madeleine K. Albright, Secretary of State; and the Honorable 

Jacob J. Lew, Director, Office of Management and Budget. Copies will also 

be made available to others upon request.

Please contact me on (202) 512-4841 if you or your staff have questions 

concerning this report. Another contact and key contributors to this 

assignment are listed in appendix V.

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues
Page 21 GAO/NSIAD-00-191 Defense Trade
Page 22 GAO/NSIAD-00-191 Defense Trade

Appendix I

Examples of Export Control Problems ApApenednxidexiIs

To justify the need for change to the export control system, the Department 

of Defense (DOD) prepared a list of examples of situations depicting 

problems with the system. Ten of these examples, pertaining to specific 

export licenses, are discussed in table 2 along with our analysis. We found 

that several of the examples indicated inefficiencies in the export licensing 

process but most contained factual errors or did not provide information 

needed to understand the reasons the situations arose.
Appendix I

Examples of Export Control Problems

Page 23 GAO/NSIAD-00-191 Defense Trade

Table 2: DOD’s Export Control Examples and GAO’s Analysis

DOD’s export control examples GAO’s analysis

1. A U.S. company waited 7 months for an export license to 

supply technical data to a Dutch company that was building 

components for a U.S. fighter engine. DOD characterized this 

example as demonstrating that the export control process is 

not suited to the current global environment.

This example demonstrates a problem of lengthy processing time. 

On September 21, 1998, a U.S company submitted an export 

license application amending an existing coproduction agreement. 

The State Department approved the license application, valued at 

$20 million, on July 16, 1999. The approval process took almost 

10 months because the Department was late in determining if the 

Arms Export Control Act required notice to Congress about this 

export. The State Department determined that the dollar value of 

this amendment and the value of the basic agreement required 

congressional notification. Before the Department could notify 

Congress, it had to provide the license application to the Arms 

Control and Disarmament Agency for review. The Agency took 

3 months to review and approve the export, thus delaying the 

notification process.

2. By the time a major U.S. electronics company received a State 

Department export license to bid on a contract to sell 

electronic modules worth more than $50 million for European 

commercial satellites, the foreign spacecraft builder had 

turned to suppliers in Europe and Japan. DOD used this 

example to demonstrate that the export licensing process 

takes too long.

Although the example suggests that the U.S. company was unable 

to submit a bid, in fact the company bid on the contract and lost. The 

French spacecraft builder awarding the contract evaluated the 

competing companies using five performance categories. The 

builder rated the U.S. company poorly in one category because it 

perceived the U.S. export control system as possibly disrupting 

future supply. In the remaining four categories, the U.S. company 

was rated acceptable in three and outstanding in one. We do not 

know how the company’s rating compared with other companies 

competing for the contract or what the final determining factor was in 

awarding the contract. 

3. A U.S. company applied to the State Department for a license 

to send updated repair instructions for helicopter engines to 

Greece. The license took 5 months. DOD used this example 

to demonstrate that the export licensing process takes too 

long.

Processing of the license application was delayed pending the 

results of an investigation on the country receiving the export. The 

U.S. company submitted its export license application to the State 

Department on December 3, 1998, and it was approved on May 5, 

1999. The license application took 5 months to approve because the 

State Department was delaying all munition exports to Greece in the 

spring of 1999 pending the conclusion of an investigation on 

whether Greece improperly transferred U.S. technology.

4. A U.S. company submitted license applications to send digital 

maps of Bosnia to the Netherlands for use in Dutch Chinook 

CH-47 helicopters supporting the United Nation’s 

peacekeeping operations. The example stated that it took

3 months to process the license applications, despite the 

Dutch Embassy urging the State Department to expedite the 

applications due to the deteriorating situation in Kosovo. DOD 

used this example to demonstrate that the export licensing 

process takes too long.

According to State Department records, the license review process 

took 51 days, rather than 3 months as stated. In addition, the export 

license application did not indicate that the maps were intended for 

use in Kosovo. Therefore, according to a State Department official, 

the reason cited in the example for expediting the request—the 

Kosovo situation—had no bearing on the license request. 
Appendix I

Examples of Export Control Problems

Page 24 GAO/NSIAD-00-191 Defense Trade

5. A U.S. company waited 3 months for a license to ship parts for 

British engines for a critical program for the United States. 

DOD used this example to demonstrate that the export 

licensing process takes too long.

