Nonproliferation: Improvements Needed to Better Control Technology Exports for Cruise Missiles and Unmanned Aerial Vehicles
Published: 2004-01-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Cruise missiles and unmanned aerial vehicles (UAV) pose a growing threat to U.S. national security interests as accurate, inexpensive delivery systems for conventional, chemical, and biological weapons. GAO assessed (1) the tools the U.S. and foreign governments use to address proliferation risks posed by the sale of these items and (2) efforts to verify the end use of exported cruise missiles, UAVs, and related technology.
section_title: What GAO Found
paragraphs: The growing threat to U.S. national security of cruise missile and UAV proliferation is challenging the tools the United States has traditionally used. Multilateral export control regimes have expanded their lists of controlled technologies, but key countries of concern are not members. U.S. export control authorities find it increasingly difficult to limit or track unlisted dual-use items that can be acquired without an export license. Moreover, a gap in U.S. export control authority enables American companies to export certain dual-use items to recipients that are not associated with missile projects or countries listed in the regulations, even if the exporter knows the items might be used to develop cruise missiles or UAVs. American companies have in fact legally exported dualuse items with no U.S. government review to a New Zealand resident who bought the items to build a cruise missile. The U.S. government seldom uses its end-use monitoring programs to verify compliance with conditions placed on the use of cruise missile, UAV, or related technology exports. For example, State officials do not monitor exports to verify compliance with license conditions on missiles or other items, despite legal and regulatory requirements to do so. Defense has not used its end-use monitoring program initiated in 2002 to check the compliance of users of more than 500 cruise missiles exported between fiscal years 1998 and 2002. Commerce conducted visits to assess the end use of items for about 1 percent of the 2,490 missile-related licenses we reviewed. Thus, the U.S. government cannot be confident that recipients are effectively safeguarding equipment in ways that protect U.S. national security and nonproliferation interests.

section_title: Letter
paragraphs: Efforts to limit the proliferation of cruise missiles and unmanned aerial  vehicles (UAV) are complicated by the availability of these items among  countries of concern. An unmanned aerial vehicle, a pilotless vehicle that  operates like an airplane, can be used for a variety of military and  commercial purposes. A cruise missile is an unmanned aerial vehicle with  the airframe designed for one-time use, which travels through the air like  an airplane before delivering its payload. The U.S. government faces trade- offs when making decisions about transfers of cruise missiles, UAVs, or  related technology. U.S. policy aims to prevent the proliferation of these  weapons systems to countries of concern and terrorists. At the same time,  the U.S. government has an interest in encouraging transfers of cruise  missiles and UAVs to U.S. allies to support regional security and bilateral  relations. The U.S. government also wants to use these sales to help  maintain the health of the U.S. defense industrial base. To accomplish  these goals, the U.S. government regulates the export of cruise missiles,  UAVs, or related technology through three agencies: the Departments of  State, Commerce, and Defense.
You asked us to assess U.S. and international efforts to limit the  proliferation of cruise missiles, unmanned aerial vehicles, and related  technology. Specifically, this report (1) describes the nature and extent of  cruise missile and UAV proliferation; (2) assesses the nonproliferation  tools that the United States and other governments use to address the  proliferation risks posed by the sale of these items; and (3) assesses U.S.  and other governments’ efforts to verify the end use of exported cruise  missiles, UAVs, and related technology.
To address these issues, we reviewed analyses prepared by the  Departments of State, Commerce, Defense, and Homeland Security, and  the U.S. intelligence community, as well as studies prepared by  nonproliferation experts. We also reviewed multilateral export control  regime documentation; met with representatives of the Missile Technology  Control Regime (MTCR) in Paris, France; and interviewed government  officials in France, Italy, and the United Kingdom. Furthermore, we  analyzed export licensing information from the Departments of State,  Commerce, and Defense on exports of cruise missiles, UAVs, and related  dual-use technology that have both military and civilian applications. For  more on our scope and methodology, see appendix I.
subsections: section_title: Background
paragraphs: Distinctions between cruise missiles and UAVs are becoming blurred as  the militaries of many nations, in particular the United States, add missiles  to traditional reconnaissance UAVs and develop UAVs dedicated to  combat missions. A cruise missile consists of four major components: a  propulsion system, a guidance and control system, an airframe, and a  payload. The technology for the engine, the autopilot, and the airframe  could be similar for both cruise missiles and UAVs, according to a 2000  U.S. government study of cruise missiles. Figure 1 shows the major  components of a cruise missile.
Cruise missiles provide a number of military capabilities. For example,  they present significant challenges for air and missile defenses. Cruise  missiles can fly at low altitudes to stay below radar and, in some cases,  hide behind terrain features. Newer missiles are incorporating stealth  features to make them less visible to radars and infrared detectors.  Modern cruise missiles can also be programmed to approach and attack a  target in the most efficient manner. For example, multiple missiles can  attack instantaneously from different directions. Furthermore, land attack  cruise missiles may fly circuitous routes to get to their targets, thereby  avoiding radar and air defense installations.
UAVs are available in a variety of sizes and shapes, propeller-driven or jet  propelled, and can be straight-wing aircraft or have tilt-rotors like  helicopters. They can be as small as a model aircraft or as large as a U-2  manned reconnaissance aircraft (see fig. 2).
U.S. policy on the proliferation of cruise missiles and UAVs is expressed in  U.S. commitments to the MTCR and Wassenaar Arrangement. These  multilateral export control regimes are voluntary, nonbinding  arrangements among like-minded supplier countries that aim to restrict  trade in sensitive technologies. Regime members agree to restrict such  trade through their national laws and regulations, which set up systems to  license the exports of sensitive items. The four principal regimes are the  MTCR; the Wassenaar Arrangement, which focuses on trade in  conventional weapons and related items with both civilian and military  (dual-use) applications; the Australia Group, which focuses on chemical  and biological technologies; and the Nuclear Suppliers Group, which  focuses on nuclear technologies. The United States is a member of all four  regimes. Regime members conduct a number of activities in support of the  regimes, including (1) sharing information about each others’ export  licensing decisions, including certain export denials and, in some cases,  approvals and (2) adopting common export control practices and control  lists of sensitive equipment and technology into national laws or  regulations.
Exports of commercially supplied American-made cruise missiles, military  UAVs, and related technology are transferred pursuant to the Arms Export  Control Act, as amended, and the International Trafficking in Arms  Regulations, implemented by State. Government-to-government transfers  are made pursuant to the Foreign Assistance Act of 1961, as amended, and  subject to DOD guidance. Exports of dual-use technologies related to  cruise missiles and UAVs are transferred pursuant to the Export  Administration Act of 1979, as amended, and the Export Administration  Regulations, implemented by Commerce.
Bureaus in two U.S. agencies are responsible for the initial enforcement of  export control laws. The Bureau of Immigration and Customs  Enforcement (ICE) in the Department of Homeland Security conducts  investigations enforcing the Arms Export Control Act, which is  administered by the State Department. ICE combines the enforcement and  investigative arms of the Customs Service, the investigative and  enforcement functions of the former Immigration and Naturalization  Service, and the Federal Protective Service as part of the Department of  Homeland Security. ICE shares responsibility with Commerce’s Bureau of  Industry and Security for enforcing the Export Administration Act. ICE  and the Bureau of Industry and Security use enforcement tools such as  investigations of purported violations of law and regulation and  interdictions of suspected illicit shipments of goods. Investigations can  result in criminal prosecutions, fines, or imprisonment or in export denial  orders, which bar a party from exporting any U.S. items for a specified  period of time.
