GAO

United States General Accounting Office

Report to the Chairman, Committee on 

International Relations, House of 

Representatives

September 1999 FOREIGN MILITARY 

SALES

Review Process for 

Controlled Missile 

Technology Needs 

Improvement

GAO/NSIAD-99-231

Page 1 GAO/NSIAD-99-231 Foreign Military Sales

Contents

Letter 3

Appendixes Appendix I Military Departments’ Disclosure and Foreign 

Military Sales Agreement Process 24

Appendix II Comments From the Department of Defense 26

Appendix III Comments From the Department of State 29

Figure Figure 1: National Disclosure Policy Exception Process 8

Abbreviations

DOD Department of Defense

FMS Foreign Military Sales

MTCR Missile Technology Control Regime
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281640 Leter

September 29, 1999

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

Dear Mr. Chairman:

The U.S. government and the defense industry face growing challenges as 

they attempt to maximize the benefits of international weapon sales while 

operating within the statutory requirements that control defense exports to 

protect national security and advance foreign policy. Over the years, the 

U.S. government has sold certain sensitive military items through the 

Foreign Military Sales program partly because the items are presumed by 

some to be better controlled by the program than through direct 

commercial sales.1

 However, the process for making decisions about what 

technology may be transferred under the program is not readily 

understood. As part of a broad request to review the Foreign Military Sales 

program, you asked us to look at how the program safeguards technology 

and arms transfers. Specifically, we (1) identified the process for deciding 

what technology may be transferred as part of a sale through the program, 

(2) assessed the controls for ensuring that technology transfer 

considerations have been weighed when reviewing requests and 

agreements, and (3) examined the Department of Defense’s proposals to 

improve technology transfer procedures. 

Results in Brief The U.S. government relies on a complex process with many participants to 

determine what technology may be transferred as part of a sale through the 

Foreign Military Sales program. Technology transfer decisions begin with 

an interagency National Disclosure Policy Committee process. When 

making overall policy decisions, the committee provides authority for the 

government to transmit classified information associated with military 

items but does not approve the actual transfer of those items. It does not 

typically address whether systems must be sold through the Foreign 

1

 Other potential advantages of the Foreign Military Sales program include promoting 

interoperability with allies and encouraging military to military contacts.
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Military Sales program or a direct commercial sale. The committee has a 

process for reviewing exceptions to the National Disclosure Policy. Within 

the National Disclosure Policy framework, separate organizations within 

the military departments recommend whether the requested items under 

their jurisdiction may be sold and manage the sales. 

The U.S. government has not established a process for ensuring that certain 

controlled items are fully and systematically identified when reviewing 

requests or approving agreements under the Foreign Military Sales 

program. As a result of weaknesses in the review process, items controlled 

by an international missile nonproliferation agreement have been 

transferred under the program without proper review and approval.

As currently structured, the Department of Defense’s proposals to reform 

the Foreign Military Sales program are primarily focused on reducing time 

for making technology transfer decisions. In considering the Department’s 

efforts to shorten the processing time, officials acknowledge the need to 

properly assess the national security risks and benefits of proposed 

transfers. A Department of Defense and industry working group proposes 

more rigorously implementing current requirements to make technology 

transfer assessments early in the planning of a weapon program. Such 

assessments are a means of expediting technology transfer decisions when 

responding to foreign customers’ requests. 

We have included recommendations in this report aimed at providing 

proper review and approval of transfers of controlled technologies through 

the Foreign Military Sales program.

Background The United States generally exports military items and services either 

through (1) U.S. government sales under the Foreign Military Sales (FMS) 

program or (2) direct commercial arms sales by individuals and business 

entities. The Arms Export Control Act authorizes the President to control 

the export of all defense articles and services and to designate items that 

are to be controlled under the U.S. Munitions List.2

 The President delegated 

2

 Section 38 (a) of the Arms Export Control Act (22 U.S.C. 2778 (a)).
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the control of exports of Munitions List items to the Secretary of State3 and 

the implementation of the FMS program to the Secretary of Defense. As 

part of its responsibilities, the State Department regulates direct 

commercial arms sales through export licenses and reviews and approves 

arms sales under the FMS program.4

 Within the Department of Defense 

(DOD), the Defense Security Cooperation Agency is responsible for overall 

administration of the FMS program, while the military departments 

implement individual sales under the program. The Arms Export Control 

Act generally excludes sales under the FMS program from the requirement 

for munitions export licenses.5

Specific policies and controls have been established for the transfer of 

classified military intelligence and critical military technology and defense 

articles. A presidential executive order prescribed a uniform system for 

classifying, safeguarding, and declassifying national security information. 

The National Disclosure Policy was established to provide a framework for 

the approval or denial of the transfer of classified military information to 

foreign governments and international organizations.6

 A decision to 

disclose or transmit information must satisfy several criteria. These include 

that the transmission of information be consistent with U.S. foreign policy 

and U.S. military and security objectives and result in benefits to the United 

States. In addition, the foreign recipient must afford the information 

substantially the same degree of protection as the United States provides it, 

and the information must be limited to what is necessary to fulfill the 

prescribed purpose. Although the policy prohibits the transmission of 

certain classified information, technology, and defense articles to foreign 

countries, it provides a process by which exceptions may be granted. 

