Export Controls: Concerns Over Stealth-Related Exports
Published: 1995-05-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a congressional request, GAO reviewed export controls over stealth-related commodities and technology, focusing on: (1) how control over stealth technology and related commodities is split between the Department of State's U.S. Munitions List (USML) and the Department of Commerce's Commodity Control List (CCL); (2) the impact of shared jurisdiction over stealth-related items; and (3) whether current referral procedures allow the Department of Defense (DOD) to review all stealth-related exports.
section_title: What GAO Found
paragraphs: GAO found that: (1) stealth technology materials fall under the jurisdiction of both USML and CCL; (2) Commerce believes that stealth-related commodities should be placed on USML to avoid confusion and possible seizure by the Customs Service; (3) the unclear jurisdiction over stealth technology may lead to the inappropriate export of militarily-sensitive stealth materials and technology; (4) the less restrictive export controls governing CCL commodities give exporters an incentive to apply for CCL export licenses for USML-covered material; (5) Commerce can deny CCL export licenses only under limited circumstances or for certain destinations, while State has broader authority to deny applications that are against national interests; and (6) the United States cannot ensure that export licenses for stealth-related technology are properly reviewed and controlled because Commerce does not refer all stealth technology export applications to DOD or State for review.

section_title: Letter
paragraphs: As you requested, we are reporting on the results of our review examining export controls over low-observable, radar signature reduction technology (hereafter referred to as “stealth technology”). Our review focused on (1) determining how control over stealth technology and related commodities is split between the State-managed U.S. Munitions List (USML) and the Commerce Control List (CCL), (2) identifying the impact of shared jurisdiction over stealth-related items, and (3) assessing whether current referral procedures allow the Department of Defense (DOD) to review all stealth-related exports.
subsections: section_title: Background
paragraphs: Stealth-related commodities and technology are sensitive for many reasons. When incorporated into advanced weapon systems, stealth technology greatly improves the effectiveness of forces. The United States is the world leader in stealth technology, and this lead has given U.S. forces a clear battlefield advantage as was demonstrated in Operation Desert Storm. Stealth-related commodities are sensitive from an export control perspective because some of the materials and processes involved have civil applications that make it difficult to control the commodities’ dissemination and retain U.S. leadership in stealth technology.
Stealth designs incorporate materials, shapes, and structures in a functional system that can meet mission requirements. Stealth techniques fall into two general groups. First, a material may deflect an incoming radar signal into neutral space thereby preventing the source radar from picking up the radar reflection and “seeing” the object. Second, a material may simply absorb an incoming radar signal, not allowing the signal to reflect back to its source. In addition to materials, measurement gear used to test radar-absorbing properties and technologies and software related to manufacturing and application techniques are also considered sensitive from an export control perspective.
DOD’s policy on the commercial export of stealth technology recognizes its military significance and sensitivity while acknowledging that some items with stealth properties have been developed for commercial purposes, are widely available, and are not militarily significant. DOD’s policy states that commercial marketing of unclassified, non-DOD funded stealth technology may be permitted on a case-by-case basis after review by appropriate offices and agencies and approval of the required export license.
The U.S. export control system is divided into two regimes, one for munitions items under the Arms Export Control Act (AECA) and one for dual-use items (items with both civil and military uses) under the Export Administration Act (EAA). The Department of State controls munitions items through its Office of Defense Trade Controls and establishes the USML, with input from DOD. The Department of Commerce, through its Bureau of Export Administration, controls dual-use commodities (e.g., machine tools) and establishes the CCL. In general, export controls under the EAA are less restrictive than the controls under the AECA.