The Arms Export Control Act, as amended in 1996, requires the President  to establish a program for end-use monitoring of defense articles and  services sold or exported under the provisions of the act and the Foreign  Assistance Act. This requirement states that, to the extent practicable,  end-use monitoring programs should provide reasonable assurance that  recipients comply with the requirements imposed by the U.S. government  on the use, transfer, and security of defense articles and services. In  addition, monitoring programs, to the extent practicable, are to provide  assurances that defense articles and services are used for the purposes for  which they are provided. The President delegated this authority to the  Secretaries of State and Defense.
section_title: Proliferation of Cruise Missiles and UAVs Poses a Growing Threat to U.S. National Security Interests
paragraphs: The proliferation of cruise missiles and UAVs poses a growing threat to  U.S. national security. Both can be used to attack U.S. naval interests, the  U.S. homeland, and forces deployed overseas. Cruise missiles and UAVs  have significant military capabilities, including surveillance and attack,  which the United States has demonstrated during military engagements in  Afghanistan and Iraq. In addition, U.S. government projections show that  the numbers of producers and exporters of cruise missiles and UAVs will  increase and that more countries of concern will possess and begin to  export them. The growing availability of these weapons, and of related  components and technology that are not readily controllable, makes it  easier for countries of concern and terrorists to acquire or build at least  rudimentary cruise missile or UAV systems.
subsections: section_title: Military Capabilities of Cruise Missiles and UAVs Threaten U.S. Interests
paragraphs: Although cruise missiles and UAVs provide important capabilities for the  United States and its friends and allies, in the hands of U.S. adversaries  they pose substantial threats to U.S. interests. First, anti-ship cruise  missiles threaten U.S. naval forces deployed globally. Second, land-attack  cruise missiles have a potential in the long-term to threaten the continental  United States and U.S. forces deployed overseas. Finally, UAVs represent  an inexpensive means of launching chemical and biological attacks against  the United States and allied forces and territory.
Cruise missiles pose a current and increasing threat to U.S. naval vessels.  For example, there are more than 100 existing and projected missile  varieties (including sub- and supersonic, high and low altitude, and sea- skimming models) with ranges up to about 185 miles or more. We reported  in 2000 that the next generation of anti-ship cruise missiles—most of  which are now expected to be fielded by 2007—will be equipped with  advanced target seekers and stealthy design. These features will make  them even more difficult to detect and defeat.
Land-attack cruise missiles pose a long-term threat to the U.S. homeland  and U.S. forces deployed overseas. Because land attack cruise missiles  suitable for long-range missions require sophisticated guidance and  complicated support infrastructures, they have historically been found  almost exclusively in superpower arsenals. According to an unclassified  summary of a national intelligence estimate from December 2001, several  countries are technically capable of developing a missile launch  mechanism to station on forward-based ships or other platforms so that  they can launch land-attack cruise missiles against the United States.  Technically, cruise missiles can be launched from fighter, bomber, or even  commercial transport aircraft outside U.S. airspace. According to the  National Air Intelligence Center, defending against land attack cruise  missiles will strain air defense systems. Moreover, cruise missiles are  capable of breaking through U.S. defenses and inflicting significant  damage and casualties on U.S. forces, according to the Institute for  Foreign Policy Analysis’ October 2000 study.
UAVs pose a longer-term threat as accurate and inexpensive delivery  systems for chemical and biological weapons and are increasingly sought  by nonstate actors, according to U.S. government and other  nonproliferation experts. For example, the U.S. government reported its  concern over this threat in various meetings and studies. The Acting  Deputy Assistant Secretary of State for Nonproliferation testified in June  2002 that UAVs are potential delivery systems for WMD, and are ideally  suited for the delivery of chemical and biological weapons given their  ability to disseminate aerosols in appropriate locations at appropriate  altitudes. He added that, although the primary concern has been that  nation-states would use UAVs to launch WMD attacks, there is potential  for terrorist groups to produce or acquire small UAVs and use them for  chemical or biological weapons delivery.
section_title: Cruise Missiles and UAVs Continue to Proliferate
paragraphs: At least 70 nations possess some type of cruise missile, mostly short-range,  anti-ship missiles armed with conventional, high-explosive warheads,  according to a U.S. government study. Estimates of the total number of  cruise missiles place the world inventory at a minimum of 75,000.  Countries that export cruise missiles currently include China, France,  Germany, Israel, Italy, Norway, Russia, Sweden, United Kingdom, and the  United States. Nations that manufacture but do not yet export cruise  missiles currently include Brazil, India, Iran, Iraq, North Korea, South  Africa, and Taiwan. None of these nonexporting manufacturing countries  is a member of the Wassenaar Arrangement, and only Brazil and South  Africa are in the MTCR. The number of cruise missile exporters is  expected to grow with producers such as India and Taiwan making their  missiles available for export.
Currently, at least 12 countries are believed to be developing land-attack  cruise missiles; some of these new systems will be exported. France, for  example, signed a deal with the United Arab Emirates (UAE) to export a  type of cruise missile. By 2005, six countries of concern will have acquired  land-attack capabilities, up from only three in 2000, according to the  National Air Intelligence Center. Furthermore, cruise missile inventories  are projected to increase through 2015 and one to two dozen countries  probably will possess a land-attack cruise missile capability by this date,  according to an unclassified National Intelligence Estimate. While both  land-attack and anti-ship cruise missile inventories are projected to  increase, land-attack cruise missile inventories are expected to experience  a significantly higher percentage of growth.
According to defense industry sources, interest has picked up dramatically  from countries all over the world for acquiring and developing even the  simplest UAV technology and is expected to continue, further diffusing  this technology. Forty-one countries operate about 80 types of UAV,  primarily for reconnaissance. Currently, some 32 nations are developing or  manufacturing 250 models of UAVs. Several countries involved in key  aspects of the UAV industry are not members of the MTCR. For example,  13 non-MTCR countries develop and manufacture UAVs. Countries that  pose a threat of WMD proliferation concern, such as China, Russia, and  Pakistan, are among the 32 countries developing and expected to export  UAVs.
section_title: Cruise Missile and UAV Proliferation Is Facilitated by the Ease of Acquiring Systems and Technologies
paragraphs: Cruise missiles and UAVs can be acquired in several ways, including  purchase of complete systems and conversion of existing systems into  more capable weapons. Acquisition of commercially available dual-use  technologies has made development of new systems and conversion of  existing systems more feasible.
Purchasing complete missile systems provides the immediate capability of  fielding a proven weapon. Complete cruise missiles can be acquired from a  variety of sources. For example, China and Russia have sold cruise  missiles to Iran, Iraq, Libya, North Korea, and Syria. In addition, France  has widely exported the Exocet, now in service in more than 29 countries.
Israel, Italy, Norway, Sweden, the United Kingdom, and the United States  have also exported anti-ship cruise missiles.