Procedures established under the National Disclosure Policy are also used 

to consider the release of unclassified military information to foreign 

entities. 

3

 The Secretary of State must have concurrence of the Secretary of Defense for items or 

categories of items that shall be considered as defense articles or services subject to export 

control.

4

 The Department of Commerce, through the Commerce Control List, regulates and reviews 

export licenses for “dual-use” items, which have both military and civilian applications. 

5

 22 U.S.C. 2778(b)(2).

6

 Classified military information includes military materiel, arms, and munitions, as well as 

military research and development information, military production information, and 

military operations planning and readiness information.
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The United States and other nations have agreed to limit the spread of 

certain types of arms and technologies by establishing various international 

agreements, or regimes. For example, in 1987 the United States and several 

major trading partners created the Missile Technology Control Regime 

(MTCR) to control the proliferation of missiles and related technology. This 

regime, implemented through national legislation in each of the member 

countries, consists of common export policy guidelines that include a list 

of controlled items. There are two categories of controlled items. Category 

I items are rarely approved for export. They include complete missile 

systems and subsystems such as rocket engines and guidance sets. 

Category II items comprise a wide range of commodities, including test 

equipment and propellants. These items are evaluated on a case-by-case 

basis and typically denied for sale if destined for use in weapons of mass 

destruction. The U.S. government controls the two categories of items 

through the U.S. Munitions List or through the Commerce Control List. The 

Missile Technology Export Control committee is a U.S. interagency 

working group that reviews proposed U.S. exports of missile technology 

and evaluates them in terms of MTCR and U.S. nonproliferation policy.

FMS Program Relies on 

the Disclosure Process 

to Determine What 

Technology May Be 

Transferred 

The U.S. government has a complex process with many participants to 

determine what technology may be transferred as part of a proposed sale. 

An interagency committee oversees the National Disclosure Policy and 

considers exceptions to the policy when classified military information is 

involved in the proposed transfer. The committee does not approve actual 

foreign military sales but provides authority to transmit the classified 

information associated with sales. In addition, military departments with 

responsibility over certain weapon systems and technologies have 

administrative processes to make disclosure decisions within their 

jurisdictions. Each military department has its own process for making 

disclosure decisions within its authority and for preparing proposed FMS 

agreements. 

National Disclosure Process 

Involves Multiple Agencies

The National Disclosure Policy Committee is responsible for formulating, 

issuing, administering, and monitoring the implementation of the National 

Disclosure Policy, as well as considering exceptions to the policy. Although 

the committee is responsible for determining what classified military 

information may be transmitted to a foreign government, it does not 

approve the actual sale that transfers the information. The committee may 

discuss actual sales in the context of considering exceptions to the policy.
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The committee consists of general members and special members who 

represent heads of various federal agencies, DOD components, and each 

military department. General members vote on all issues and include the 

Secretaries of State, Defense, Army, Navy, and Air Force and the Chairman 

of the Joint Chiefs of Staff. Special members usually vote only on those 

issues in which they have a direct interest.7

 The committee is co-chaired by 

the State Department and DOD.

The committee has a process for reviewing exceptions to the National 

Disclosure Policy. As illustrated in figure 1, the committee’s executive 

secretary distributes any request for an exception to policy to all relevant 

members. The committee’s procedures allow a 30-day time frame for 

reaching final decisions. The members present a position within

10 working days. If there is not unanimous agreement on the proposed 

exception, the committee members work on achieving consensus. If they 

are unable to do so, the committee chairman formulates a position and 

informs the members within 10 working days. The chairman’s decision 

becomes final unless appealed to the Secretary or the Deputy Secretary of 

Defense by the cognizant department or agency within 10 working days. 

7

 Special members include the Secretary of Energy; the Directors of the Central Intelligence 

Agency and the Defense Intelligence Agency; the Under Secretaries of Defense for Policy, 

for Acquisition and Technology, and for Command, Control, Communications, and 

Intelligence; the Assistant to the Secretary of Defense (Atomic Energy); and the Director of 

the Ballistic Missile Defense Organization. 
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Figure 1: National Disclosure Policy Exception Process

Unlike in earlier times, when the FMS program was often favored over 

commercial sales as the method of transfer for some sensitive weapon 

systems, some committee representatives told us that today they typically 

do not recommend that systems be sold through the FMS program and 

often do not address the method of sale. According to several officials, both 

methods of sale are equally secure in protecting technology. For example, 

in early 1999 the committee agreed to change a long-standing policy that 

required an advanced missile system to be sold through the FMS program. 

The revised policy allows the system to be sold either through the FMS 

program or directly by the contractor with State Department approval. 

Irrespective of the method of sale, the purchasing country must agree to 

security requirements, such as inventory of the equipment, and U.S. 

government verification that the requirements have been met.

DOD’s policy is to remain generally neutral regarding the method of sale. 