Exporters must determine whether the item they wish to export is on the CCL or the USML and then apply to the appropriate agency for an export license. When there is confusion over which agency controls a commodity, an exporter may ask State to make a commodity jurisdiction determination. State, in consultation with the exporter, DOD, Commerce, and other agencies, reviews the characteristics of the commodity and determines whether the item is controlled under the USML or the CCL. Since 1992, the majority of all commodity jurisdiction determinations ruled that the commodity belonged on the CCL and not the USML.
section_title: Stealth-Related Commodities Are Controlled by State and Commerce
paragraphs: On the USML, stealth-related commodities are primarily controlled in two general categories. Stealth-related items are controlled under several other categories when the technology is incorporated as part of a system or end item. For example, fighter aircraft that incorporate stealth features are controlled under the category for aircraft. In general, the USML relies on functional descriptions of the items being controlled. Table 1 shows that the USML controls stealth-related exports as parts of several control categories.
The CCL, as shown in table 2, controls stealth-related exports under seven export commodity control numbers. In general, the CCL uses more detailed language (often with technical performance criteria) than the USML to describe what is controlled. Because some export control classification numbers cover a broad array of items, some of the exports classified under these numbers are not related to stealth.
State and DOD officials acknowledge that the descriptions in the CCL and the USML covering stealth-related items and technology do not clearly define which stealth-related exports are controlled by which agency. State and DOD officials also agree that the lines of jurisdiction should be clarified. DOD officials noted that they are only concerned about militarily significant items or items in the grey area that are potentially militarily significant.
A Commerce official noted that overlapping jurisdiction is confusing for exporters and said commodities that fall in the grey area between Commerce and State should be placed on the USML. The Commerce official said that putting grey area cases on the USML would help exporters avoid the (1) confusion of determining where to go for a license and (2) possibility of having their exports seized by a Customs agent who believes the items belong on the USML. The Commerce official cautioned, however, that in moving items to the USML, consideration should be given to whether comparable items are readily available from other countries. State noted in its comments to this report that, under the AECA, foreign availability is not a factor in determining whether an item warrants the national security and foreign policy controls of the USML.
Commerce noted in its comments that it does not agree that there is overlapping or unclear jurisdiction over stealth-related commodities and technology between the CCL and the USML. We disagree. As noted in the report, officials from both DOD and State told us that the lines of jurisdiction are unclear and should be clarified. Further, as discussed below, this unclear jurisdiction has led to problems in Commerce’s licensing of sensitive stealth-related commodities.
section_title: Unclear Jurisdiction May Lead to Inappropriate Exports of Militarily Sensitive Stealth-Related Commodities
paragraphs: Unclear jurisdiction over stealth-related commodities increases the likelihood that militarily sensitive stealth technology will be exported under the less restrictive Commerce export control system. In 1994, Commerce approved two export applications for a radar-absorbing coating determined later to belong on the USML. Although DOD and State have not verified the exact capabilities and military sensitivity of this product, these export licenses illustrate the problems with unclear jurisdiction and authority over stealth-related exports.
subsections: section_title: Commerce Approved Applications for Militarily Sensitive Stealth Material
paragraphs: Commerce approved two applications in 1994 to export a high-performance, radar-absorbing coating. The details of one of the applications was reported in a major trade publication. As reported, the export application described the high-performance claims for the product and indicated that 200 gallons of the material would be used for a cruise missile project headed by a German company. Commerce also granted a license to export the same commodity to another country for use on a commercial satellite. Commerce approved both of these applications in fewer than 10 days and, in accordance with referral procedures, did not refer these applications to either DOD or State.
The article reporting Commerce’s approval of this material for export noted that the radar frequencies this stealth coating seeks to defend against include those employed by the Patriot antimissile system. In response to that report and subsequent concerns raised by DOD, State performed a commodity jurisdiction review to determine whether the stealth coatings actually belonged under the USML. At this time, the coatings had not yet been shipped overseas. On the basis of State’s review that included consultation with both DOD and Commerce, State ruled that the radar-absorbing coating was under the jurisdiction of the USML.