Various government and academic studies have raised concerns that the  wide availability of commercial items, such as global positioning system  receivers and lightweight engines, allows both countries and nonstate  actors to enhance the accuracy of their systems, upgrade to greater range  or payload capabilities, and convert certain anti-ship cruise missiles into  land-attack cruise missiles. Thus, less capable and expensive systems  could be more easily improved to attack targets not currently accessible,  especially on land. Although not all cruise missiles can be modified into  land-attack cruise missiles because of technical barriers, specific cruise  missiles can and have been. For example, a 1999 study outlined how the  Chinese Silkworm anti-ship cruise missile had been converted into a land- attack cruise missile. Furthermore, the Iraq Survey Group reported in  October 2003 that it had discovered 10 Silkworm anti-ship cruise missiles  modified to become land-attack cruise missiles and that Iraq had fired 2 of  these missiles at Kuwait.
Many issues concerning modification of cruise missiles also apply to  UAVs, according to one industry group. Larger UAVs are more adaptable  to change. Although several experts said that it is more expensive and  difficult to modify an existing aircraft into a UAV than to develop one from  scratch, some countries, such as Iraq, developed programs to convert  manned aircraft into UAVs. Some experts also expressed concerns over  adding autopilots to small aircraft to turn them into unmanned UAVs that  could deliver chemical or biological weapons.
section_title: Key Nonproliferation Tools Have Limitations Addressing Cruise Missile and UAV Proliferation
paragraphs: The U.S. government generally uses two key nonproliferation tools—- multilateral export control regimes and national export controls—to  address cruise missile and UAV proliferation, but both tools have  limitations. The United States and other governments have traditionally  used multilateral export control regimes, principally the MTCR, to address  missile proliferation. However, despite successes in strengthening  controls, the growing capability of countries of concern to develop and  trade technologies used for WMD limits the regime’s ability to impede  proliferation. The U.S. government uses its national export control  authorities to address missile proliferation but finds it difficult to identify  and track commercially available items not covered by control lists.  Moreover, a gap in U.S. export control regulations could allow subnational  actors to acquire American cruise missile or UAV technology for missile  proliferation or terrorist purposes without violating U.S. export control  laws or regulations. The United States has other nonproliferation tools to  address cruise missile and UAV proliferation—diplomacy, sanctions, and  interdiction of illicit shipments of items—but these tools have had unclear  results or have been little used.
subsections: section_title: Multilateral Export Control Regimes Increased Focus on Cruise Missiles and UAVs, but Are Limited in Their Effectiveness
paragraphs: The United States and other governments have used the MTCR, and, to  some extent, the Wassenaar Arrangement, as the key tools to address the  proliferation of cruise missiles and UAVs. While the United States has had  some success in urging these regimes to focus on cruise missiles and  UAVs, new suppliers who do not share regime goals limit the regimes’  ability to impede proliferation. In addition, there has been less consensus  among members to restrict cruise missiles and UAVs than to restrict  ballistic missiles.
The MTCR is principally concerned with controlling the proliferation of  missiles with a range of 300 kilometers and a payload of 500 kilograms or  with any payload capable of delivering chemical or biological warheads.  MTCR members seek to restrict exports of sensitive technologies by  periodically reviewing and revising a commonly accepted list of controlled  items, such as lightweight turbojet and turbofan engines, or materials and  devices for stealth technology usable in missiles. The Wassenaar  Arrangement seeks to limit transfers of conventional arms and dual-use  goods and technologies that could contribute to regional conflict. Military  UAVs below MTCR capability levels of 300 kilometers range and 500  kilograms payload are included on the Wassenaar Munitions List. DOD  officials noted that MTCR attempts to impede the proliferation of UAVs  capable of delivering WMD, while Wassenaar covers conventional  weapons and items with a military function.
In recent years, the increased awareness of the threat of chemical and  biological weapons and terrorists has increased members’ interest in  cruise missile and UAV controls, according to State. MTCR control lists  were revised between 1997 and 2002 to adopt six of eight U.S. proposals to  include additional items related to cruise and UAV technologies. Members  agreed in 2002 to adopt (1) expanded controls on small, fuel-efficient gas  turbine engines, (2) a new control on integrated navigation systems, and  (3) a new control on UAVs designed or modified for aerosol dispensing.  At the September 2003 MTCR Annual Plenary, members agreed to add to  the control list complete UAVs designed or modified to deliver aerosol  payloads greater than 20 liters. In the Wassenaar Arrangement, the United  States and other members during 2003 made several proposals for new  controls related to UAVs and short-range cruise missiles and their  payloads. Once changes are officially accepted, MTCR and Wassenaar  members are expected to incorporate the changed control lists into their  own national export control laws and regulations. While including an item  on a control list does not preclude its export, members are expected to  more carefully scrutinize listed items pending decisions on their export.  They are also expected to notify other members when denying certain  export licenses for listed items.
Despite the efforts of these regimes, nonmembers such as China and Israel  continue to acquire, develop, and export cruise missile or UAV technology.  The growing capability of nonmember supplier countries to develop  technologies used for WMD and trade them with other countries of  proliferation concern undermines the regimes’ ability to impede  proliferation. For example, China has sold anti-ship cruise missiles to Iran  and Iraq (see fig. 3). Israel also reportedly sold the Harpy UAV to India,  according to a Director of Central Intelligence report in 2003.
In addition to the limitations posed by non-member suppliers, some  nonproliferation experts and foreign government officials noted that  MTCR’s effectiveness has been limited because there has been less  consensus among MTCR and Wassenaar members to restrict cruise  missiles and UAVs than to restrict ballistic missiles. MTCR members have  not always agreed with each others’ interpretation of the MTCR guidelines  and control lists concerning cruise missiles. Specifically, members have  had different views on how to measure the range and payload of cruise  missiles and UAVs, making it difficult to determine when a system has the  technical characteristics that require more stringent export controls to  apply under MTCR guidelines. For example, cruise missiles can take  advantage of more fuel-efficient flight at higher altitudes to gain  substantially longer ranges than manufacturers and exporting countries  advertise. Even with the new definition of range that the MTCR adopted in  2002, different interpretations remain among members over whether  particular cruise missiles could be modified to achieve greater range. In  one case, the United States and France disagreed about France’s proposed  sale of its Black Shaheen cruise missile to the United Arab Emirates,  according to French and U.S. government officials and nonproliferation  experts (see fig. 4). In a second case, members have raised questions  about Russia’s assistance to India, a nonmember, to develop the Brahmos  cruise missile project and called for further discussion of the system’s  technical capabilities.
In October 2002, we reported on other limitations that impede the ability  of the multilateral export control regimes, including MTCR and the  Wassenaar Arrangement, to achieve their nonproliferation goals. For  example, we found that MTCR members may not share complete and  timely information, such as members’ denied export licenses, in part  because the regime lacks an electronic data system to send and retrieve  such information. The Wassenaar Arrangement members share export  license approval information but collect and aggregate it to a degree that it  cannot be used constructively. Both MTCR and the Wassenaar  Arrangement use a consensus process that makes decision-making  difficult and lack a means to enforce compliance with members’ political  commitments to regime principles. We recommended that the Secretary of  State establish a strategy to work with other regime members to enhance  the effectiveness of the regimes by implementing a number of steps,  including (1) adopting an automated information-sharing system in MTCR  to facilitate more timely information exchanges, (2) sharing greater and  more detailed information on approved exports of sensitive transfers to  nonmember countries, (3) assessing alternative processes for reaching  decisions, and (4) evaluating means for encouraging greater adherence to  regime commitments.