However, the policy allows for exceptions to permit FMS-only 

Committee member

sponsors an

exception to the

National Disclosure Policy

Committee member

sponsors an

exception to the

National Disclosure Policy

Executive Secretariat 

refers the exception

to general and special

 committee members as

appropriate

Executive Secretariat 

refers the exception

to general and special

 committee members as

appropriate

Each committee

member prepares

a position

Each committee

member prepares

a position

Committee members work

 on resolving differences. If

no resolution, the chairman

makes final decision

Committee members work

 on resolving differences. If

no resolution, the chairman

makes final decision

Appeal the

decision 

Appeal the

decision 

Secretary 

or Deputy Secretary

of Defense decides

appeal

Secretary 

or Deputy Secretary

of Defense decides

appeal

Decision on the exception

to the National Disclosure

Policy is accepted

and recorded

Decision on the exception

to the National Disclosure

Policy is accepted

and recorded

No

Yes

Unanimous

agreement 

Unanimous

agreement 

No

Yes
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recommendations based on criteria such as presidential directives, 

legislation, and national or military department policies. While military 

departments have recommended that certain weapon systems be sold only 

through the FMS program, military officials we met with had widely 

varying opinions about whether the FMS program affords greater control 

than direct commercial sales. Some officials prefer selling sensitive items 

through the FMS program because DOD officials are involved in 

implementing every aspect of the sale under that program. Other officials 

stated that defense contractors have strong incentives to adhere to export 

control laws and will ensure that sensitive items are properly controlled 

when sold directly by the contractor.

Military Departments Have 

Separate Disclosure and 

FMS Agreement Processes

Each military department has its own process for implementing the 

National Disclosure Policy and for preparing FMS agreements. The 

Secretary of Defense has delegated authority to implement the National 

Disclosure Policy to military departments and other defense agencies for 

information originated by or under the control of their organizations, 

provided such information is in compliance with disclosure policy. The 

military departments, in turn, have delegated some disclosure authority to 

the heads of commands, agencies, and major staff elements within their 

organizations. Major military commands we visited have delegated certain 

authority to disclosure officers who work with weapon program offices on 

international sales. Appendix I provides additional information on the 

differences between military departments’ disclosure and FMS agreement 

preparation processes. For example, the Army generally handles FMS 

agreement preparations at the command level with higher level approval, 

while the Air Force prepares FMS agreements at the Secretary level with 

input from other headquarters and program offices. The Army maintains 

disclosure as a security policy function held by the Deputy Chief of Staff for 

Intelligence, while the Air Force and the Navy consider disclosure an 

international function located with the Deputy Under Secretary of the Air 

Force for International Affairs and the Navy International Programs Office, 

respectively. 

DOD organizations prepare Delegation of Disclosure Authority Letters or 

component regulations to provide authority to disclosure officers to 

transmit classified military information to foreign nationals as part of 
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weapon sales or other military activities.8 The disclosure letter explains 

classification levels, categories, scope, and limitations on information, 

including unclassified technical data, that may be disclosed to a foreign 

recipient. Some FMS program officials, in consultation with disclosure 

officers, refer to the disclosure letter as guidance when preparing FMS 

agreements. Each military department has a mechanism for verifying that 

the agreements do not exceed disclosure authority before referring them to 

the Defense Security Cooperation Agency and State Department for final 

approval.

Disclosure letters can be subject to interpretation. In matters that require 

interpretation, disclosure officers contact program managers or engineers 

for technical assistance. At military commands we visited, the disclosure 

officers were in separate organizations from the FMS program 

management offices. For weapon systems programs that had large 

international sales, the disclosure officers were co-located in the program 

offices to facilitate decisions. Some disclosure officers told us that they 

want to retain a separate chain of command from the program offices so 

they will remain independent from those who manage the sales.

Certain Controlled 

Technology Is Not 

Properly Identified and

Reviewed Under the 

FMS Program

The U.S. government has not established a process for ensuring that certain 

controlled items are fully and systematically identified when reviewing 

country requests for information or approving agreements to purchase 

items through the FMS program. While the State Department and many 

DOD components review proposed FMS agreements, no one organization 

is responsible for ensuring that all controlled items have been identified 

and reviewed. As a result, controlled missile-related technology has been 

transferred under the FMS program without proper review and approval.

DOD Focal Point for FMS 

Not Responsible for Making 

Technology Transfer 

Decisions 

While the Defense Security Cooperation Agency is the principal 

organization through which DOD carries out its security assistance 

responsibilities, including administering the FMS program, it does not have 

the mission or expertise to identify controlled technology and make 

technology transfer decisions for DOD. The Defense Security Cooperation 

8

 DOD directives require DOD components to prepare Delegation of Disclosure Authority 

Letters and other documents such as the Program Protection Plan and Technology 

Assessment/Control Plan to ensure that release of technology is considered early on for 

weapon systems. 
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Agency is responsible for raising issues, through appropriate channels, 

when higher decision-making authority is required. It relies on the military 

departments, as well as other DOD organizations, to identify technology 

transfer concerns. A DOD directive requires certain DOD components to 

conduct policy reviews, technical evaluations, operational and military 

impact assessments, and intelligence assessments of all proposed 

technology transfer cases. However, Defense Security Cooperation Agency 

officials said they do not assess whether the military departments have 

complied with this directive for controlled technology.