Approval of the license application was delayed for an unknown 

reason. The U.S. company submitted its export license application 

to ship parts for the British engines for the Joint Strike Fighter 

Program on November 6, 1997. The State Department then referred 

the application to DOD for review. However, there was a discrepancy 

in the two Departments’ records as to when DOD completed its 

review. DOD’s records showed that it completed its review on 

December 22, 1997, but the State Department’s records indicated 

that DOD completed its review on February 6, 1998. According to 

the Director of the State Department export licensing office, the 

State Department accesses the DOD computer licensing system 

every night to obtain DOD’s final position on all export licenses for 

that day. However, this case, for some unknown reason, was not 

retrieved. As a result, the State Department did not approve the 

export license until February 11, 1998. The license would have been 

issued in 1-1⁄2 months rather than 3 months had the case been 

retrieved on the day that DOD completed its review. This example 

demonstrates inefficiencies in the export licensing review process.

6. A U.S. company license request to sell Air-Sea Rescue Flares 

to the Italian Coast Guard to rescue North Atlantic Treaty 

Organization airmen during the Kosovo crisis was turned 

down because the licensing officer did not think the 

application had enough detail. The flares had already been 

approved for sale to 30 countries, and the export to Italy was 

eventually approved. DOD used this example to demonstrate 

that the export control process does not reflect the real world 

situation.

The company’s initial application was returned on January 14, 1999, 

because of missing information needed for the license review 

process. The company resubmitted its application on February 1, 

1999, and the license was approved on April 13, 1999. The export 

license application stated that the flares were to be used for the 

certification and operational testing of the launcher for the ATR-42 

aircraft; the application did not associate this export with the Kosovo 

crisis. In addition, the application referred to a prior export of the 

item about 8 years ago for which the State Department no longer 

has a record, but it did not indicate that the item had been approved 

for sale to 30 countries. According to the Director of the State 

Department export licensing office, such information is needed to 

facilitate the review of an export license application. The Department 

of Defense took almost 7 weeks to review this case because it had a 

backlog of export licensing cases and this license application did not 

identify an urgent requirement for turnaround, according to a DOD 

official.

(Continued From Previous Page)

DOD’s export control examples GAO’s analysis
Appendix I

Examples of Export Control Problems

Page 25 GAO/NSIAD-00-191 Defense Trade

7. A U.S. company applied for an export license to ship modules 

containing focal plane arrays (a type of optical sensor) to 

Sweden. These modules were to be incorporated into 

cameras for civilian use by factories, power plants, and similar 

customers. For 4 years, the company applied for and obtained 

6 export licenses from the Department of Commerce 

authorizing the export of 1,000 modules. (The Department of 

Commerce is responsible for reviewing and approving exports 

that have both civilian and military applications.) In November 

1998, the U.S. company submitted another application to the 

Department of Commerce to export 200 modules. In January 

1999, the Department of Defense, which was reviewing the 

license at the request of the Department of Commerce, asked 

the company for additional information. The company 

promptly submitted the requested information but received no 

reply from DOD. On May 12, 1999, the company’s export 

application was returned without action but included 

instructions to apply for an export license at the State 

Department. DOD used this example to demonstrate that the 

export control process does not reflect the real world situation.

A pending determination of whether this export license application 

falls under the jurisdiction of the Department of Commerce or State 

Department delayed this case. At the time the U.S. company 

submitted its export application, the U.S. government was 

determining whether the type of modules were to be controlled as a 

dual-use item by the Department of Commerce or as a munition 

item by the State Department. DOD officials believed that these 

modules were a munitions item and, consequently, advised the 

Department of Commerce to return the export application to the 

company and direct the company to submit its application to the 

State Department. Subsequently in April 1999, the State 

Department determined that the modules should be controlled as a 

munitions item.

8. A U.S. company bid on a contract to sell gear knobs for use in 

a commercial airliner to a manufacturer in a North Atlantic 

Treaty Organization country. The U.S. company has had a 

license pending for months despite the fact that the knobs are 

in widespread commercial use. At the critical design review, 

the company was told that the knobs had to be covered by a 

shroud so the visiting foreign contractors could not see the 

product to be installed in their aircraft. DOD used this example 

to demonstrate that the export control process does not reflect 

the real world situation.

The approved export license did not contain the restrictions cited in 

DOD’s example. The U.S. company’s initial export application was 

submitted on January 12, 1999, and was returned on January 22, 

1999, because it lacked sufficient documentation for information 

needed during the licensing review process, such as specification of 

the end user and end-use of the export. The U.S. company 

resubmitted its application on March 11, 1999, and the license was 

issued on July 13, 1999. The approved license did not contain any 

restriction on shrouding the knob during the critical design review. 

The company is required to abide only by those restrictions stated 

on the approved license.