After State’s ruling, Commerce suspended the export licenses it had approved and the exporter submitted new export applications to State. After State and DOD were unable to obtain adequate information on the exact performance characteristics of the product from the exporter, State decided not to approve the export applications.
section_title: Commerce’s Export Control Regulations Are Less Restrictive Than State’s Munitions Control Regulations
paragraphs: Commerce’s export control authority under the EAA is more limited than State’s authority under the AECA. In fact, a high-ranking Commerce official said Commerce probably could not have denied the two applications to export the radar-absorbing coatings.
The EAA regulates dual-use exports under national security controls and foreign policy controls. As shown in table 3, the seven stealth-related commodities on the CCL are controlled for national security and missile technology reasons (considered a foreign policy control).
National security controls are designed to prevent exports from reaching the former East bloc and Communist nations. Exports that are controlled on the CCL for national security reasons and that are going to noncontrolled countries can only be denied by Commerce if there is evidence the exports will be diverted to a controlled country.
Foreign policy controls under the EAA are designed to control exports for specific reasons (e.g., missile technology concerns) and if the exports are going to specific countries (e.g., countries considered to be missile proliferators). In essence, these controls are targeted to specific items, end uses, and/or countries. Consequently, items controlled for missile technology reasons (e.g., most stealth-related commodities), as a practical matter, are not restricted if they are destined for other end uses (e.g., ship applications and aircraft) or for a country not considered to be a missile proliferation threat (e.g., any member of the Missile Technology Control Regime).
In contrast, under the AECA, commodities on the USML are controlled to all destinations, and authority to regulate exports is not limited by end use or country. The AECA grants State broad authority to deny export applications based on a determination that the license is against national interests.
section_title: Referral Practices Prevent DOD From Seeing Most Stealth-Related Exports
paragraphs: Commerce referral procedures for the seven stealth-related categories do not require most applications to be sent to either DOD or State for review. Commerce referral procedures depend on the reason the export is controlled and the ultimate destination.
subsections: section_title: DOD Does Not Review Most Stealth-Related Exports
paragraphs: As shown in table 4, between fiscal years 1991 and 1994, most applications under the seven export control classification numbers related to stealth were not referred to either DOD or State. During this time, only 15 of 166 applications processed by Commerce were sent to either DOD or State for review. Table 4 also shows, because some export control classification numbers cover a broad array of items, some of the export applications classified under these numbers are not related to stealth. Table 5 lists examples of applications that were referred by Commerce, and table 6 lists applications that were not referred.
section_title: Referral Procedures Depend on Reason for Control
paragraphs: In general, commodities controlled on the CCL for national security reasons are referred to DOD only if they are going to a controlled country. These referral procedures are based, in part, on agreements between Commerce and DOD. National security controls are designed to prevent exports from going to controlled countries. Consequently, exports of commodities that are controlled for national security reasons and that are going to other destinations are generally not restricted, and Commerce does not refer such applications to DOD.
Exports of commodities controlled for missile technology reasons are referred by Commerce only if they meet two key tests. First, the description of the export must fit the definition of missile technology items as described in the Annex to the Missile Technology Control Regime. Some commodities that fall under export commodity control numbers controlled for missile technology may not fit the detailed description of missile technology found in the Annex. Second, the export must be going to a country considered to be of concern for missile technology proliferation reasons.
Export applications that Commerce refers based on missile technology concerns are sent to the Missile Technology Export Control group (MTEC). The MTEC is chaired by State with representatives from DOD, Commerce, the U.S. intelligence agencies, and others at the invitation of the Chair and the concurrence of the group. DOD, by being a member of MTEC, has access to missile technology applications that Commerce refers to the group.