As required by policy, the Defense Security Cooperation Agency refers FMS 

requests and agreements for major defense equipment to the Director, 

Office of the Joint Chiefs of Staff, and the Office of the Under Secretary of 

Defense for Acquisition and Technology.9

 Joint Staff, in coordination with 

the unified commands and the military departments, provides operational 

and military mission impact assessments on technology transfers. DOD’s 

Acquisition and Technology office is responsible for ensuring that the 

proposed technology to be transferred does not threaten U.S. weapon 

superiority. Security assistance policy requires coordination with these 

organizations for all new security assistance requests and FMS agreements 

for major defense equipment, including requests and agreements that are 

expected to result in a notification to Congress or determined to be of a 

sensitive nature. Defense Security Cooperation Agency country managers 

determine whether or not to refer FMS requests and agreements that meet 

major defense equipment criteria to the Joint Staff and the Acquisition and 

Technology office. Items that do not meet the criteria are only occasionally 

referred to these organizations.

The Defense Security Cooperation Agency is also responsible for notifying 

the State Department of all requests for purchases through the FMS 

program and for obtaining the Department’s approval for FMS agreements. 

The State Department must provide its approval before any arms can be 

transferred, including arms sold under the FMS program, but it relies on 

DOD to provide information describing the proposed sale and the 

sensitivity of the technology.

9 Major defense equipment is defined as sensitive defense articles and services identified on 

the U.S. Munitions List where the U.S. government has incurred either a nonrecurring 

research and development cost for the item of more than $50 million or the item has a total 

production cost of $200 million.
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The Defense Security Cooperation Agency refers FMS requests and 

agreements to the Defense Threat Reduction Agency on an ad hoc basis. 

The Director of the Defense Threat Reduction Agency stated that the 

Agency does not generally review FMS requests or agreements. However, 

Defense Threat Reduction Agency officials told us they should be given the 

opportunity to respond officially on all FMS major defense equipment or 

sensitive items. Currently, the Defense Security Cooperation Agency does 

not formally refer FMS requests or agreements to the Defense Threat 

Reduction Agency and furnishes information copies on a limited number of 

cases.10 Because one of the Defense Threat Reduction Agency’s principal 

functions is to provide DOD’s recommendations on license applications, it 

utilizes technical experts and intelligence sources to determine the 

advisability of exporting a particular controlled item. The Defense Threat 

Reduction Agency, in reviewing licenses, will examine the legitimacy of 

foreign companies involved in the sale by using intelligence sources as well 

as the State Department’s Watch List of export violators. Defense Security 

Cooperation Agency officials stated that they informally discuss 

intelligence assessments about FMS cases with Defense Threat Reduction 

Agency officials. Defense Security Cooperation Agency officials told us 

that they have an opportunity to review the Defense Threat Reduction 

Agency’s intelligence assessments because most FMS cases have 

associated commercial sales components that require an export license.11

The export license review process identifies foreign companies that may be 

involved in the sale. 

The Defense Security Cooperation Agency also does not routinely refer 

FMS requests or agreements to intelligence organizations such as the 

Defense Intelligence Agency for review. According to DOD directives, the 

Defense Intelligence Agency upon request provides intelligence reviews on 

technology, goods, services, and munitions transfer cases to the Defense 

10 According to DOD policy, each time the Defense Security Cooperation Agency 

coordinates FMS requests and agreements with the Joint Chief of Staff and the Office of the 

Under Secretary, Acquisition and Technology, it also provides information copies to various 

DOD components, including the Defense Threat Reduction Agency.

11 According to Defense Security Cooperation Agency officials, direct commercial sales are 

often associated with FMS agreements because of foreign buyer offset requirements and 

customer preference. Offsets are the entire range of industrial and commercial 

compensation practices provided to foreign governments and firms as inducements or 

conditions for the purchase of military goods and services. Offsets can include 

coproduction, technology transfer, training, investment, marketing assistance, and 

commodity trading.
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Threat Reduction Agency for munitions licenses and to the National 

Disclosure Policy Committee for exceptions.

Gaps in the FMS Review 

Process Led to Exports of 

Missile Technology Without 

Approval

The lack of clearly established responsibilities for FMS technology transfer 

review has led to certain controlled items being transferred without proper 

review and approval. For example, MTCR-controlled equipment has been 

transferred under the FMS program without proper review and approval 

for MTCR concerns. The State Department and DOD have no assurance 

that MTCR-controlled items are routinely being reviewed for 

nonproliferation concerns. As a result, both departments have begun 

discussions to improve the review of MTCR items. The State Department 

and DOD have organizations with expertise in reviewing MTCR-controlled 

technology for export licenses but are not fully using them to review 

proposed FMS agreements.