(Continued From Previous Page)

DOD’s export control examples GAO’s analysis
Appendix I

Examples of Export Control Problems

Page 26 GAO/NSIAD-00-191 Defense Trade

9. In September 1999, a U.S. company was preparing the GE-4 

commercial satellite for launch in French Guiana scheduled for 

late November. During final checkout prior to shipment, a 

failure occurred with one of the traveling wave tubes made by 

a German company. To determine the cause of the tube’s 

failure and remove the technical lien from the spacecraft, the 

U.S. company submitted a license for the traveling wave tube 

to the State Department on June 2, 1999. The State 

Department rejected the license application as being too 

broad. The tube had to be licensed for reexport to the 

company in Germany for repair and/or replacement before the 

satellite could be retested with the repaired tubes. The license 

application was resubmitted on September 15, 1999, to the 

State Department. It was approved on October 6, 1999 

(21 days later). The license processing time almost caused a 

shipping delay for the repaired satellite and thus was close to 

causing a launch slip and, consequently, steep financial 

penalties for the company. Since the company already had 

authority to buy and install this commercial satellite 

component, company officials thought it seemed excessive to 

get an additional license for this activity. DOD used this 

example to demonstrate that the export control process does 

not reflect the real world situation.

The U.S. company did not use options available to it for export 

components with high failure rates. The U.S. company submitted its 

initial application on May 25, 1999, which the State Department 

received on June 3, 1999. The export license application was for 

400 traveling wave tubes destined for France, Germany, and Japan. 

A State Department licensing officer called the U.S. company to 

discuss the case. Subsequently on July 19, 1999, the State 

Department returned the application and asked the U.S. company to 

submit a new license application with additional information and 

clarifications. The U.S. company resubmitted its application on 

September 13, 1999, for two traveling wave tubes destined for 

Germany with an urgent requirement to approve by September 23, 

1999, in support of GE-4 satellite. The application was approved on 

October 6, 1999. The Director of the State Department export 

licensing office stated that the U.S. company should have used the 

temporary licenses available under the export regulations, which are 

commonly used by other companies.

10. In October 1998, a U.S. company submitted a license 

application to the State Department to enable it to compete on 

the United Kingdom’s Future Strategic Tanker Aircraft project. 

The company’s intent was to compete its aircraft as a possible 

candidate to replace the United Kingdom’s aging fleet of VC10 

and TriStar aircraft. The company had also received notice 

that a European company would be proposing its aircraft in 

the competition. Because it had not received any feedback 

from the U.S. government, the U.S. company resubmitted its 

export license application in April 1999. Both the Departments 

of State and Defense delayed the license approval, preventing 

the U.S. company from participating in the U.K. competition 

until significant high-level intervention brought this case to 

light. DOD used this example to demonstrate that the export 

control process does not reflect the real world situation.

The U.S. company submitted its initial application on November 3, 

1998. The State Department returned the application on March 29, 

1999, because it was concerned that commercial entities were 

involved as end-users in the case. Specifically, the tanker aircraft 

were to be owned and operated by commercial entities as cargo 

planes and leased to the United Kingdom part-time as strategic 

tankers—an unusual arrangement raising licensing policy questions. 

The State Department licensing officer informed the U.S. company 

about its concerns and asked the company to submit a new 

application and include more details about the roles of the 

commercial entities in the project. The U.S. company resubmitted its 

application on May 5, 1999. After discussing its concerns with 

officials of the Embassy of the United Kingdom in Washington, the 

State Department approved the license application with conditions 

on August 16, 1999. The Director of the State Department export 

licensing office stated that DOD, unlike the State Department, was 

not concerned about the commercial entities and approved the case 

in 3 weeks without placing any conditions or restrictions on the 

export.

(Continued From Previous Page)

DOD’s export control examples GAO’s analysis
Page 27 GAO/NSIAD-00-191 Defense Trade

Appendix II

The Defense Trade Security Initiative ApendxiI

In May 2000, the administration agreed to these 17 proposals as part of its 

Defense Trade Security Initiative.

1. Major Program License: Create a single comprehensive export license for 

hardware, technical data, and defense services issued at the beginning of a 

project where the U.S. firm is the prime contractor. 

2. Major Project License: Create a single comprehensive license for a direct 

commercial sale of defense articles by a U.S. prime contractor to North 

Atlantic Treaty Organization member states, Japan, and Australia. 

3. Global Project License: Create a single comprehensive license to cover 

all exports occurring under a government-to-government international 

agreement for a cooperative project.

4. Technical Data Exports for Acquisitions, Teaming Arrangements, 

Mergers, Joint Ventures, and Similar Arrangements: Develop a single 

comprehensive export authorization to permit qualified U.S. defense 

companies to exchange broad ranging technical data for a variety of 

business arrangements with qualified foreign firms from North Atlantic 

Treaty Organization members, Japan, or Australia.

5. Enhance the Use of Multiple Destination Licenses: Increase the use of an 

existing license to permit U.S. firms to market specific products to 

designated users for a specified purpose.