In a recent report, we noted concerns about Commerce’s referral practices for missile-related exports. Only a fraction of the export applications under export control classification numbers controlled for missile technology reasons going to China were sent by Commerce to other agencies for review. According to the current Chair of the MTEC, Commerce does not refer all relevant missile technology applications to the MTEC for review. Commerce officials stated that they refer all relevant cases and noted that the MTEC Chair may be unfamiliar with Commerce referral procedures. State noted in its comments that it would be preferable for the MTEC to review all export licenses for Annex items.
section_title: Recommendations
paragraphs: In light of the more stringent controls under the AECA and the sensitivity of stealth technology, we recommend that the Secretary of State, with the concurrence of the Secretary of Defense and in consultation with the Secretary of Commerce, clarify the licensing jurisdiction between the USML and the CCL for all stealth-related commodities and technologies with a view toward ensuring adequate controls under the AECA for all sensitive stealth-related items and the Secretary of Commerce revise current licensing referral procedures on all stealth-related items that remain on the CCL to ensure that Commerce refers all export applications for stealth-related commodities and technology to DOD and State for review, unless the Secretaries of Defense and State determine their review of these items is not necessary.
section_title: Agency Comments
paragraphs: We obtained written comments from the Departments of State and Commerce (see apps. I and II). State generally agreed with the analyses and recommendations in the report. State indicated that our first recommendation should be revised to properly reflect State’s leading role in determining which items are subject to the AECA (i.e., belong on the USML). State also noted that our second recommendation should be amended to include State in determining whether some stealth-related export licenses need to be referred to State for review for foreign policy reasons. We clarified both recommendations to address State’s concerns.
Commerce disagreed with our first recommendation stating that the lines of jurisdiction over exports of stealth-related commodities are already clear. As demonstrated in the report, we believe the lines of jurisdiction are unclear. In addition, State, in its comments to this report, concurs with our recommendation to clarify which stealth-related items should be controlled under the USML and the CCL. Commerce also disagreed with our second recommendation indicating that the executive branch has drafted an executive order that would give the relevant agencies authority to review all dual-use license applications. If implemented, this draft executive order may help improve the review of sensitive exports by DOD and State. However, this draft executive order, by itself does not address the need to clarify jurisdiction between the CCL and the USML in light of the military significance and sensitivity of stealth-related technology and the more stringent controls under the AECA.
DOD officials provided oral comments on a draft of this report. We made changes to the report as appropriate to address the technical issues they raised.
section_title: Scope and Methodology
paragraphs: To determine how control over stealth technology is split between the CCL and the USML, we reviewed the two lists and interviewed officials from State’s Office of Defense Trade Controls, Commerce’s Bureau of Export Administration, DOD’s Defense Technology Security Administration, and the Institute for Defense Analyses.
To identify the impact of shared jurisdiction over stealth-related items, we reviewed the export controls established in the AECA and the EAA; obtained Commerce export licensing records on computer tape and focused our analysis on licenses processed after the CCL was restructured in 1991; examined Commerce export license application records that had export classification numbers related to stealth technology; and discussed the impacts of shared jurisdiction over stealth with defense and technical experts in DOD’s Special Programs Office, the Institute for Defense Analyses, the Defense Technology Security Administration, and officials from the MTEC group, State’s Office of Defense Trade Controls, and the Bureau of Export Administration.
To assess whether current referral procedures allow DOD to review all stealth-related exports, we examined the referral histories for the stealth-related exports we identified.
We conducted our review from June 1994 through April 1995. Our review was performed in accordance with generally accepted government auditing standards.
As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution of this report until 15 days after its issue date. At that time, we will send copies to other congressional committees and the Secretaries of Defense, State, and Commerce. We will also make copies available to other interested parties upon request.