The State Department must provide its approval before any arms, including 

those sold under FMS agreements, can be transferred. The Defense 

Security Cooperation Agency submits proposed FMS agreements or 

summaries to the State Department’s Bureau of Political-Military Affairs, 

Office of Regional Security and Arms Transfer Policy (Regional Security 

Office), for approval. When an FMS agreement involves missiles or 

components that may fall under the MTCR, the Regional Security Office 

refers the agreement to the State Department’s Office of Chemical, 

Biological, and Missile Nonproliferation for review. However, because the 

Regional Security Office does not have technical experts and may not know 

which items are MTCR-controlled, officials told us that they rely on DOD to 

identify whether or not MTCR-controlled items are included in an 

agreement.

State Department Regional Security Office officials identified a deficiency 

in the FMS review process for MTCR-controlled items in May 1999, when 

reviewing a follow-on FMS agreement to a co-production agreement to 

produce the M1A1 tank with a foreign government. The U.S. government 

sold equipment under a series of FMS agreements beginning in 1989, 

including a filament winding machine controlled by the MTCR, to this 

foreign government to build a tank factory.12 Regional Security Office 

officials reviewed this follow-on agreement and forwarded it to the MTCR 

12 A filament winding machine is used to produce lightweight, high-strength structures for a 

variety of weapon systems parts and commercial products such as liquid natural gas tanks.
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experts within the State Department for review. The MTCR experts initially 

denied approval of the FMS agreement because they thought it was for the 

sale of the filament winding machine. Because this machine is controlled 

under category II of the MTCR, they were concerned that this export could 

contribute to the foreign government’s missile production capabilities. 

However, when State Department officials learned that the agreement was 

for the sale of spares for a filament winding machine that had already been 

exported, they approved the sale of the spares. State Department officials 

told us that the original FMS agreements were not referred to the missile 

experts for review because the filament winding machine was not 

specifically listed in the information provided by the Defense Security 

Cooperation Agency and was identified as test and support equipment. 

Information was not provided that would have allowed a missile 

technology expert to know that the agreement involved MTCR-controlled 

technology.

State Department officials told us that several years ago there was another 

incident involving a sale to the same country under the same series of FMS 

agreements. The U.S. government sold an MTCR-controlled item, an 

accelerator, without proper review by MTCR experts.13 According to State 

Department officials, a subsequent export license application to sell an 

accelerator to the same country was denied by the State Department 

because the item was MTCR-controlled. The contractor questioned the 

denial because the U.S. government had already sold an accelerator to the 

same country. The State Department advised DOD officials about the 

problem but does not know what corrective measures DOD took at that 

time to ensure that MTCR-controlled items under FMS agreements were 

being properly reviewed. DOD officials responsible for the M1A1 tank FMS 

agreements said they were not contacted or made aware of the problem.

Sufficient information about weapon system components and equipment in 

FMS agreements is necessary to identify MTCR-controlled items. Many 

MTCR-controlled items may not be obvious−even to a technical expert−

unless the items in an agreement are reviewed against the list of MTCRcontrolled equipment. Some MTCR-controlled items are dual-use and 

controlled by the Commerce Control List, resulting in confusion over who 

13 An accelerator, controlled by category II of the MTCR, is an X-ray machine that can be 

used to inspect missiles and other weapon system components for cracks and voids or 

welded assemblies used in automotive, shipbuilding, aerospace, and power production 

component manufacturing.
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is responsible for identifying and controlling these items. 14 Regional 

Security Office officials assumed that DOD had identified all of the 

technology issues in FMS agreements−including whether or not the 

agreements covered MTCR-controlled technology. Although State 

Department officials have discovered two such cases, they do not know 

how many MTCR-controlled items may have been transferred under the 

FMS program without proper review because there are no procedures in 

place to identify such items. In addition to missile-related technology 

proliferation concerns, State Department officials are concerned about the 

transfer of sensitive technologies, such as medical testing equipment that 

can be used to develop biological weapons, that are controlled by other 

nonproliferation regimes.15

Technical experts in the military departments, however, told us that they do 

not review FMS agreements specifically for compliance with the MTCR. 

Officials at various military departments, commands, and program offices 

told us that they do not compare items to be transferred under FMS 

agreements against the list of MTCR-controlled items. They stated that 

MTCR compliance is the responsibility of either the State Department or 

the Defense Security Cooperation Agency. According to State Department 

and Defense Security Cooperation Agency officials, the military 

departments also have technical experts who know what a particular item’s 

capabilities are and exactly what equipment is being transferred under an 

FMS agreement.

Defense Security Cooperation Agency officials said their agency does not 

have the technical experts to identify sensitive technologies such as those 

controlled by the MTCR. Since the Defense Security Cooperation Agency 

learned of this coordination deficiency for missile-related technology, it has 

taken steps to have military departments identify missile-related items in 

proposed FMS agreements. The Defense Security Cooperation Agency sent 

draft guidance to the military departments, in August 1999, advising them 

of their responsibility to identify missile-related technology that is included 

in proposed agreements and to certify that MTCR concerns have been 

14 The Arms Export Control Act does not specifically address the export of dual-use items 

under the FMS program.

15 Other nonproliferation control regimes include the Australia Group to discourage the 

spread of chemical and biological weapons and the Nuclear Suppliers Group to control 

enrichment materials and reprocessing plant assistance to countries of nuclear proliferation 

concern.
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resolved. The Defense Security Cooperation Agency also plans to amend an 

internal coordination document to ensure that agreements have been 

properly reviewed for MTCR issues.

