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Foreword
 

The Defense Security Service (OSS) is charged with the mission of assisting the cleared 

defense industry in the recognition and reporting of foreign contacts and collection attempts, 

as outlined in the National Industrial Security Program Operating Manual (NISPOM). This 

annual trends report is made possible by the cumulative effort of cleared defense contractors 

reporting suspicious activity to their facility security officers and ultimately to DSS. 

This publication is designed for use by security officials, cleared contractors, intelligence professionals and DoD policy and decision-makers. It covers some of the most important topics 

associated with foreign targeting and collection attempts directed at the defense industry, 

including which technologies are being targeted, how this targeting is accomplished, and 

where it originates. 

The ultimate goal of this publication is to provide individuals and organizations with future 

trends to improve threat awareness and technology protection related to foreign collection 

attempts directed at the U.S. defense industry. I strongly encourage the continued reporting of 

suspicious contact reports to DSS field offices. Prompt reporting of foreign collection attempts 

is critical to an effective industrial security program. 

4 

William A. Curtis 

Acting Director, Defense Security Service 
Contents 

I. Executive Summary 1 

A. Reporting Trends 1 

B. World Trends 1 

C. Technology Interests Trends 1 

D. Most Frequently Reported Technology Targets 1 

E. Most Frequently Reported Foreign Collection Methods of Operation (MO) 1 

IV. Technology Analysis for Top lO'Cate,gories .. ; ... J.r. (",7".1 •••••••••.••••....8 

. '~ '.......... ./ "/ "0'1
 A. InformatIOn Systems ,?": ' i:f:'! 8 

II. Introduction (:."~~. "'~ ~:'.'~ ..--;,~: 3 

III. World Collection Trends ... 

A. Country Trends: Totals .. 

B. Sensor & Lasers _ ' 1-'.( 11 .. - ,- \ .... 

C. Electronics ; : ' 14 

D. Armaments & Energetic Materials (A&EM) 15 

E. Aeronautics 17 

F. Marine Systems 19 

G. Guidance, Navigation & Vehicle Control (GN&VC) 21 

H. Space Systems 23 

I. Power Systems 24 

1. Manufacturing & Fabrication (M&F) 25 

V. Future Trends Assessment 27 

VI. Appendix: MO Definitions 28 

The 7th Annual Defense Technology Collection Trends publication was prepared by Raj 

Shekhat and James Norvell, of the DSS Counterintelligence Office (CI). Comments and 

queries are welcome and may be directed to the DSS Counterintelligence Office at 1340 

Braddock Place, Alexandria, VA 22314-1651. Special thanks to Emeric Butler for design 

and Marion Todaro for editing. 

Approved for public release, ASD(PA)/03-S-1662 
1. Executive Summary 

A. Reporting Trends 

In 2002, the DSS/CI Office received 818 suspicious contact reports from cleared contractors, DSS industrial security representatives, 

and special agents. This represents a 14 percent 

increase over 2001. There are three major reasons for the climb in reported cases. First, the 

Internet and e-mail provide foreign entities 

with fast and efficient methods of communication and collection with relative anonymity. 

This is supported by the fact that 44 percent of 

all cases involved an e-mail request for information (RFI), up from 32 percent in 2001. 

Second, DSS continues to see a sharp rise in 

foreign nations targeting and utilizing a wide 

variety of methods as organized collection 

becomes more complex. Finally, due to the 

events of September 11, 2001 as well as other 

terrorist threats and activities in the U.S. and 

abroad, a heightened sense of awareness 

among DSS field personnel and cleared 

defense contractors has yielded an increase in 

case identifications. 

B. Country Trends 

In 2002, DSS identified 84 countries associated with suspicious activities. The number of 

associated countries has increased for 6 consecutive years: from 37 countries in 1997 to 47 

in 1998; 56 in 1999; 63 in 2000; 75 in 2001, 

and finally to 84 in 2002. This represents a 227 

percent increase from 1997 to 2002. Countries 

identified represent every social and political 

climate and DSS continues to see a broad range 

of targeting. Also of note, in 2002, the top ten 

collecting countries accounted for 57 percent 

of all suspicious activity, while the top five 

countries represented. over 40 percent of all 

suspicious activity. 

C. Technology Interests Trends 

In 2002, as reported in previous years, the 

majority of targeted technologies, including 

those associated with the Department of 

Defense (DoD) programs and weapons systems, were covered by the International Traffic 

of Arms Regulations (ITAR). Foreign entities 

continue to target weapons components, technical information and emergent technologies 

more aggressively than complete weapons systems and military equipment. Additionally, 

suspicious activity in 2002 included the targeting of all 18 militarily critical technology 

(MCTL) categories. 

D. Most Frequently Reported Technology 

Targets 

Technologies generating the most foreign 

interest in 2002 by frequency of targeting 

include: Information Systems, Sensors & 

Lasers, Electronics, A&EMs, Aeronautics 

Systems, and Marine Systems. Although the 

top technologies targeted remained relatively 

the same from 2001 to 2002, Electronics 

moved ahead of A&EMs and Aeronautics 

Systems. 

E. Most Frequently Reported Foreign 

Collection Methods of Operation (MO): 

Mas are the techniques employed by a foreign 

entity to collect intelligence against a given 

target. Cleared defense companies' reports 

from 2002 indicate several trends with respect 

to the variety of Mas employed by foreign 

entities. MOs associated with potential collection efforts in 2002 are as follows, ranked in 

order of frequency of occurrence (Note: MOs 

are defind in detail in the Appendix): 

• Request for Information (RFI) 

• Attempted Acquisition of Technology 
• Solicitation and Marketing Services 

• Exploitation of Foreign Visits 

• Exploitation of Relationships 

• Targeting at Conventions, Seminars, and Exhibits 

• Foreign Targeting ofD.S. Personnel While Abroad 

• Suspicious Internet Activity 

Graph 1 Methods of Operation by Foreign Entities in 2002 

Foreign Targeting of U.S. 3% 

Personnel While Abroad (9%) 2% Suspicious 

(6%) Internet Activity 

Targeting at 4% 

Conventions 

Exploitation: 5%
 

Relationships (7%)
 

(4%) 

44% 

Exploitation: 5% (32%) Foreign Visit (8%) 

13% 

(15%) 

24% 

(21 %) 

Note: Percentages in parentheses indicate 2001 values. 