6. Enhance the Use of Overseas Warehousing Agreements: Increase the use 

of overseas warehousing and distribution agreements that permit U.S. 

firms to export large numbers of items (such as spare parts) to a foreign 

company.

7. Expedited License Review for North Atlantic Treaty Organization Allies: 

Expedite U.S. government review of export licenses for Defense 

Capabilities Initiative projects or programs.

8. Special Embassy Licensing Program: Expedite U.S. government review 

of licenses submitted by the governments of the North Atlantic Treaty 

Organization countries, Japan, and Australia via their embassies in 

Washington, D.C., for end use by the requesting government.

9. Interagency Export License Electronic Control Process: Enhance 

computer connectivity between the Departments of Defense and State to 
Appendix II

The Defense Trade Security Initiative

Page 28 GAO/NSIAD-00-191 Defense Trade

permit greater and more timely exchange of data on export license 

applications.

10. Extension of International Traffic in Arms Regulations Exemption to 

Qualified Countries: Extend a licensing exemption to countries that share 

with the United States congruent and reciprocal policies in export controls, 

industrial security, intelligence, law enforcement, and market access. This 

exemption would be limited to unclassified exports to a foreign 

government and companies that are identified as reliable by the U.S. 

government in consultation with the foreign government.

11. Defense Services Exemptions for Maintenance and Related Training: 

Create a new regulatory exemption for increased levels of maintenance 

services and training for North Atlantic Treaty Organization countries, 

Japan, and Australia.

12. Exemption for Department of Defense Bid Proposals: Permit U.S. firms 

to export certain technical data and services in support of DOD bid 

proposals without a license.

13. More Effective Use of Existing International Traffic in Arms 

Regulations Exemptions by the Department of Defense: Clarify the 

Department’s use of existing regulatory exemptions that are available to it.

14. Streamlined Licensing for Commercial Satellite Components and 

Technical Data: Streamline the licensing process for parts and minor 

components and limited technical data needed to bid on projects and 

respond to insurance requests on commercial satellites.

15. International Traffic in Arms Regulations Exemption for Foreign 

Military Sales Defense Services: Permit the license-free export of technical 

data and defense services if they are expressly authorized in a Foreign 

Military Sales agreement and in the associated contract with a U.S. 

company.

16. Advance Retransfer Consent for Items Sold or Granted by the U.S. 

Government: Permit the retransfer of unclassified defense articles (valued 

under $7 million) previously sold or granted by the U.S. government if the 

articles are to be transferred only between the governments of North 

Atlantic Treaty Organization countries, Japan, or Australia that signed 

advance blanket retransfer assurances.
Appendix II

The Defense Trade Security Initiative

Page 29 GAO/NSIAD-00-191 Defense Trade

17. Review and Revise the U.S. Munitions List of Controlled Defense 

Articles and Services: Establish a process for reviewing portions of the U.S. 

Munitions List on an annual basis so that the entire list is reviewed over a 

4-year period.
Page 30 GAO/NSIAD-00-191 Defense Trade

Appendix III

Comments From the Department of Defense ApendxiI
Page 31 GAO/NSIAD-00-191 Defense Trade

Appendix IV

Comments From the Department of State ApendxiIV

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix.
Appendix IV

Comments From the Department of State

Page 32 GAO/NSIAD-00-191 Defense Trade

See comment 1.

See comment 2.

Now on p. 4.

Now on pp. 10-12 and 

appenndix I.

Now on pp. 9-10.
Appendix IV

Comments From the Department of State

Page 33 GAO/NSIAD-00-191 Defense Trade

Now on p. 16.
Appendix IV

Comments From the Department of State

Page 34 GAO/NSIAD-00-191 Defense Trade
Appendix IV

Comments From the Department of State

Page 35 GAO/NSIAD-00-191 Defense Trade

The following are GAO’s comments on the State Department’s letter dated 

August 9, 2000.

GAO Comments 1. We have modified the text of the report to address this comment.

2. The law states that the State Department should provide the Senate 

Foreign Relations Committee and the House International Relations 

Committee with a study examining the munitions licensing process, 

including the time it takes to review various licenses. The State 

Department recognizes that it is expected to perform such a study, but 

it did not meet the statutory time frame because of other commitments. 

As we stated in the report, this study may contribute to an 

understanding of the reasons for various processing times. We 

encourage the State Department to fulfill its intentions of providing the 

congressional committees with this study.
Page 36 GAO/NSIAD-00-191 Defense Trade

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

GAO Contact Thomas J. Denomme (202) 512-4287

Acknowledgments In addition to the name above, Anne-Marie Lasowski, Marion Gatling, 

Lillian I. Slodkowski, John Ting, and John Van Schaik also made significant 

contributions to this report.

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