section_title: U.S. Government Authorities Have Had Difficulty Restricting Dual- use Missile Technology Exports
paragraphs: U.S. ICE and Commerce authorities have had difficulty identifying and  tracking dual-use exports in transit that could be useful for cruise missiles  and UAV development because such exports have legitimate civilian uses.  As a result, U.S. enforcement tools have been limited in conducting  investigations of suspected exports of illicit cruise missile and UAV dual- use items. Moreover, a gap in U.S. export control regulations could allow  missile proliferators to acquire unlisted American cruise missile or UAV  dual-use technology without violating the regulations.
subsections: section_title: Investigations Challenged by Nature of Cruise Missile and UAV Dual-use Technology and Regulatory Limitations
paragraphs: ICE officials said that it is difficult to conduct Customs enforcement  investigations of possible export violations concerning certain cruise  missile or UAV dual-use technologies. First, parts or components that are  not on control lists are often similar to controlled parts or components,  enabling exporters to circumvent the controls entirely, according to ICE  officials. Because ICE inspectors are not engineers and shipping  documents do not indicate the end product for the component being  shipped, determining what the components can do is problematic. Second,  countries seek smaller UAVs than those controlled. ICE officials said that  buyers who cannot get advanced UAVs instead try to obtain model  airplanes and model airplane parts, which might substitute for UAVs and  their components. Third, ICE officials noted that circumventing the export  control law is easy because the U.S. government has to prove both the  exporter’s knowledge of the law and the intent to violate it. As of October  2003, Customs had completed two investigations related to UAVs, and had  nine others open, as well as one open case related to cruise missiles. The  two cases related to UAVs, both involving suspected diversions of items to  Pakistan, resulted in one finding of no violation and one guilty plea. As a  result, two defendants received prison terms of 24 and 30 months,  respectively, with 2 years of supervised release.
Commerce officials also indicated that there are challenges to enforcing  export controls on dual-use goods related to cruise missile or UAV  development. They stated that some investigations were not pursued  because the technical parameters of the items exported were below the  export control thresholds for missile technology. Nonetheless, Commerce  officials noted that exported items below these parameters could be  changed after export by adding components to improve the technology.  For example, software exported without a license could receive an  upgrade card that would make it an MTCR-controlled item. As of October  2003, Commerce had completed 116 investigations related to missile  proliferation, but not specifically to cruise missiles or UAVs.  Furthermore, the Secretary of Commerce in 2003 identified other  challenges for the enforcement of controls on dual-use goods related to  missile development. First, it is difficult to detect and investigate cases  under the “knowledge” standard set by the “catch-all” provision. Second,  some countries do not yet have catch-all laws or have different standards  for catch-all, which complicates law enforcement cooperation. Third,  identifying illegal exports and re-exports of missile-related goods requires  significant resources. Nonetheless, the Secretary stated that United States  has the ability to effectively enforce end-use and end-user controls on  missile technology and that multilateral controls provide a strong  framework for cooperative enforcement efforts overseas.
section_title: Gap in U.S. Export Controls Could Allow Proliferators to Gain U.S. Dual-use Technology for Cruise Missile or UAV Purposes
paragraphs: A gap in U.S. export control regulations could allow missile proliferators  or terrorists to acquire U.S. cruise missile or UAV dual-use technology  without violating U.S. export control laws or regulations. The Export  Administration Regulations (EAR) establish license requirements for items  not listed in the regulations on the Commerce Control List, as well as for  items that are listed. License requirements for items not listed are based  on the exporter’s knowledge of the end user or end uses to which the item  would be applied. For missile controls, an exporter may not export or re- export an item if the exporter knows that the item (1) is destined to or for  a missile project listed in the regulations or (2) will be used in the design,  development, production or use of missiles in or by a country listed in the  regulations, whether or not that use involves a listed project. However,  this condition on exports does not apply to activities that are unrelated to  the 12 projects or 20 countries listed in the regulation. This section of the  regulations was intended to apply to national missile proliferation  programs, according to Commerce officials, and not to nonstate actors  such as certain terrorist organizations or individuals. Finally, this section  of the regulations does not apply to exports of dual-use items for missiles  with less than 300 kilometers range and 500 kilograms payload because  the regulatory definition of a missile excludes missiles below MTCR range  and payload thresholds. However, such missiles with lesser range or  payload could be sufficient for terrorist purposes.
The case of a New Zealand citizen obtaining unlisted dual-use items to  develop a cruise missile illustrates this gap in U.S. export controls. In June  2003 this individual reported that he purchased American components  necessary to construct a cruise missile to illustrate how a terrorist could  do so. Because the New Zealand citizen is not on a list of prohibited  missile projects, terrorist countries, or terrorists, there is no specific  export control requirement that an American exporter apply to the U.S.  government for a review of the items before export, according to  Commerce officials. According to Commerce licensing and enforcement  officials, they have no legal recourse in this or similar cases, as there is no  violation of U.S. export control law or regulations. The Commerce officials  said that they would need to wait until the New Zealander used the  weapon improperly before action under export control law or regulations  could be taken. It would be the New Zealand government’s responsibility  to address any illicit action resulting from such transfers of U.S. items,  according to other Commerce officials. One department official stated that  not all export control loopholes can be closed and that U.S. export  controls cannot fix defects in other countries’ laws. Another Commerce  official explained that current catch-all controls assume that terrorists  would not attempt to acquire illicit arms in friendly countries, such as  NATO allies.
Commerce officials explained that proliferators seeking a rudimentary,  rather than state-of-the-art cruise missile, would be able to construct such  a weapon of components not listed on the Commerce Control List. For  these items, Commerce must directly link the items to a WMD program to  apply the catch-all controls; otherwise, no action can be taken, according  to the officials. They remarked that catch-all controls were added to give  licensing officers more flexibility in reviewing items. However, exporters  adept in covering up direct links to a WMD program could continue to  divert dual-use missile-related items, according to the Commerce officials.
section_title: Other Nonproliferation Tools Had Unclear Results or Were Little Used
paragraphs: The United States has other nonproliferation tools to address cruise  missile and UAV proliferation: diplomacy, sanctions, and interdiction of  illicit shipments of items. The United States used diplomacy to address  suspected cases of proliferation of cruise missiles and UAVs in at least 14  cases. U.S. efforts to forestall transfers of items succeeded in about one- third of these cases. The United States issued diplomatic action in at least  14 cases to inform foreign governments of proposed or actual transfers of  cruise missile or UAV items. The U.S. government successfully halted  transfers in five cases, did not successfully halt a transfer in two cases, did  not know the results of its actions or action was still in process in six  cases, and claimed partial success in one other case. Of nine cases  involving MTCR items, six of the nine countries demarched were MTCR  members and three were not.
Under several U.S. laws that authorize the use of sanctions when the U.S.  government determines that missile proliferation has occurred, the U.S.  government used sanctions twice between 1996 and 2002 for violations  related to exports of cruise missiles. In these two cases, the United States  sanctioned a total of 18 entities in 5 countries. However, a State official did  not know whether the entities ceased their proliferation activities as a  result.
Although the Acting Deputy Assistant Secretary of State for  Nonproliferation identified interdiction as one tool used to address  proliferation of cruise missile and UAV technology, U.S. and foreign  government officials knew of few cases of governments’ interdicting such  shipments. To date, the United States reported using interdiction once to  stop illicit shipments of cruise missile or UAV technology. ICE officials  referred to only one case of an interdiction of a propeller for a Predator  UAV destined for Afghanistan. Commerce officials knew of no cases  where Commerce had been involved in interdiction of cruise missile or  UAV dual-use technology. Foreign governments reported no known cases  of interdiction of suspect cruise missile or UAV technology exports.