All Charts and Graphs may not total to 100% due to rounding and because 

MOs representing less than 1% of targeting are not included. 

Although foreign entities may use a combina­ three MOs having been used in 81 percent of
 

tion of methodologies, as a particular situation all foreign collection attempts reported to DSS.
 

demands, top MOs have remained consistent More detailed information on MOs by specific
 

to those identified in previous years. The technology categories is included in the tech­


overall percentage of RFIs and Attempted nology section.
 

Acquisitions increased in 2002, with the top
 

2
 
II. Introduction 

The Defense Security Service (DSS) 

Counterintelligence (CI) Office has developed 

the 7th annual trends study as a tool for security professionals. The data and analytical work 

presented in this study are based solely on 

reports of suspicious foreign activity provided 

by DSS industrial security representatives and 

DSS special agents. These reports are composed of information provided by U.S. cleared 

defense contractors and industry personnel 

who have experienced suspicious foreign 

activity. 

The U.S defense industry develops and produces the bulk of our nation's defense technology and plays a significant role in creating and 

protecting the information that is critical to 

national security. The National Industrial 

Security Program (NISP) was established to 

ensure that the cleared U.S. defense industry 

safeguards classified information in their possession while performing work on contracts, 

programs, bids, or research and development 

efforts. 

Based on significant analytical work, this publication provides general information and 

draws conclusions that help cleared company 

personnel and DSS personnel recognize and 

report suspicious foreign activity. Through 

research presented in this document, DSS 

enables cleared contractors to enact responsive, 

threat appropriate, and cost-effective Security 

Countermeasures (SCM). Moreover, government agencies are encouraged to utilize this 

reported information to evaluate their own 

threat environments. 

3
 
III. World Collection Trends 

A. Country Trends: Totals 

In 2002, 84 countries were associated with 

suspicious activities. As the table below illustrates, this number is a 12 percent increase 

from the number of countries in 2001. 

Furthermore, the number of associated countries has increased 6 consecutive years. In 

2002, the top ten collecting countries represented 57 percent of all suspicious activity, 

while the top five accounted for over 40 percent of all suspicious activity. 

Table 1 Country Trends 

Year 1997 1998 1999 2000 2001 2002 

Number of Countries with Identified 

Collection Involvement 37 47 56 63 75 84 

B. Country Trends: Industrial Base 

Strength 

These 84 countries represent every region of 

the world and every social and political environment. In 2001, the majority of countries 

targeting cleared contractors were primarily 

countries with economies and technology 

industries that were competitive with the 

United States and with varying degrees of 

military capability. In 2002, a new trend is 

observed, with the majority of collecting 

nations categorized as still in the development 

stage. Graph 2 below illustrates this finding. 

This trend accounts for the fact that components rather than complete defense systems 

continue to be more heavily targeted. The 

majority of developing nations are not in a 

position to build state-of-the-art defense 

equipment. 

Graph 2 Targeting Based on Foreign Industrial Strength 2002 

Underdeveloped 150/0 

Countries (16%) 

55% 

(39%) 

Developed 

Countries 

4
 
C. Worldwide Breakdown by Region 

Figure 1 Regional Breakdown of Foreign Collection in 2002 

rP 

• Europe (20%) • North Asia (24%) 

o Middle EasUNorth Africa (24%) • South Asia (19%) 

• Sub-Saharan Africa (1 %) D Unknown (3%) 

The map above reflects the regions where collection efforts originated. The associated percentages indicate the level of collection reported in 2002. The map does 

not imply national-level support of the collection activity. Collectors may have 

based their operation in a third country to conceal intentions or identity as the ultimate end-user of collected technology. 

o South America (4%) 

o Other (5%) 

The 2002 sources of targeting outlined in the 

world map in Figure 1 include North Asia and 

South Asia, which were presented differently 

in 2001 as Asia and Eurasia. These two 

regions are split into North Asia and South 

Asia to more accurately account for political, 

religious, and social similarities between 

countries in Asia. In light of this new reporting methodology, North Asia and South Asia 

represent a combined 43 percent of all collection in 2002, compared to Asia and Eurasia, 

which represented a combined 40 percent of 

all collection in 2001. 

cent of total collection in 2001 to 20 percent 

in 2002. This does not imply a significant 

decrease in overall targeting by countries 

within the European category, but rather a 

more significant increase in targeting from 

Asian and Middle EastlNorth African nations. 

The Middle East! North Africa region 

increased from 17 percent in 2001 to 24 percent in 2002. In addition, South America 

showed comparative declines in targeting 

from 10 percent in 2001 to 4 percent in 2002, 

and Sub-Saharan Africa also showed comparative declines in targeting from 8 percent in 

2001 to 1 percent in 2002. 

Collection within the European region exhibited a comparative decline, falling from 30 per5
 
D. Foreign Collectors 

Graph 3 Foreign Collectors of U.S. Technologies 

40% ,.---------------------------------------, 

35% I I
 

36%
 

30%
 

25%
 

24%
 

20%
 I ,23%.
 

21%
 

15%
 

10% 

5% 

0%
 

Commercial Government Individual Unknown
 

Sponsored
 

20% 

0% 

.2002 D 2001 D 2000 

Government
 

Affiliated
 

DSS identifies types of collectors after evaluating reported information, conducting extensive research, and assessing relationships and 

representatives in each incident. Targeting 

sponsored by foreign governments includes 

Ministry of Defense, foreign military 

attaches, and other official government entities. This targeting accounted for 17 percent 

of all reported cases in 2002, a decrease of 6 

percentage points from 2001 reporting. 

Foreign government-affiliated collection 

includes research institutes, laboratories, government-funded universities, and contractors 

representing governments. These types of 

collectors represent 31 percent of all reported 

incidents, a significant percentage increase 

from the 21 percent reported in 2001. (Note: 

Foreign companies whose work is exclusively or predominantly in support of government 

agencies are also included as government 

affiliates.) 