The State Department routinely reviews proposed FMS agreements that 

meet the dollar threshold for congressional notification.16 However, State 

Department officials said that many MTCR-controlled items are valued 

below this dollar threshold. The State Department uses a list of FMS 

agreements that the Defense Security Cooperation Agency provides and 

that gives a general description of the item being sold as the basis for 

approving the low dollar value agreements. The current process for 

approving low dollar value agreements does not identify MTCR-controlled 

items unless the State Department requests additional information to 

identify such items.

The State Department and DOD currently do not fully utilize their 

organizations that have expertise in reviewing MTCR-controlled items. For 

example, the State Department established the Missile Technology Export 

Control committee, an interagency working group, to review export license 

applications involving MTCR-controlled items. However, while the State 

Department committee representative reviews FMS agreements referred 

by the Regional Security Office, the full committee does not review FMS 

agreements for nonproliferation concerns. Defense Threat Reduction 

Agency reviewers have technical expertise in weapon systems, as well as 

knowledge of the types of items controlled by the MTCR, but they generally 

do not identify MTCR-controlled items in agreements because the Defense 

Security Cooperation Agency does not formally refer FMS agreements to 

the Defense Threat Reduction Agency. 

16 Section 36(b) of the Arms Export Control Act (22 U.S.C. 2776(b)) requires the President to 

notify Congress of FMS agreements to sell any defense articles or services for $50 million or 

more, any design and construction services for $200 million or more, or any major defense 

equipment for $14 million or more before such agreements are issued.
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DOD’s Reinvention 

Initiatives Focus on 

Shortening Technology 

Transfer Approval 

Time

DOD has several ongoing reinvention initiatives that attempt to address 

foreign customer and industry complaints about the FMS program, 

including the perception that the technology transfer review process takes 

too long. These initiatives contain proposals focused on shortening the 

technology transfer review time, for example, by more rigorously 

implementing DOD requirements for program documentation that assesses 

what technology may be transferred.

The Defense Security Cooperation Agency organized a working group 

comprised of DOD and industry officials to address complaints about the 

technology transfer process. One of the group’s proposals is to encourage 

National Disclosure Policy Committee members to make decisions in a 

timely manner when acting on exception cases. Although aware of DOD’s 

initiatives to make disclosure decisions more quickly, some committee 

representatives said they need to research a case and assess the merits of a 

proposed transfer from a national security perspective. Some officials 

responsible for disclosure and releasability decisions also told us they have 

been asked to make decisions more quickly. 

Some of the initiatives address the need to improve information to support 

technology transfer decisions. For example, the DOD and industry working 

group is proposing more rigorous implementation of current requirements 

to prepare weapon systems program documents that include technology 

transfer assessments. This proposal is aimed at addressing technology 

transfer considerations early in the development of the weapon system to 

facilitate decision-making when export requests are received. In addition, 

the Navy recommended pursuing an electronic policy distribution and 

coordination system to facilitate the work of its internal technology 

transfer review board and speed disclosure processing.17 The Army is also 

sponsoring an initiative to develop an integrated classified database of 

relevant records and documents such as the National Disclosure Policy and 

weapon-specific program protection plans to support technology transfer 

decisions. Air Force headquarters officials told us the Air Force recently 

reviewed its approximately 800 Delegation of Disclosure Authority Letters 

to ensure disclosure guidance for all Air Force programs was current. They 

said one benefit of the review was to reduce the need to consult 

17 The Navy Reinvention Laboratory issued reports in October 1998 and June 1999 

documenting its first two phases of reform work and recommendations for improvement.
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headquarters staff when making disclosure decisions related to Air Force 

programs, since officials in the field have current guidance.

The DOD and industry working group proposes that DOD conduct a 

technical review of the U.S. Munitions List to identify items and 

technologies that should be decontrolled because they are low-risk or 

already widely available. However, the State Department has authority over 

the U.S. Munitions List and, with DOD concurrence, is responsible for 

determining what items are to be controlled. 

Beside the FMS reinvention initiatives, DOD has chartered three high-level 

advisory groups to study international industrial base issues in the context 

of U.S. national security. These studies are ongoing, but the findings are 

likely to have an impact on technology transfer policy and procedures.

To date, none of DOD’s initiatives specifically addresses the gaps in the 

FMS technology transfer review process. For example, the DOD/industry 

working group’s proposals address the need to establish disclosure and 

technology transfer guidelines for controlled unclassified information. The 

group emphasizes removing unnecessary restrictions. However, the 

proposals do not address the need to establish clear responsibilities for 

ensuring that certain controlled items, like those we found, are fully and 

systematically identified and reviewed. 

Conclusions The Foreign Military Sales program does not have a systematic process to 

identify and review certain controlled technologies. As a result, items 

controlled by an international missile nonproliferation agreement were 

sold through the Foreign Military Sales program without proper review and 

approval. 