The U.S. government announced discussions in June 2003 with 11 foreign  governments to increase the use of interdiction against all forms of WMD  and missile proliferation. A meeting in Paris of these governments  participating in the Proliferation Security Initiative announced a statement  of interdiction principles on September 4, 2003. These principles include  a commitment to    undertake effective measures for interdicting the transfer or transport of  WMD, delivery systems, and related materials to and from states and  nonstate actors of proliferation concern;   adopt streamlined procedures for rapid exchange of relevant information  concerning suspected proliferation activity; and review and work to strengthen relevant national legal authorities and  international law and frameworks to accomplish these objectives.
section_title: Compliance with Conditions on Exports of Cruise Missiles, UAVs, and Related Dual-use Items Seldom Verified through End-use Monitoring
paragraphs: Post-shipment verification (PSV) is a key end-use monitoring tool used by  U.S. agencies to confirm that authorized recipients of U.S. technology both  received transferred items and used them in accordance with conditions  of the transfer. However, State and Commerce seldom conduct PSVs of  transferred cruise missiles, UAVs, and related items; State’s program does  not monitor compliance with conditions when checks are made.  Furthermore, Defense officials were not aware of any end-use monitoring  for more than 500 cruise missiles transferred through government-to- government channels, although officials are considering conducting such  checks in the future. Similarly, other supplier countries place conditions  on transfers, but few reported conducting end-use monitoring once items  were exported.
subsections: section_title: State Did Not Assess Compliance and Infrequently Monitored Cruise Missile and UAV Exports
paragraphs: The Arms Control Export Act, as amended in 1996, requires, to the extent  practicable, that end-use monitoring programs provide reasonable  assurance that recipients comply with the requirements imposed by the  U.S. government in the use, transfer, and security of defense articles and  services. In addition, monitoring programs are to provide assurances that  defense articles and services are used for the purposes for which they are  provided. Accordingly, under State’s monitoring effort, known as the Blue  Lantern program, State conducts end-use monitoring of direct commercial  sales of defense articles and services, including cruise missiles, UAVs, and  related technology. According to Blue Lantern program guidance, a PSV is  the only means available to verify compliance with license conditions once  an item is exported. Specifically, a PSV is used (1) to confirm whether  licensed defense goods or services exported from the United States  actually have been received by the party named on the license and (2) to  determine whether those goods have been or are being used in accordance  with the provisions of that license.
Despite these requirements, we found that State did not use PSVs to assess  compliance with cruise missile or UAV licenses having conditions limiting  how the item may be used. These licenses included items deemed  significant by State regulations. Based on State licensing data, we  identified 786 licenses for cruise missiles, UAVs, or related items from  fiscal years 1998 through 2002. Of these, 480 (61 percent) were licenses  with conditions, while 306 (39 percent) were licenses without conditions.  These 786 licenses included one for a complete state-of-the-art Predator B  UAV (see fig. 5), and 27 for supporting Predator technical data, defense  services, and parts. The licenses also included 7 for supporting technical  data, defense services, and parts for the highly advanced Global Hawk  UAV.
We found that State did not conduct PSVs for any of the 480 licenses with  conditions and conducted PSVs on only 4 of 306 licenses approved without  conditions. Each license reviewed through the post-shipment checks  involved transferred UAV-related components and equipment. Three of the  licenses receiving checks resulted in unfavorable determinations because  a company made inappropriate end-use declarations or the end user could  not confirm that it had received or ordered the items. State added that it  has many other sources of information besides PSV checks on the misuse  and diversion of exported articles. These sources include intelligence  reporting, law enforcement actions, embassy reporting, and disclosures of  U.S. companies.
A State licensing official stated that few post-shipment Blue Lantern  checks have been conducted for cruise missiles, UAVs, and related items  because many are destined for well-known end users in friendly countries.  However, over fiscal years 1998 through 2002, 129 of the 786 licenses  authorized the transfer of cruise missile and UAV-related items to  countries such as Egypt, Israel, and India. These countries are not MTCR  members, which indicates that they might pose a higher risk of diversion.  In addition, over the last 4 years, State’s annual end-use monitoring reports  to Congress recognized an increase in the incidence of West European- based intermediaries involved in suspicious transactions. State noted in its  2001 and 2002 reports that 23 and 26 percent, respectively, of unfavorable  Blue Lantern checks for all munitions items involved possible  transshipments through allied countries in Europe.
In contrast to State’s guidance, State officials said that the Blue Lantern  program was never intended to verify license condition provisions on the  transfer of munitions such as cruise missile and UAV-related items.  Instead, State officials explained that the program seeks to make certain  only that licensed items are being used at the proper destination and by  the proper end user. A State official further said that the compliance office  is not staffed to assess compliance with license conditions and has not  been managed to accomplish such a task.
In commenting on a draft of this report, State emphasized the importance  of Blue Lantern pre-license checks in verifying controls over the end user  and end use of exported items and said that we did not include such  checks in our analysis. We reviewed the 786 cruise missile and UAV  licenses to determine how many had received Blue Lantern pre-license  checks, a possible mitigating factor reducing the need to conduct a PSV.  We found that only 6 of the 786 licenses from fiscal years 1998 through  2002 that State provided us had been selected for pre-license checks. Of  these, four received favorable results, one received an unfavorable result,  and one had no action taken.
section_title: Department of Defense Conducted Little Monitoring of Transferred Cruise Missiles
paragraphs: Under the Arms Control Export Act, as amended in 1996, the Department  of Defense also is required to monitor defense exports to verify that  foreign entities use and control U.S. items in accordance with conditions.  The amended law requires an end-use monitoring program for defense  articles and services transferred through the Foreign Military Sales  program. Monitoring programs, to the extent practicable, are required to  provide reasonable assurances that defense articles and services are being  used for the purposes for which they are provided.
The Defense Security Cooperation Agency (DSCA) is the principal  organization through which Defense carries out its security assistance  responsibilities, including administering the Foreign Military Sales  program. Under this program, the United States transfers complete  weapons systems, defense services, and related technology to eligible  foreign governments and international organizations from Defense stocks  or through Defense-managed contracts. Bilateral agreements contain the  terms and conditions of the sale and serve as the equivalent of an export  license issued by State or Commerce.
From fiscal years 1998 through 2002, DSCA approved 37 agreements for  the transfer of more than 500 cruise missiles and related items, as well as  one transfer of UAV training software. The agreements authorized the  transfer of Tomahawk land-attack cruise missiles, Standoff land-attack  missiles, and Harpoon anti-ship cruise missiles, as well as supporting  equipment such as launch tubes, training missiles, and spare parts.  Approximately 30 percent of cruise missile transfers were destined for  non-MTCR countries. Figure 6 shows the destinations of transferred cruise  missiles.