Foreign commercial activities are businesses 

engaged in the commercial and defense sectors, whose suspicious activity is not associated with foreign governments. Foreign commercial collection has continued to decrease 

relative to other types of collection from 36 

percent in 2000 to 19 percent in 2002. 

Although corporate collection is attributed to 

the dual-use nature of many technologies, the 

rapid decline in commercial collection over 

the past 3 years is correlated with the 

increase in government-affiliated collectors. 

DSS analytical work suggests that the 

increase in government-affiliated collection is 

linked with the decrease in commercial collection for two reasons: (1) More accurate 

6
 
identification of the ultimate end-user, and 

(2) The large increase in targeting from countries that maintain a strong union with their 

own (foreign) companies. 

Finally, foreign individuals include those 

individuals for whom DSS has been unable to 

identify an affiliation because of a lack of 

information (where only a name or e-mail 

address is known). The number of reported 

individual collection attempts has decreased 

over the last 3 years, as DSS continues to 

aggressively identify affiliations held by individuals. It is clear that the majority of these 

incidents involved foreign sponsorship or 

affiliation; however, a small percentage were 

identified as seeking personal financial gain. 

Foreign government-related collection represented almost 50 percent of attempts in 2002. 

The continued increase in foreign government-affiliated collectors highlights the possibility that governments direct their research 

institutes, universities, and science and technology academies to develop and acquire 

desired technologies. As noted earlier, many 

sensitive military technologies are dual-use, 

so technological expertise in these areas not 

only contributes to military superiority but 

also to a profitable industrial base. In light of 

this and the findings illustrated in Graph 3 

(previous page), foreign government-affiliated collection is expected to rise. DSS expects 

foreign government-affiliated collection to 

increase at the expense of direct governmentsponsored collection as nations attempt to 

gather desired information through a more 

indirect route. 

Figure 2: Shipments to the Port of Umm Qasr, Iraq 

7
 
IV. Technology Analysis for Top 10 

Categories 

DSS documents and reviews foreign interests 

in critical U.S. defense technology in 18 categories. The Militarily Critical Technology 

List (MCTL) is the primary reference for DSS 

to identify and describe militarily critical technologies and subcategories. The MCTL is a 

detailed and structured compendium of the 

emerging technologies the DoD assesses to be 

critical to maintaining superior U.S. military 

capabilities. The MCTL can be found on the 

Internet at www.dtic.mil/mctl. The following 

is a detailed look at the top militarily critical 

technologies targeted in 2002. (Graph 4 

breaks down the overall targeting) 

Graph 4 Top 10 Technologies Targeted in 2002 

Power 3% 

Systems (1 %) M&F

Space 4%
 

Systems (5%)
 

GN&VC	 4%
 

(4%)
 

Marine 4% 

Systems (6%) 

9%
 

(11 %)
 

9%
 

(14%)
 

A. Information Systems 

Overview-Information Systems remained the 

single most targeted militarily critical technology category, accounting for a quarter of all 

suspicious collection activity reported to DSS 

in 2002. Interest in this category, relative to 

other technologies, decreased by 5 percentage 

points from 2001 reporting. However, 58 (70 

percent) of the 84 foreign countries associated 

with suspicious activity in 2002 attempted to 

collect information systems technology. This 

is a significant increase from last year, when 

44 countries were associated with similar collection activity, and can be partly attributed to 

an increase in their indigenous military pro8
 
Collection Incidents for Information Systems Subcategory 1997-2002 (continued) 

Information Systems 1997 1998 1999 2000 2001 2002 

Intelligent Systems 4 3 0 11 5 28 

Modeling and Simulation 5 6 6 12 17 11 

Network Switching 4 1 0 1 10 28 

Signal Processing 0 1 3 9 20 21 

Software Systems 10 15 13 33 27 8 

Transmission Systems 5 6 4 29 1 4 

Example of Information Systems Collection Attempt 

Infonnation systems trend from 2001: targeting of encryption technologies. 

KG-84 cryptographic devices KIV-7HS 

Attempted acquisition was the primary method of targeting of encryption devices. Foreign 

i i entities attempted 

to purchase 

encryption 

devices such as 

the KG-194, KN7HS, and the KG84 (pictured 

above) without 

proper export 

licenses. Also targeted were submersible and miniature lightweight secure radios. Government 

affiliated and commercial entities were identified with the majority of targeting in those cases. 

In 2002, two individuals were found guilty of attempting to export KIV-7 HS technology to 

China. The highly publicized arrests followed a 4-month investigation by the Customs Special 

Agent-in-Charge Office in Baltimore. The technology that these individuals were attempting to 

export includes the most sensitive items on the U.S. munitions list. The KIV-7HS encryption 

unit/technology is designed for government use only and cannot be legally exported from the 

U.S. without first obtaining an export license from the State Department. An undercover 

Customs agent, posing as the intennediary, engaged in a series of telephone conversations and 

faxed correspondence with the subject. Correspondence revealed that the subject was affiliated with a Singapore-based company, the buyer of the KIV-7HS units. The subject asked if the 

undercover agent could obtain the license. After being told by the undercover agent that no 

license would be approved for export to China and that export to China would be a violation 

of the Anns Control Export Act, the subject continued to show interest. On August 24, the 

subject confinned to the U.S. Customs undercover agent that the KN-7HS units would be 

shipped from Los Angeles through Taipei to Singapore, then forwarded to China. 

10
 
duction capabilities. Fifty-four percent of all 

collection was government sponsored or affiliated and 12 percent involved commercially 

related collection. 

Modeling and simulation technology was also 

significantly targeted in 2002. This technology encompasses a wide-range of dual-use 

applications, ranging from engineering design 

to flight trainers and simulators. The key elements of this technology involve digital processing to manipulate the data, human systems interface (through which the users interFigure 3: Satellite 

act with the data) and the knowledge embedded in the software. Several incidents 

involved the targeting of Electromagnetic 

Pulse (EMP) model and simulation software. 