Recommendations To provide for proper review and approval of proposed exports of 

controlled technologies through the Foreign Military Sales program, we 

recommend that the Secretaries of State and Defense establish a process to

• identify all items on a proposed Foreign Military Sales agreement that 

are controlled under the Missile Technology Control Regime or other 

nonproliferation agreements by taking full advantage of the expertise 

that resides in the Defense Threat Reduction Agency, the military 

services, or elsewhere; 
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• refer the information to the State Department; 

• direct the Missile Technology Export Control group or other 

nonproliferation groups to review missile technology-related items or 

other controlled items to ensure compliance with the nonproliferation 

agreements; and

• reflect this process in ongoing reinvention efforts.

Agency Comments In commenting on a draft of this report, DOD generally concurred that it 

must develop and implement the processes necessary to strengthen 

technology transfer controls over MTCR-controlled items proposed for 

export under the FMS program. However, DOD did not agree with the title 

of our draft report or our conclusion that responsibilities are unclear under 

the FMS program. DOD pointed out that the material weaknesses we 

identified occurred only in technology transfer cases involving MTCRcontrolled items. We agree and modified the title and text to be more 

precise. However, as we note in the report, the DOD and industry 

reinvention working group recognized that confusion exists about the rules 

governing the use and transfer of controlled unclassified information under 

the FMS program. Such confusion goes beyond the transfer of MTCRcontrolled items.

DOD concurred with the intent of our recommendation but solicited relief 

from what it characterized as the daunting task of listing MTCR-controlled 

items on all FMS documents, which it believes would impede the flow of 

goods to foreign customers. Our recommendation does not limit DOD’s 

flexibility in how it identifies MTCR-controlled items, as we recognize that 

there may be different means of doing so. However, identifying controlled 

items is the first step to ensuring that such items are reviewed for 

nonproliferation concerns in compliance with U.S. export control laws. 

Therefore, we have not modified our recommendation. The comments 

from DOD are reprinted in appendix II. DOD also provided some technical 

suggestions, which we have incorporated in the text where appropriate. 

In commenting on a draft of this report, the State Department agreed with 

our conclusions and stated that it is working with the Defense Security 

Cooperation Agency to establish better procedures. The comments from 

the State Department are reprinted in appendix III. The State Department 

also provided technical suggestions, which we have incorporated in the 

text where appropriate.
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Scope and 

Methodology

To identify the process for making technology transfer decisions under the 

FMS program, we determined which organizations were involved in the 

FMS disclosure and approval processes and interviewed officials from 

these organizations about their roles and responsibilities and the criteria 

and guidance they used in performing their duties. Specifically, we spoke 

with officials from the State Department’s Political Military Bureau and 

multiple DOD offices, including the Office of the Under Secretary of 

Defense for Acquisition and Technology, the Office of the Under Secretary 

of Defense for Policy, the Defense Security Cooperation Agency, the 

Defense Threat Reduction Agency, and the Defense Intelligence Agency. 

We also spoke with officials from the Joint Chiefs of Staff, the U.S. Central 

Command, the Central Intelligence Agency, and each of the military 

departments as follows:

• Department of the Army

• Deputy Under Secretary of the Army (International Affairs)

• U.S. Army Security Assistance Command

• Tank-automotive and Armaments Command

• Aviation and Missile Command

• Apache Program Office

• Program Executive Office, Tactical Missiles

• Short Range Air Defense Office

• Department of the Air Force

• Deputy Under Secretary of the Air Force (International Affairs)

• Air Force Materiel Command

• Air Force Security Assistance Center

• F-16 and F-15 System Program Offices

• Advanced Medium Range Air-to-Air Missile Joint System Program 

Office

• Department of the Navy

• Naval International Programs Office

• Naval Air Systems Command

• E2C Program Office

• F-18 Program Office

At the military departments, we examined export weapons policy papers, 

Delegation of Disclosure Authority Letters, Technology 

Assessment/Control Plans, Program Protection Plans, FMS agreements, 

and/or export licenses for selected weapons programs. In addition, we 

reviewed the laws, regulations, DOD directives, and policies that govern 

technology transfer and disclosure of information.
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To assess controls for reviewing technology transfer considerations, we 

examined coordination documentation from various DOD offices, Joint 

Staff, and military departments. We reviewed the Defense Security 

Cooperation Agency’s coordination requests to the Joint Chiefs and the 

Office of the Under Secretary of Defense for Acquisition and Technology 

and their responses from 1994 to 1998. The Defense Security Cooperation 

Agency did not have these requests centrally maintained, so we relied on 

the records of the recipient offices. In addition, we discussed with DOD 

and State Department officials how they identified controlled technology 

and reviewed it in accordance with relevant DOD policies and procedures, 

governing laws and regulations, and MTCR guidelines. We compared the 

coordination practices for FMS items with those for export licenses to 

identify any similarities or differences among the reviewing organizations 

and their level of expertise in making decisions. By comparing practices 

with export control laws and policies, we identified areas of weaknesses 

and discussed these with DOD and State Department officials.