Defense’s end-use monitoring program, called Golden Sentry, has  conducted no end-use checks related to cruise missile or UAV transfers,  according to the program director. DSCA guidance states that government- to-government transfers of defense items, including cruise missiles, are to  receive routine end-use monitoring. Under routine monitoring, Security  Assistance Officers and/or military department representatives account for  the end use of defense articles through personal observation in the course  of other assigned duties. However, the program director stated that he was  unaware of any end-use monitoring checks, routine or otherwise, for  transferred U.S. cruise missiles over the period of our review. In addition,  a past GAO report found problems with monitoring of defense items and  recommended that DSCA issue specific guidance to field personnel on  activities that need to be performed for the routine observation of defense  items. Nonetheless, Defense’s Golden Sentry monitoring program is not  yet fully implemented, despite the 1996 legal requirement to create such an  end-use monitoring program. DSCA issued program guidance in December  2002 that identified the specific responsibilities for new end-use  monitoring activities. In addition, as of November 2003, DSCA was  conducting visits to Foreign Military Sales recipient countries to determine  the level of monitoring needed and was identifying weapons and  technologies that may require more stringent end-use monitoring. The  program director stated that he is considering adding cruise missiles and  UAVs to a list of weapon systems that receive more comprehensive  monitoring.
section_title: Commerce Conducted Little Monitoring of Cruise Missile and UAV-related Dual-use Exports
paragraphs: The Export Administration Act, as amended, provides the Department of  Commerce with the authority to enforce dual-use controls. Under the act,  Commerce is authorized to conduct PSV visits outside the United States of  dual-use exports. The Export Administration Regulations indicate that a  transaction authorized under an export license may be further limited by  conditions that appear on the license, including a condition that stipulates  the need to conduct a PSV. Commerce can conduct a PSV by applying a  condition to a license that requires U.S. mission staff residing in the  recipient country to conduct a PSV, or it can send a safeguards verification  team from Commerce headquarters to the country to conduct a PSV.  Based on Commerce licensing data, we found that Commerce issued 2,490  dual-use licenses between fiscal years 1998 and 2002 for items that could  be useful in developing cruise missiles or UAVs. Of these, Commerce  selected 2 percent of the licenses, or 52 cases, for a PSV visit and  completed visits to 1 percent of the licenses. Specifically, Commerce  designated PSVs as a license condition for 28 licenses, and completed 5.  Commerce designated PSVs as part of a safeguards team for 24 cases, and  completed all of them. Of these 24 checks, 23 resulted in favorable  determinations, while 1 was unfavorable.
Commerce guidance for selecting PSVs and pre-license checks establish  criteria based on technologies and countries that require a higher priority  for conducting PSVs and pre-license checks. The guidance identifies 19  specific missile technology categories from the Commerce Control List  involving particularly sensitive commodities as choke points for the  development of missiles and indicating a priority for PSV or pre-license  selection. For example, items such as software and source code to  improve inertial navigation systems, as well as lightweight turbojet and  turbofan engines, are included as choke point missile technologies. In  addition, the guidance identifies 20 countries of missile diversion concern  that may also warrant a pre-license check or PSV. The guidance further  identifies 12 specific countries or destinations that have been used  repeatedly, and are likely to be used again, as conduits for diversions of  sensitive dual-use commodities or technology. The guidance states that  other factors might mitigate the need to select a license for a PSV.
We applied Commerce’s guidelines to the 2,490 cruise missile or UAV- related licenses and identified 20 that met the criteria to receive a PSV or a  pre-license check. However, Commerce selected only 2 of these 20  licenses. All 20 licenses were for choke point missile technology useful for  cruise missile or UAV development. Some of these licenses were for  countries of missile diversion concern, such as India, while others were  for transshipment countries, such as Singapore. Figure 7 shows the  destinations for items in the 20 licenses and the percentage of licenses for  each destination.
We found that Commerce selected 2 of the 20 licenses for a PSV. One PSV  resulted in a favorable determination, while the other had not been  completed at the time of our review. Even though the 20 licenses met  guidance criteria, few of these licenses had been selected for PSVs. A  Commerce official explained that licenses might not be selected for a PSV  because many factors might mitigate the need for a PSV for a particular  license even though it meets the selection criteria. However, Commerce  officials could not explain which factors lessened the need for a PSV for  the remaining 18 licenses.
section_title: Few International Suppliers Verify End-use Controls
paragraphs: Other supplier countries have established export control laws and  regulations, which also place conditions on transfers and can authorize  agencies to conduct end-use monitoring of sensitive items. For example,  government officials from the United Kingdom, France, and Italy stated  that their respective governments might add conditions for cruise missile  and UAV-related items, as well as for other exports. While national export  laws authorize end-use monitoring, none of the foreign government  officials reported any PSV visits for cruise missile or UAV-related items.
The national export control systems of other cruise missile and UAV  supplier countries that responded to our request for information apply  controls differently from the United States for missile-related transfers.  Government officials in France, Italy, and the United Kingdom stated that  their respective governments generally do not verify conditions on cruise  missile and UAV transfers and conduct few post-shipment verification  visits of such exports. The South African government was the only  additional supplier country responding to a written request for  information that reported it regularly requires and conducts PSVs on  cruise missile and UAV transfers.
Officials in the United Kingdom stated that the U.K. government seeks to  ensure compliance with license conditions, but it has no institutional  system for conducting PSVs for British exports. Although defense attaches  keep their eyes open for cases of misuse of an item, the officials did not  know whether any PSV visits had been done for transfers of British cruise  missiles or UAVs. A U.K. government official said that occasionally  embassy officials may conduct PSVs on other British equipment. For  example, a PSV may be undertaken to confirm that British tanks are not  being used by Israel to conduct operations in Gaza. However, the official  added that such actions are neither required nor routine.
Italian government officials stated that all armament transfers include  conditions that the end user cannot retransfer to other countries or users  without prior permission from the government. Additionally, some export  licenses require an import delivery certificate as a condition to certify that  an item has been imported. For those licenses, the government of Italy  allows firms fixed periods of time to provide required documents. If the  recipient does not send a required delivery certificate, then a PSV would  be conducted to verify whether the end user received the items.
According to French officials, France does not conduct explicit PSV visits.
Instead, its officials observe end-use conditions during technical or  military-to-military contacts. Specifically, French officials stated that when  missiles or any other highly technological goods are sold contact between  the government and the recipient provides opportunities to ensure the  disposition of the exported item.
According to South African government officials, requirements for PSV  visits may be applied to licenses for cruise missile and UAV-related  technology. Furthermore, South Africa conducts regular end-use  verifications to selected end users of non-MTCR countries and may initiate  other ad hoc visits as required by the South African control authorities. In  addition, government-to-government agreements require end-use  certificates containing delivery verification information and include  authorizations for end-use verification visits, as well as non-retransfer,  non-modification, and non-reproduction clauses. South African  government officials also stated that each clause must be fully verified and  authenticated.
section_title: Conclusions
paragraphs: The continued proliferation of cruise missiles and UAVs poses a growing  threat to the United States, its forces overseas, and its allies. Most  countries already possess cruise missiles, UAVs, or related technology,  and many are expected to develop or obtain more sophisticated systems in  the future. The dual-use nature of many of the components of cruise  missiles and UAVs also raises the prospect that terrorists could develop  rudimentary systems that could pose additional security threats to the  United States. Since this technology is already widely available throughout  the world, the United States works in concert with other countries through  multilateral export control regimes to better control the sale of cruise  missiles, UAVs, and related technologies. Even though the effectiveness of  these regimes is limited in what they can accomplish, the United States  could achieve additional success in this area by adopting our previous  recommendations to improve the regimes’ effectiveness.