In one incident, a foreign entity attempted to 

obtain modeling and simulation software for 

EMP weapons effects. 

Specific targeted technologies included: 

• CPU Chips 

• EMP Simulation-to analyze HEMP/APM 

vulnerabilityIlethality 

• Interactive Technical Manuals 

• Intercept Technology Platforms (PLS, 

GSM, CDMA) 

• Microwave Technology 

• Mobile Computing Devices 

• Multiple Encryption Technologies 

• Multiple Modeling & Simulating 

Technologies (electromagnetic pulse) 

• Multiple Software Platforms (JOVIAL, GIS) 

• Simulator Technology 

• Video Tracking System 

Table 2 

Collection Incidents for Information Systems Subcategory 1997-2002 

Information Systems 1997 1998 1999 2000 2001 2002 

Command, Control, Communications, 

Computing, Intelligence (C4 I) 6 5 5 8 24 12 

Computer Aided Design, (CAD) 

Computer Aided Manufacturing (CAM) 1 1 2 4 2 2 

High-Performance Computing 2 5 0 3 3 3 

Human Systems Interface 0 0 0 0 0 4 

Information Security 13 6 2 21 16 7 

9
 
3% 

19% 

44% 

(27%) 

Graph 5 

Methods for Targeting: Information Systems 

Targeting of 4% 

U.S. Personnel (6%) 4% Internet

(6%) Activity 

Targeting at 3% 

Conventions (5%) 

Exploitation:
 

Relationships (6%)
 

Exploitation: 5% 

Foreign Visit 

17% 

(24%) 

(15%) 

Note: For all graphs, the 2001 values that are not shown were unavailable 

B. Sensors & Lasers 

Overview-Sensors & Lasers remained the 

second most targeted technology category, 

comprising 17 percent of all suspicious collection activity reported to DSS in 2002. 

Interest in this category decreased from 2001 

by 3 percentage points, compared with other 

technologies. Moreover, the number of countries targeting sensors and lasers stayed relatively stable from the previous year, with 40 

countries reported in 2002 versus 41 countries reported in 2001. Additionally, 50 percent of all collection was government sponsored or affiliated. 

Acoustic Sensors remained the most heavily 

targeted subcategory within Sensors & 

Lasers, representing almost 68 percent (46 

out of 68 total attempts) of collection within 

the category. Marine passive sonar technology was again the most targeted technology 

within the Acoustic Sensors' sub-category, 

accounting for 37 percent. Passive sonar has 

little commercial application aside from limited academic research and is predominantly 

used for covert military location of underwater objects that radiate sound, and more 

specifically for antisubmarine and antisurface 

warfare. 

In addition, air and terrestrial platform 

11
 
collection quadrupled from 3 attempts in DSS noted a sharp decline in reports of tar­


2001 to 12 attempts 2002. Air platforms are geting against electro-optical sensors. These
 

those applications used on aircraft to reduce sensors have military applications that facili­


noise levels and aircraft
 tate operations at
 

acoustic vibrations.
 night or under conTerrestrial platforms ditions of limited 

are seismic acoustic visibility. This 

systems for location technology is used 

and identification of in night-vision 

petroleum producing goggles, vehicle 

features within the drive systems and 

earth's crust. Passive weapons sights. As 

acoustic terrestrial sys­ reported in 2001, 

tems are included for several countries 

intruder detection and Figure 4: Ship Radar 

for the detection and 

location of target vehicles and direct fire 

weapons. Air and terrestrial platforms, like 

other acoustic sensor technologies, are targeted based on military needs. 

had second and 

third generation 

image-intensifier capabilities based on 

assessed technology transfers. This suggests 

that the decline in reported targeting of electro-optical sensor technology, in 2002, may 

in part be a result of countries having 

Table 3 

Collection Incidents for Sensors & Lasers Subcategory 1997-2002 

Sensors and Lasers 1997 1998 1999 2000 2001 2002 

Acoustic Sensors 4 18 2 5 41 46 

Air and Terrestrial Platforms N/A N/A N/A N/A 3 12 

Marine Passive Sonar N/A N/A N/A N/A 17 17 

Marine Platform N/A N/A N/A N/A 11 5 

Other Acoustic Sensors N/A N/A N/A N/A 0 7 

Electro-Optical Sensors N/A N/A N/A N/A 0 0 

Focal Plane Array/Infrared 8 11 5 5 7 11 

Radars 5 8 22 9 20 5 

Imagery 5 13 8 3 12 0 

Lasers 0 0 4 8 24 4 

Other 2 10 5 14 21 0 

Note: Acoustic sensors were not subcategorized prior to 2001 

12
 
Activity Targeting at 4%1 

Conventions (3%) .-J-.,~!r-,-­

... 4% 

6% 

sufficiently updated or accepted current sec­ • Microwave Radar 

ond or third generation sensors available to • Patriot Radar 

them. • Photo Divide Array Sensor 

• TVS 8000 (High-tech Infrared Camera) 

Specific targeted technologies included: • Cargo Inspection System 

• Mobile Air Defense Radar 

• Mine Detection System 

Example of Sensors & Lasers Collection Attempt 

A cleared DoD contractor received an email request from an embargoed nation to 

purchase several thousand sonobuoys. A 

Figure 5: Sonobuoy sonobuoy is an instrument that is dropped 

into the ocean (from either an aircraft or ship) to record underwater sounds. It includes a 

hydrophone and a radio transmitter to send sound signals back to the aircraft or ship. The 

U.S. Navy uses sonobuoys to detect enemy submarines. The DoD contractor believed the 

request to be suspicious because of the high number requested. The contractor also suspected that the sonobuoys would be transferred to a third country. 