Please contact me at (202) 512-4587 if you or your staff have any questions concerning this report. Major contributors to this report were Davi M. D’Agostino, Jai Eun Lee, and David C. Trimble.
section_title: Comments From the Department of State
paragraphs: The following are GAO’s comments on the Department of State’s letter dated May 1, 1995.
subsections: section_title: GAO Comments
paragraphs: 1. We agree that foreign availability is not relevant in determining whether an item should be controlled on the U.S. Munitions List (USML). Our statement in the draft report concerning foreign availability considerations has been deleted. 2. The report was changed to more accurately describe the Missile Technology Control Regime. 3. We made changes to the report to reflect State’s view that Commerce should not “pre-screen” export licenses and that the Missile Technology Export Control group (MTEC) should review all export licenses for Missile Technology Control Regime Annex items. 4. We added a footnote to the report to mention Enhanced Proliferation Controls Initiative referrals.
section_title: Comments From the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s letter dated May 2, 1995.
subsections: section_title: GAO Comments
paragraphs: 1. We agree that the two systems are different. However, as discussed in the report, Commerce’s system is less restrictive than State’s system. This difference, as Commerce notes, is due to Commerce being responsible for regulating dual-use commodities and State regulating more sensitive military commodities. 2. The rationalization exercise was initiated in 1990 by President Bush to move dual-use items on the USML to the Commerce Control List (CCL), not to examine both control lists for problems of unclear or overlapping jurisdiction. Though some stealth-related commodities were examined during the course of this exercise in 1991, problems of overlapping jurisdiction remain. In addition, as noted in our report, the Department of Defense (DOD) and State officials agree that jurisdiction over stealth-related technology and commodities is ill defined and should be clarified. 3. We do not have responsibility for determining where the lines of jurisdiction between the control lists should be drawn. As we stated in our recommendation, this is the role of the Department of State in consultation with DOD and the Department of Commerce. 4. We made changes to the report to more accurately reflect Commerce’s position. 5. We do not suggest that new International Traffic in Arms Regulations controls over dual-use items be implemented. 6. Our draft report acknowledged the role of DOD in establishing referral procedures. We made changes to the final report to further clarify DOD’s role. Moreover, in comments on our draft report, State indicated that it would be preferable for Commerce to refer to State all export licenses for Missile Technology Control Regime Annex items regardless of destination. 7. We clarified our use of the term “stealth” in the final report to explain that our review focused primarily on radar cross-section reduction. Consequently, any possible overlap in export controls for other aspects of stealth technology (e.g., technologies and materials related to reducing infrared, acoustic, electromagnetic and visual signatures, and counter low-observables technologies) was not addressed in our report. 8. We made changes to the report to comply with the confidentiality concerns raised by Commerce. 9. Our draft report acknowledges that because some export control classification numbers cover a broad array of items, some of the exports classified under these numbers are not related to stealth. We made changes to the final report to make this point more clearly. We would have preferred to review these applications with technical experts from DOD to determine which applications involved stealth technology. However, in our review examining missile related exports to China, we were prevented from sharing license information with DOD for the purposes of assessing the technology in a sample of Commerce export licenses. Due to Commerce’s lengthy administrative requirements for requesting permission to share license information with DOD, we were unable to perform this detailed analysis in the timeframes of our assignment. 10. Commerce states that it has sufficient authority to deny validated license applications for products the U.S. government does not want to export. It points to regional stability controls reached with interagency consensus as examples of its use of such authority. While Commerce could take a more expansive view of its statutory charter, in practice, it has been more restrained. For example, Commerce officials told us they could not have prevented the export of radar-absorbing coatings to Germany for use on a cruise missile. 11. We made changes to the report to clarify our point that items controlled for missile technology reasons are, as a practical matter, not restricted if they are destined for other uses or for a country not considered a missile proliferation threat. 12. The report does not state that Commerce violated its referral procedures for exports going to China that are controlled for missile-technology reasons. Our point is that current referral practices preclude State and DOD from seeing most Commerce license applications for export commodity classification numbers controlled for missile technology reasons. 13. The examples in the table are valid. The license that was returned without action was held by Commerce for 44 days before it was returned. This provided Commerce ample time to refer the case to DOD for review. The other application involved equipment used to make radar cross-section measurements—an important capability in assessing efforts to reduce the radar signature of an aircraft or missile.
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