U.S. export controls may not be sufficient to prevent cruise missile and  UAV proliferation and ensure compliance with license conditions. Because  some key dual-use components can be acquired without an export license,  it is difficult for the export control system to limit or even track their use.  Moreover, current U.S. export controls may not prevent proliferation by  nonstate actors, such as certain terrorists, who operate in countries that  are not currently restricted under missile proliferation regulations.  Furthermore, the U.S. government seldom uses its end-use monitoring  programs to verify compliance with the conditions placed on items that  could be used to develop cruise missiles or UAVs. Thus, the U.S.  government does not have sufficient information to know whether  recipients of these exports are effectively safeguarding equipment and  technology in ways that protect U.S. national security and nonproliferation  interests. The challenges to U.S. nonproliferation efforts in this area,  coupled with the absence of end-use monitoring programs by several  foreign governments for their exports of cruise missiles or UAVs, raise  questions about how nonproliferation tools are keeping pace with the  changing threat.
section_title: Recommendations for Executive Action
paragraphs: A gap in dual-use export control regulations could enable individuals in  most countries of the world to legally obtain without any U.S. government  review U.S. dual-use items not on the Commerce Control List to help make  a cruise missile or UAV. Consequently, we recommend that the Secretary  of Commerce assess and report to the Committee on Government Reform  on the adequacy of the Export Administration Regulations’ catch-all  provision to address missile proliferation by nonstate actors. This  assessment should indicate ways the provision might be modified.
Because the departments have conducted so few PSV visits to monitor  compliance with U.S. government export conditions on transfers of cruise  missiles, UAVs and related dual-use technology, the extent of the  compliance problem is unknown. While we recognize that there is no  established or required number of PSV visits that should be completed, the  small number completed does not allow the United States to determine the  nature and extent of compliance with these conditions. Thus, we  recommend that the Secretaries of State, Commerce, and Defense, as a  first step, each complete a comprehensive assessment of cruise missile,  UAV, and related dual-use technology transfers to determine whether U.S.  exporters and foreign end users are complying with the conditions on the  transfers. As part of the assessment, the departments should also conduct  additional PSV visits on a sample of cruise missile and UAV licenses. This  assessment would allow the departments to gain critical information that  would allow them to better balance potential proliferation risks of various  technologies with available resources for conducting future PSV visits.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Secretaries of Commerce,  Defense, and State for their review and comment. We received written  comments from Commerce, Defense, and State that are reprinted in  appendixes II, III, and IV. DOD and State also provided us with technical  comments, which we incorporated as appropriate.
Commerce did not agree that the limited scope of the current catch-all  provision should be called a gap in U.S. regulations but agreed to review  whether the existing catch-all provision sufficiently protects U.S. national  security interests. Commerce said that it believes that the export control  system effectively controls items of greatest significance for cruise  missiles and UAVs and are on the Commerce Control List. It stated that  our report is ambiguous as to whether the gap relates to items listed on the  control list or to items that are not listed, as they are not considered as  sensitive for missile proliferation reasons. Commerce also stated that we  should explain the basis for suggesting that noncontrolled items are  sensitive and should be placed on the MTCR control list, if that is our  position. Our references to the gap in the regulations refer to dual-use  items that are not listed on the Commerce Control List and we have made  changes to the draft to clarify this point. Furthermore, we are not  suggesting that unlisted items should be added to the MTCR control list to  deal with the issue we identified in the New Zealand example. As we  recommend, the vehicle to address this gap would be an expansion of  Commerce’s catch-all provision whereby license reviews would be  required when the exporter knows or has reason to know that the items  might be used by nonstate actors for missile proliferation purposes. In  commenting on our draft report’s recommendation to require an export  license review for any item that an exporter knows or has reason to know  would be used to develop or design a cruise missile or UAV of any range,  Commerce agreed to review whether the existing provision sufficiently  protects U.S. national security interests. We have modified our  recommendation to reflect the need for an assessment of the catch-all  provision’s scope and possible ways to modify the provision to address the  gap.
State disagreed with our findings and conclusions concerning its end-use  monitoring program. State said that our report was inaccurate in  suggesting that State does not monitor exports to verify compliance with  export authorizations and noted that we did not discuss the importance of  pre-license checks to verify end use and end user restrictions. It said that  our report was misleading and inaccurate to suggest that State does not  monitor exports to verify compliance with export authorizations. State  said that the most important restrictions placed on export authorizations  involve controls over the end user and the end use of the article being  exported. State also said that it uses many tools in the export licensing  process to verify these restrictions and that the Blue Lantern program’s  pre- and post-license checks are only one of these tools. State said that  pre-license checks verify the bond fides of end users, as well as the receipt  and appropriate end use of defense articles and services, including UAV-  and missile-related technologies. It also questioned why our analysis did  not include pre-license checks as part of State’s efforts to ensure  compliance with arms export regulations.
We agree that pre-license checks are critical to ensure that licenses are  issued to legitimate, reliable entities and for specified programs or end  uses in accordance with national security and foreign policy goals. We also  agree that they augment controls and checks used during the licensing  process to determine the legitimacy of the parties involved and the  appropriate end use of the export prior to license approval. However, such  checks cannot confirm the appropriate end user or end use of an item  after it has been shipped and received by the recipient. Regarding other  tools in the export licensing process to verify conditions, we asked State  for additional information that would indicate what other actions, besides  PSV checks, State took. State officials said that some license conditions  required follow-up action—such as forms or reports—either by State  officials, exporters, or end users. We asked for examples of such follow-up  action related to licenses for cruise missiles, UAVs, or related technology.  A State official said that, after querying the relevant licensing teams, State  officials did not identify any licenses requiring follow-up action and that  there is no system, formal or otherwise, that would document follow-up  actions that had been taken. In response to State’s comments, we added  information on Blue Lantern pre-license checks to the report, information  that further demonstrates the limited monitoring that State conducts on  cruise missile and UAV-related transfers. We reviewed the 786 cruise  missile and UAV licenses to determine how many had received Blue  Lantern pre-license checks, a possible mitigating factor reducing the need  to conduct a PSV. These included 129 licenses to non-MTCR countries,  such as Egypt, Israel, and India, which present a higher risk of misuse or  diversion. We found that only 6 of the 786 licenses that State provided us  had been selected for pre-license checks. Of these, 4 received favorable  results, 1 received an unfavorable result, and 1 had no action taken.
Commerce and DOD partially agreed with our second recommendation to  complete a comprehensive assessment of cruise missile, UAV and related  dual-use technology transfers. However, both departments raised  concerns over the resources needed to conduct such a comprehensive  assessment and sought further definition of the scope of the transfers to  be assessed as the basis for interagency action and additional resources  for monitoring. DOD suggested that a random sample of cases could  achieve results equivalent to that of a comprehensive assessment. It  agreed to conduct a greater number of PSVs in order to (1) provide the  U.S. government with a high level of confidence over time that exporters  and end users are complying with export license conditions and (2) allow  the U.S. government to determine whether adequate resources are devoted  to license compliance issues. We clarified our recommendation so that a  comprehensive assessment could include a sampling methodology so long  as it provided each agency with a high level of confidence that the sample  selected accurately demonstrated the nature and extent of compliance  with conditions. State disagreed with our recommendation and said that  the absence of evidence in our report of misuse or diversion does not  warrant such an extensive effort. Nonetheless, State said that in  conjunction with steps taken to improve the targeting of Blue Lantern  checks and increase the number conducted annually, it would pay special  attention to the need for additional pre- and post-shipment checks for  cruise missile- and UAV-related technologies. Since State conducted no  PSV checks for any of the 480 licenses for cruise missile or UAV-related  licenses with conditions that we reviewed and only 6 pre-license checks  for the 786 licenses, the need for State to assess its monitoring over cruise  missile and UAV licenses is a recommendation we strongly reaffirm.