Graph 6 Methods for Targeting: Sensors & Lasers 

Targeting of U.S. 2%I 

Personnel Abroad (7%) 1% Internet 

Exploitation: 

Foreign Visits (5%) 

Exploitation: 

Relationships (5%) 36% 

(28%) 

27% 

(22%) 

13
 
C. Electronics 

Overview-Foreign targeting of electronics 

technologies moved from 5th in 2001 to 3rd 

most frequently targeted technology in 2002, 

with 34 countries accounting for 12 percent of 

all targeting. In 2001, 24 countries targeted 

electronics technologies, accounting for 7 percent of all targeting. Foreign government and 

government affiliated entities represented 58 

percent of all electronics targeting efforts, followed by commercial entities representing 28 

percent and individuals accounting for 10 percent. This remained consistent with 2001 

reporting, where 60 percent of electronics targeting was associated with foreign government and government affiliated entities. 

The majority of electronic targets fall within 

the materials/components and fabricated subcategories. Specific targeted technologies 

included: 

• Band Pass Filters 

• Combiners 

• Monolithic Microwave Integrated Circuit 

(MMIC) Chips 

• Oscillators 

• Pin Diodes 

• Phase Shifters 

• RF Filters 

• SP12T Absorptive Switch 

• Wave Guides 

Figure 6: Electronic Circuit Board 

Table 4 

Collection Incidents for Electronics Subcategory 1997-2002 

Electronics 1997 1998 1999 2000 2001 2002 

Materials/components 4 6 12 1 17 50 

Fabricated materials 2 3 1 0 5 31 

Microelectronics 5 2 4 7 1 1 

Optoelectronics 4 1 1 1 2 2 

14
 
Graph 7 Methods for Targeting: Electronics 

Targeting Suspicious of U.S. 2% 

Personnel Abroad 2% Internet Activity 

Exploitation: 2% Targeting at 

Relationships (4%) Conventions 

Solicitation & 5% ------: 

Marketing (10%) 

Request for 49% 

Information (41 %) 

38% 

(33%) 

D. Armaments & Energetic Materials 

(A&EMs) 

Overview-A&EMs was the 4th most targeted 

technology, representing 9 percent of all suspicious collection activity reported to DSS in 

2002, a decrease, relative to other technologies, of 6 percentage points from 2001 reporting. However, the number of countries targeting AE&Ms increased from the previous year, 

with 29 countries reported in 2002, versus 27 

countries reported in 2001. In addition, 36 

percent of all 2002 collection of AE&Ms was 

government sponsored or affiliated collection. 

There has been a dramatic increase in the pursuit of "smart weapon" design and development, with only a few countries currently 

capable of producing guided and individually 

targeted multiple-reentry weapons. The 

extended range and superior level of accuracy 

of "smart weapons" will continue to make this 

critical technology a targeted commodity. 

u.s. advanced A&EM technology continues 

to be a major target for foreign collectors 

worldwide, who are attempting to update and 

integrate core weapons systems of military, 

paramilitary and terrorist forces. It is clear 

from DSS analysis that there is a growing 

trend towards the A&EM subcategory, 

General A&EM Targeting, as developing foreign collectors attempt to improve all areas of 

this critical technology. Analysis supports the 

15
 
conclusion that developed and, more importantly a larger number of developing countries 

continue to aggressively target the entire spectrum ofA&EMs because of their limited 

knowledge of these weapons systems. 

Specific targeted technologies included: 

• Advanced Gun Barrels 

• AIM-9X/9M 

• Classified Patriot Data 

• Crusader Missile 

• Explosive Stands for Lab Testing -

Nitroglucose, rdx TNT 

• Land Attack Standard Missile 

• MK 36 Sidewinder Rocket Motor 

• MK 38 Machine Gun System 

• Missile Data 

• Objective Individual Combat Weapon 

• TOW2/TOW2A Weight and Propulsion Data 

Table 5 

Collection Incidents for Armaments & Energetic Materials Subcategory 1997­

Armaments & Energetic Materials 1997 1998 1999 2000 2001 2002 

General A&EM targeting 0 0 0 0 28 71 

Ammunition, small/medium caliber 0 0 0 0 4 1 

Bombs, warheads, large caliber projectiles 5 8 4 16 24 4 

Energetic material 0 1 1 1 32 1 

Safing arming, fusing, firing 1 1 0 5 9 9 

Gun and artillery systems 1 4 4 1 9 3 

Mines, countermines, and demolition systems 1 1 0 1 2 3 

Example of Armaments & Energetic Materials Collection Attempt 

A cleared contractor in Pennsylvania 

received e-mail from an embargoed 

nation requesting information concerning 

advanced gun-barrel technology. It 

appears the information was requested in 

order to prolong the life of gun barrels 

within the country and was surprisingly 

requested by a medical professional. 

Open source research could not find the 

foreign company; however, open source 

research associated three separate foreign 

Figure 7: Surface-to-Air Missiles government defense contractors with a 

telephone number on the e-mail. These 

foreign government contractors were associated with front companies. 

16
 
Graph 8 Methods for Targeting: Armaments & Energetic Materials 

Exploitation: 6% 

Foreign Visits (11 %) 

11% 

(27%) 

11% 

(11 %) 

(9%) 

Targeting at 

Conventions 

12% 

Internet 

Activity 

48% 

(27%) 

E. Aeronautics Systems 

Overview-Aeronautics technology was tied 

for the 4th most targeted technology, accounting for 9 percent of all 2002 reports. This 

marked a 2-percentage point decrease, relative 

to other technologies, from 2001 reporting. 

Thirty-eight different countries attempted to 

collect aeronautics technology in 2002. 

Moreover, 45 percent of all collection was 

government sponsored or affiliated. The technologies placed in this category include those 

associated with aircraft, aero-gas turbine 

engines and the human interface technology 

within aeronautics systems. In 2002, there 

were a total of 92 incidents of aeronautics 

technology being targeted, including fixed 

wing aircraft parts and engine technology. In 

one instance, an embargoed nation requested 

specific engines for use in their military aircraft. 