To examine DOD’s proposals to improve technology transfer practices, we 

obtained documents from the Defense Security Cooperation Agency and 

the military departments regarding their FMS reinvention initiatives. We 

spoke with government officials involved in these initiatives about their 

proposed plans, the status of implementation of recommendations, and/or 

the extent of coordination with other reinvention projects.

We performed our review between January and August 1999 in accordance 

with generally accepted government auditing standards.

We are sending copies of this report to Representative Sam Gejdenson, 

Ranking Minority Member, House International Relations Committee, and 

Senator Jesse Helms and Senator Joseph Biden in their capacities as 

Chairman and Ranking Minority Member of the Senate Foreign Relations 

Committee. We are also sending copies to the Honorable Madeleine K. 

Albright, Secretary of State; the Honorable William S. Cohen, Secretary of 

Defense; and the Honorable Jacob J. Lew, Director, Office of Management 
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Page 22 GAO/NSIAD-99-231 Foreign Military Sales

and Budget. We will make copies available to others on request. Please 

contact me at (202) 512-4841 if you have any questions concerning this 

report. Key contributors to this assignment were Anne-Marie Lasowski, 

Anne Howe, and John Neumann.

Sincerely yours,

Katherine V. Schinasi

Associate Director

Defense Acquisitions Issues
Page 23 GAO/NSIAD-99-231 Foreign Military Sales
Page 24 GAO/NSIAD-99-231 Foreign Military Sales

Appendix I

Military Departments’ Disclosure and Foreign Apenxdeis

Military Sales Agreement Process ApendxIi

Air Force Disclosure Process:

The Air Forces central focal point for making disclosure decisions is the Deputy Under Secretary of the Air Force

for International Affairs. The level of coordination depends on the complexity of the case. For major weapon sales,

the International Affairs Disclosure Division coordinates a position through an internal process known as Topline

coordination. If the Air Force does not have disclosure authority, it requests an exception from the National

Disclosure Policy Committee. The division is responsible for notifying staff of disclosure decisions and issuing

disclosure guidance.

Air Force Delegation of Disclosure Authority:

The International Affairs Disclosure Division delegates certain disclosure authority for major weapon sales to major

commands. Commanders of major commands, field operating agencies, and direct reporting units are responsible

for designating disclosure officers and ensuring that the command disclosure program is effective.

Air Force Foreign Military Sales Agreement Preparation:

The International Affairs Policy Division generally prepares Foreign Military Sales agreements for major weapon

systems with input from the program offices.

Army Disclosure Process:

The Office of the Deputy Chief of Staff for Intelligence has exclusive authority for making disclosure decisions for

classified military information under the Armys jurisdiction. The Office prepares proposed exceptions to the

National Disclosure Policy in consultation with the sponsoring Army agency and the Deputy Under Secretary of

the Army, International Affairs. In addition, International Affairs prepares export policies as needed.

Army Delegation of Disclosure Authority:

The Deputy Chief of Staff for Intelligence has delegated portions of its disclosure authority to selected Army

components. The commander of the U.S. Army Security Assistance Command, under the Army Materiel Command,

has the authority to make disclosure determinations for security assistance programs. Major system commands

have an information security directorate that is responsible for providing a disclosure assessment for information

under their jurisdiction.

Army Foreign Military Sales Agreement Preparation:

Each commands security assistance management directorate, in consultation with program offices, prepares

Foreign Military Sales agreements that are reviewed by the U.S. Army Security Assistance Command.
Appendix I

Military Departments’ Disclosure and 

Foreign Military Sales Agreement Process

Page 25 GAO/NSIAD-99-231 Foreign Military Sales

Navy Disclosure Process:

The Navy International Programs Office, which reports to the Assistant Secretary of the Navy (Research,

Development, and Acquisition), is the central focal point for making disclosure decisions. The Office heads an

internal working group, the Technology Transfer and Security Assistance Review Board, which makes technology

transfer decisions. The Office drafts a policy memorandum and coordinates it with various Navy components,

including systems commands. Once a consolidated position is obtained, the Office transfers the policy to the Vice

Chief of Naval Operations and the Assistant Secretary of the Navy (Research, Development, and Acquisition) to

make a final decision on the disclosure policy. If the Navy does not have disclosure authority, the Office requests an

exception from the National Disclosure Policy Committee.

Navy Delegation of Disclosure Authority:

The International Programs Office has delegated limited disclosure authority to the systems commands. The

commands have a security branch responsible for disclosure decisions under their jurisdiction.

Navy Foreign Military Sales Agreement Preparation:

The International Programs Office, in conjunction with the commands and program offices, generally prepares

Foreign Military Sales agreements. The Office also validates the agreements before they are signed.
Page 26 GAO/NSIAD-99-231 Foreign Military Sales

Appendix II

Comments From the Department of Defense ApendxIi
Appendix II

Comments From the Department of Defense

Page 27 GAO/NSIAD-99-231 Foreign Military Sales
Appendix II

Comments From the Department of Defense

Page 28 GAO/NSIAD-99-231 Foreign Military Sales
Page 29 GAO/NSIAD-99-231 Foreign Military Sales

Appendix III

Comments From the Department of State ApendxIi

(707399) Leter
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