Specific targeted technologies included: 

• Gas Turbine Engines 

• F-18 

• F-16CIJ Blueprints 

• Unmanned Aviation Vehicles (UAV) 

17
 
Table 6 

Collection Incidents for Aeronautics Systems Subcategory 1997-2002 

Aeronautics 1997 1998 1999 2000 2001 2002 

Aircraft, fixed wing 10 5 6 11 46 13 

Gas turbine engines 8 5 7 3 7 12 

Human (crew systems) interface 1 5 0 1 0 1 

Energetic material 3 1 1 4 9 3 

Safing arming, fusing, firing 4 4 1 4 21 18 

Figure 8: F-15 Eagle 

Example of Aeronautics Systems Collection Attempt 

An individual from an embargoed country e-mailed a cleared DoD contractor with a request 

to purchase a "sample" Unmanned Aerial Vehicle (DAV). Depending upon its performance, 

the individual stated that he might purchase "many more". The iIidividual also requested 

performance characteristics of the DAV, which were export controlled. The individual 

involved was identified by DSS in three other unauthorized attempts to obtain export-controlled aeronautics technology from other cleared 000 contractors. 

18
 
4%~

Conventions (6%) I 

6% ---. 

(7%) 

7% 

Graph 9 Methods for Targeting: Aeronautics Systems 

Targeting of U.S. 3%
 

Personnel Abroad (10%)
 3% Internet 

I (2.5%) Activity 

Targeting at 

Exploitation: 

Relationships 

Exploitation: 

Foreign Visits (7%) 41%

(34%) 

21% 

(22%) 

F. Marine Systems 

Overview-Marine Systems was the 6th most 

frequently targeted technology, representing 4 

percent of all 2002 targeting, compared to 6 

percent of all 2001 targeting. The number of 

countries targeting Marine Systems stayed relatively the same, with 25 targeting in 2001 

versus 26 targeting in 2002. Furthermore, 30 

percent of all collection was government 

sponsored or affiliated. There were 47 incidents reported to DSS by cleared DoD contractors involving marine technology. The 

majority of these reported incidents, at least 

50 percent, involved RFIs sent via email or 

letter. In addition, there were several reported 

incidents involving the outright acquisition of 

marine technology by foreign entities who 

either solicited or applied for employment 

with DoD contractors. 

Specific targeted technologies included: 

• Blueprints for Aircraft Carrier 

• DD-2l 

• Electroware Absorption 

• Guided Missile Destroyer 

• General Information on Ships & Submarines 

• Information on Hull Thickness at Specific 

Points in Ships 

• Marine/Hydrographic Surveyor 

• Propeller Design 

• Turbines on Ships 

• Underwater Acoustics 

• Unmanned Undersea Vehicles 

19 
Table 7 

Collection Incidents for Marine Systems Subcategory 1997-2002 

Marine Systems 1997 1998 1999 2000 2001 2002 

Propulsors and propulsion system 3 1 0 1 0 3 

Signature control and survivability 1 2 2 5 1 1 

Subsurface and deep submergence vehicles 2 0 2 3 1 2 

Figure 9: Attack Submarine USS Seawolf 

20
 
Activity 

10%-­

° Conventions 

Request for 

Information 52% 

Graph 10 Methods for Targeting: Marine Systems 

Internet 6% 30/c Targeting at 

Exploitati~n:

Foreign VISitS 

10% 

19% 

G. Guidance, Navigation, & Vehicle 

Control (GN&VC) 

Overview-GN&VC technology was the 7th 

most targeted technology, comprising 4 percent of all suspicious collection activity 

reported to DSS in 2002. Overall interest in 

this category remained at 4 percent of all collection efforts; however, GN&VC technology 

was the 10th most targeted in 2001. The total 

incident number increased from 28 in 2001 to 

42 in 2002. Fifteen countries targeted 

GN&VC technology in 2002, with the top 

country representing 26 percent (11 of 42) of 

the total. Furthermore, 44 percent of all collection was government sponsored or affiliated. The number of incidents of targeting has 

increased from 2001 because military ships, 

vehicles, and platforms require precision guided technology and navigation capabilities. 

DSS expects a continual increase in the targeting of GN&VC technology given that current 

trends in warfare require increasingly accurate 

guided long-range systems. 

Specific targeted technologies included: 

• Avionics System Auto-pilot Technology 

• Air Defense Simulator 

• GPS Sensors 

• GPS Software Simulation Tools 

• Gyro Stabilizers 

• Inertial Navigation System Technology 

• Laser Gyroscopes 

• Fiber Optic Inertial Measuring Unit 

• Transponders 

21
 
Example of Guidance, Navigation, & Vehicle Control Collection Attempt 

A cleared company received several phone calls to purchase ten, 

export-controlled ring laser gyroscopes for a foreign company. 

When asked to provide the names of the end-user, the caller never 

responded. He left several messages requesting the gyroscopes. 

Ring laser products are produced for a number of aerospace, land 

vehicle, marine and space applications. '-­ ,­

Figure 10: Ring Laser Gyroscope 

Graph 11 Methods for Targeting: Guidance, Navigation, & Vehicle Control 

Exploitation:
 

Foreign Visits
 

Exploitati~n: 5%
 

Relationships
 

7% 

Targeting at 

Conventions 

5%° 

29% 

3oil Suspicious

° Internet Activity 

44% 

22
 
H. Space Systems 

Overview-Space Systems technology was 

the 8th most targeted technology, comprising 

4 percent of all suspicious collection activity 

reported in 2002. Interest in the category 

decreased slightly, relative to other technologies, by 1 percentage point from 2001 reporting. However, the number of countries targeting Space Systems increased significantly 

from the previous year, with 23 countries 

reported in 2002 versus 14 in 2001. 

Additionally, 67 percent of all collection was 

government sponsored or affiliated. 

Electronic RFIs accounted for 29 percent of 

all Mas; however, more surprising is the fact 

that attempted acquisition of space systems 

technology represented 44 percent of all Mas. 

As reported last year, the loss of critical information through web site advertising by 

cleared U.S. defense contractors is of great 

concern. More specifically, the sites provide 

information that includes names of defense 

contractors, universities researching critical 

technology, government agencies conducting 

R&D, and event calendars and locations. DSS 

analytical work suggests that, as defense contractors continue to provide "directional" 

information to foreign collectors, attempted 

acquisition will continue to be the easiest 

method of operation for accessing sensitive 

technology. 

Specific targeted technologies included: 

• GPS Satellite 

• Overhead Surveillance Technology 

• Satellite Photo Imagery System 

• Satellite Information 

• Space Component Information 

Figure 11: International Space Station 

Example of Space Systems Collection Attempt 

An e-mail request was sent to a cleared defense contractor from an embargoed nation requesting Global 

Positioning System (GPS) code signal and performance capabilities for GPS satellites. The e-mail was 

sent from a faculty member of a foreign state-run 

university and included the following detailed questions about GPS technology: 

1) The maximum radial velocity appears when the 

GPS satellite crosses the horizon. Why? 

2) The CIAI code signal on Ll is twice as powerful 

as the P-code signal on Ll. Why? 

3) What is the role ofL3 and L4 in the GPS system? 

23
 
Graph 12 Methods for Targeting: Space Systems 

7% ----, 

Conventions 

47% 

Targeting at 

Solicitation & 

Marketing 

9% 

I. Power Systems 

Overview-Power Systems was the 9th most 

frequently targeted technology in 2002, representing 3 percent of all collection attempts, 

compared with 1 percent of all attempts in 

2001. Additionally, 13 countries targeted 

power systems in 2002, and 54 percent of all 

targeting involved government or government 

affiliated entities, while 34 percent involved 

commercial entities. Power systems technology includes electric subsystems and systems 

in literally hundreds of kinds of military 

equipment. These ongoing applications dictate 

military requirements for power level, power 

reliability, ruggedness, packaging and the ability to operate in a wide-range of environments. Technologies targeted within power 

systems in 2002 included fuel cell technology, 

batteries, pulse generators and magnets used 

in power systems. 

24 

The majority of targeting focused on batteries, 

including high power lithium, thermal, and 

hydrogen batteries. The two most prevalent 

MOs identified with power systems were 

requests for information and attempted acquisition of technology, each accounting for 35 

percent (or a total of 70 percent) of all targeting. Solicitation and marketing of services 

accounted for 15 percent of the targeting 

efforts. 

Specific targeted technologies included: 

• Diesel Systems for Patriot Missile 

• Energy Light Battery Cells 

• Hydrogen Battery Cells 

• Lithium Battery Cells (High-power) 

• Magnets (High-power) 

• Silver-Zinc Battery Cells 
Graph 13 Methods for Targeting: Power Systems 

Exploitati~n: 6% 

Relationships 

Exploitation: 

Foreign Visits 

15% 

35% 

35% 

J. Manufacturing & Fabrication (M&F) 

Overview-M&F technology was the 10th 

most targeted technology, comprising 3 percent of all suspicious collection activity 

reported to DSS in 2002. Interest in the category decreased slightly relative to other technology, by 1 percentage point from 2001 

reporting. Additionally, the number of countries targeting M&F technology increased 

from the previous year, with 18 countries 

reported in 2002, versus 15 countries reported 

in 2001. Furthermore, 50 percent of all collection was government sponsored or affiliated. 

The most common method of targeting for the 

technology was through RFIs, which occurred 

in 52 percent of all attempts in 2002, compared with 46 percent of all attempts in 2001. 

Specific targeted technologies included: 

• Calibration Technology 

• Fabrication Vacuum Vessels 

• Pressure Vessels - Kevlar Air Fuel Tanks 

• Rocket Motor Case Fabrication Methods 

25
 
Exploitation: 

Relationships 

Graph 14 Methods for Targeting: Manufacturing & Fabrication 

52% 13% (46%) 

26
 
v. Future Trends Assessment 

The analytical work presented in this document clearly brings into focus new trends that 

were seen in 2002. The most significant of 

these is the substantial increase in targeting by 

developing nations and the multiple trends 

that seem to support this demographic shift. 

As mentioned in the World Collection Trends 

section, it is clear that developing nations 

have become the most significant threat collectors to the U.S. Defense Industry, with over 

half of all attempted collection originating in 

developing nations. This is also illustrated in 

the regional geographic trends where areas 

with large numbers of developing countries 

(Asia, Middle East) have shown an increase in 

collection and regions with primarily developed nations (Europe) have shown declines. It 

is also important to note that in some cases 

developing nations may be utilizing developed 

countries as a base for their targeting operations and vice versa. 

Developing nations will continue to produce 

small arms and ammunition as well as military aircraft, armored vehicles, naval vessels, 

and even ballistic missiles. Furthermore, these 

countries aim to integrate newer technologies 

into their products and hence reduce their 

dependence upon foreign military hardware. 

In some cases the belief is that a robust 

weapons program will reduce the effects of 

arms embargoes, interruptions in the flow of 

spare parts, restrictions on the use and resale 

of foreign weapons, and suppliers' attempts to 

influence their foreign and domestic policy. 

With regard to actual targets, Information 

Systems and Sensors will most likely remain 

the two most frequently targeted categories by 

mostly government or government affiliated 

entities in the coming year. Of note, Chemical 

and Biological Systems fell from the top lO 

list of targeted technologies to 12th overall. 

The current global climate and the high level 

of interest in development and acquisition of 

biological and chemical weapons by foreign 

nations, militaries, and terrorist groups over 

the last few years does not directly align with 

the decreasing trend cited in the DSS analysis. 

Further research suggests that many of the 

cleared facilities handling biological and 

chemical systems have ramped up securitylevels in light of significant global interest. 

More importantly, it is possible that foreign 

groups interested in these technologies may 

have targeted other nations or already 

acquired the desired systems. 

Another important trend is the significant rise 

in government-affiliated collection over the 

last 3 years, with a simultaneous decrease in 

both commercial and individual targeting 

compared with other collectors over the same 

period. As stated earlier, more accurate detection of the real end-user is one reason for the 

noted trend. However, DSS has seen a sharp 

increase in targeting by nations that have a 

clear hand in their foreign companies' operations. These countries tend to be either in the 

developing stage or close to other hostile 

nations. 

Additionally, there are important observations 

to note with regard to foreign methods of 

operation. First, nations targeting U.S. technology will continue to use whatever method 

is available to them to acquire technology or 

information. Countries vary in their methods, 

and, as the number of countries targeting U.S. 

technology matures, the expectation is that the 

methods will remain broad. One exception is 

that the RFI and Attempted Acquisition are 

two MOs that will continue to be the most 

27
 
popular MOs. The increase in RFI use is obvious because all countries targeting new technology start at this point; however, the rise in 

Attempted Acquisition is slightly more of a 

concern. Foreign entities are able to save significant time and money by acquiring technologies, which cuts out costs associated with 

research and development. The next step then 

becomes reproducing the technology. 

As noted earlier, advertising and information 

provided by defense contractors through their 

web-sites and in other formats are a major 

starting point for attempted foreign acquisition. In many cases RFIs can be bypassed in 

favor of outright acquisition of the desired target. The cleared contractor will likely be the 

most lucrative target and DSS estimates that 

reports of suspicious activity will increase 

from the 818 reported in 2002 despite active 

security countermeasures taken by these compallIes. 

28
 
VI. Appendix: MO Definitions 

Request for Information (RFI). A request 

for information is any request, not sought or 

encouraged by the cleared company, received 

from a known or unknown source that concerns classified, sensitive or export-controlled 

information. While the recipient may not 

have directly solicited the request, the inquiry 

may have actually been indirectly solicited. 

An example of an unwanted, but indirectly 

solicited request is an incident where a cleared 

defense contractor's product was reviewed in 

a trade journal and the company subsequently 

received a number of suspicious, but "solicited," reader-service card inquiries from an 

embargoed country. 

Attempted Acquisition of Technology. This 

MO involves foreign entities attempting to 

gain access to sensitive technologies by purchasing U.S. companies and technology. 

Once a foreign entity gains ownership, control, or influence over a U.S. company with 

classified contracts, that ownership, control or 

influence must be mitigated through an insulating instrument approved by the United 

States Government. If such an approved insulating legal instrument is not implemented, the 

U.S. company and the foreign investor face 

the possibility of contract cancellations and 

loss of future classified contracts. 

Solicitation and Marketing of Services. In 

this MO, consistent with past reporting, foreign individuals with technical backgrounds 

offer their services to research facilities, academic institutions, and even cleared defense 

contractors. A number of incidents involved 

foreign nationals seeking postdoctoral fellowship at cleared universities. Emigres are continuing to seek employment at companies that 

are involved in cutting edge technologies. 

Exploitation of Foreign Visit. The term "foreign visitor" includes one time visitors, long 

term visitors (such as exchange employees, 

official government representatives and students) and frequent visitors (such as foreign 

sales representatives). Suspicious conduct 

includes actions prior to, during and after a 

visit. The primary factor that makes foreign 

visits suspicious is the extent to which the foreign visitor would request access to facilities 

or to discuss information outside the scope of 

approved activities. 

Targeting at Conventions. Conventions, 

seminars and exhibits are rich collection targeting opportunities for foreign collectors. 

These functions directly link U.S. programs 

and technologies with knowledgeable personnel. Events provide an opportunity for foreign 

nations to employ a greater variety of MOs to 

target visitors. Also, exhibits offer a unique 

opportunity for foreign entities to study, compare and photograph actual products in one 

location. Of even more importance, foreign 

events held on the collector's home territory 

are vulnerable to exploitation by traditional 

FIS technical means (for example, electronic 

surveillance) and the employment of entrapment ploys (such as inducement of the target 

into a compromising situation). The audiences at international seminars are comprised 

principally of the leading national scientists 

and technical experts, who can pose more of a 

threat than intelligence officers. Technical 

experts focus their questions and requests on 

specific technical areas that have direct application to their work. Reports show that during seminars, foreign entities may use subtle 

approaches such as sitting next to a potential 

target and initiating a casual conversation. 

This can establish a point of contact that may 

lead to exploitation at a later date. Use of 

membership lists of international business 

and/or technical societies as a source to identify potential targets and as a means of introduction is also increasing. 

29
 
Targeting of Existing Relationships or Joint 

Ventures. Exploitation of Joint 

Venture/Research. This MO offers significant 

collection opportunities for foreign interests. 

As with frequent foreign visits and other international programs, joint business efforts place 

foreign personnel close to U.S. personnel and 

technology and can facilitate access to protected programs. Of growing concern is the 

use of foreign research facilities and software 

development companies located outside of the 

U.S. to work on commercial projects that are 

related to protected programs. Anytime a 

company relinquishes direct control of its 

processes or product to someone else, they are 

exposing that technology to possible exploitation. Also of concern is the placement of foreign workers in close proximity to protected 

operations. While high technology programs 

receive the greatest amount of public attention, low technology programs, such as fabrics 

for military battle dress uniforms, are equally 

at risk. 

Targeting of U.S Personnel Abroad. This 

MO involves the targeting of U.S. defense 

contractor employees traveling overseas. The 

targeting occurs at airports and includes luggage searches, unauthorized use of laptop 

computers, extensive questioning beyond normal security measures, etc. Other travelers 

have received excessively "helpful" service by 

host government representatives and hotel 

staffs. Reporting also indicates that traditional FIS collection methods are still used by foreign nations. These measures include surreptitious listening devices, hotel room searches, 

intrusive inspection of electronic equipment, 

and positioning of personnel to eavesdrop on 

conversations. 

Internet Activity. Targeting associated with 

this MO includes exploitation of the Internet 

(hacking). The majority of the endeavors 

have been correlated with probing efforts, 

which account for most of the activity in this 

category. The computer probes are most likely searching for potential weaknesses in systems for exploitation. In one example, a probing effort that lasted 24 hours originated from 

a "girls school" in an Asian country. This 

probing effort was probably masked. The 

potential exists for users to go to several sites 

and receive anonymous e-mail addresses. By 

detecting probes, the cleared companies have 

already demonstrated they have the security 

countermeasures in place to thwart attempts to 

penetrate their computer systems. Although 

probing a system is not illegal, a crime is 

committed once a port is breached by an 

unauthorized entity. 

30