As arranged with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days after the  date of this letter. At that time, we will send copies of this report to  appropriate congressional committees and to the Secretaries of  Commerce, Defense, and State. Copies will be made available to others  upon request. In addition, this report will be available at no charge on the  GAO Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-8979 or at christoffj@gao.gov. A GAO contact and  staff acknowledgments are listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the nature and extent of cruise missile and UAV  proliferation, we reviewed documents and studies of the Departments of  Commerce, Defense, Homeland Security, and State, the intelligence  community, and nonproliferation and export controls specialists in  academia and the defense industry. These included the Unclassified  Report to Congress on the Acquisition of Technology Relating to Weapons  of Mass Destruction and Advanced Conventional Munitions, 1 January  through 30 June 2002; the Director of Central Intelligence worldwide  threat briefing on The Worldwide Threat in 2003: Evolving Dangers in a  Complex World 11 February 2003; and the DOD UAV Roadmap for 2000 to  2025 and 2002 to 2025. We also reviewed databases of the UAV Forum and  UVONLINE. Also, we reviewed plenary, working group, and information  exchange documents of the MTCR. We met with officials of the  Departments of Commerce, Defense, Homeland Security, and State, the  intelligence community, and with nonproliferation and export controls  specialists in academia in Washington, D.C., and officials of the National  Air Intelligence Center in Dayton, Ohio. We also met with representatives  of private companies Adroit Systems Inc., EDO, Boeing, MBDA, Lockheed  Martin, and with the industry associations National Defense Industrial  Association (NDIA) and the Aerospace Industries Association in  Washington, D.C. In addition, we received a written response from NDIA  to a list of detailed questions. Also, we met with representatives of the  Defense Manufacturing Association, SBAC, Goodrich, BAE Systems, and  MBDA in London, United Kingdom; and of the European Unmanned  Vehicle Systems Association (EURO UVS) in Paris, France. In addition, we  attended two conferences of the Association for Unmanned Vehicle  Systems International (AUVSI) in Washington, D.C., and Baltimore,  Maryland.
To examine how the U.S. and other governments have addressed  proliferation of cruise missile and UAV risks, we analyzed the documents  and studies noted above and met with officials and representatives of the  previously mentioned governments and nonproliferation and export  controls specialists in academia. We also reviewed relevant documents  and data to determine how the U.S. and other governments have used  export controls, diplomacy, interdiction, and other policy tools. Based on  this information, we conducted analyses to determine how each tool had  been employed and with what results.
To evaluate the end-use controls used by the U.S. and other governments,  we obtained documents and met with officials from the Departments of  Commerce, Defense, and State. We also reviewed arms transfer data from  DOD and export licensing data from State and Commerce databases to  assess what cruise missile and UAV technology the United States  exported, how the U.S. government selected licenses to receive post- shipment monitoring, and how it applied end-use post-shipment controls.  Moreover, we reviewed applicable U.S. export control laws and  regulations. We performed qualitative and quantitative analyses of selected  export licenses to determine the extent and frequency of applied license  conditions and end-use checks related to cruise missile and UAV transfers.  To determine the completeness and accuracy of the Defense and State  data sets, we reviewed related documentation, interviewed knowledgeable  agency officials, and reviewed internal controls. The State database  system is not designed to identify all cruise missile or UAV commodities  transferred. Therefore, the team developed a list of search terms based on  consultations with State officials concerning which terms would likely  capture all transfers involving cruise missiles, UAVs, and related  technology. State provided the criteria we used to determine what State- licensed exports were cruise missile or UAV-related. State officials queried  their licensing database to search for specific category codes and 12  keywords. The resulting report that State provided to us contained 400  pages with 1,300 entries. While we have high confidence that our analysis  allowed us to capture most of the relevant cases, it is possible that a few  relevant State cases might have been missed. We also assessed the  reliability of the Commerce data by performing electronic testing of  required data elements and by interviewing agency officials  knowledgeable about the data. We determined that the data elements were  sufficiently reliable for the purposes of this engagement.
We also interviewed officials of the governments of France, Italy, and the  United Kingdom, and met with representatives of the point of contact for  the MTCR in Paris, France. In addition, we received written responses to  questions we provided to the governments of Israel, Japan, South Africa,  and Switzerland. Russia and Canada provided a response too late to be  included in this report. We requested the same information from the  government of Germany, but received no response. Our ability to address  two objectives was impaired by a Department of State delay in assisting  our efforts to collect responses to written questions from foreign  governments. State agreed to facilitate this effort 4 months after our initial  request for assistance and only after we reduced the number of countries  to receive our questions from 16 to 7 and reduced the number of  questions. Given this delay, governments had less time to respond to our  questions than we had originally planned. Thus, we could not fully assess  how other governments address the proliferation risks of cruise missiles,  UAVs, and related technology and apply end-use controls on their exports  of these items.
We performed our work from October 2002 to November 2003 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Comments from the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce letter  dated November 14, 2003.
subsections: section_title: GAO Comments
paragraphs: 1.  Commerce said that our report does not distinguish among the varying  threats posed by different types of cruise missiles and UAVs. Our  report does make distinctions between the threats posed by anti-ship  cruise missiles to U.S. naval forces, land-attack cruise missiles to the  U.S. homeland and forces deployed overseas, and UAVs as potential  delivery systems for chemical and biological weapons. As our report  stated, the potential for terrorist groups to produce or acquire  rudimentary cruise missiles or small UAVs using unlisted dual-use  items is an emerging threat that needs to be better addressed.  2.  Commerce said that agreement was finalized at the September 2003  MTCR Plenary to add a new category of UAVs to the MTCR control  list. We have added information to the report to take this into account.  3.  Commerce said that our report does not discuss action taken at the  September 2003 MTCR Plenary to include a catch-all provision in the  regime guidelines that could strengthen MTCR disciplines and address  some of the concerns of our report. While helpful, the practical impact  of this change is negligible. Nearly all MTCR members currently have  catch-all controls in their national export control authority.  Furthermore, as Commerce pointed out, the U.S. catch-all controls  have limited scope and do not address the type of situation presented  in the New Zealand example.  4.  We believe that our explanation was clear as to how we applied  Commerce’s guidance to select licenses that met Commerce’s listed  criteria for receiving a PSV. As clearly noted in our report, we first  started with the 2,490 dual-use licenses with commodity categories  that Commerce had identified as relevant to cruise missile and UAV  items. Second, we selected those licenses having only commodity  categories identified in Commerce guidance as chokepoint  technologies. Third, we matched these licenses to a recipient country  identified as a country of missile proliferation concern or as a conduit  country. This analysis resulted in 20 licenses. When we found that two  of the 20 licenses we identified had been selected for a PSV, we asked  Commerce officials to explain which of the other variables  (information about the parties to the transaction, proposed end use,  previous licensing history, etc.) mitigated the need for a PSV. As we  reported, Commerce officials could not explain which factors lessened  the need for a PSV for the remaining 18 licenses.  5.  Commerce stated that there is ambiguity in our report as to whether  the gap relates to items listed on the Commerce Control List or to  items that are not listed because they are not considered as sensitive  for missile proliferation reasons. Our references to the gap in the  regulations refer to dual-use items that are not listed on the Commerce  Control List. We have made changes to the draft to clarify this point.  6.  Commerce stated that if it is GAO’s position that noncontrolled items  are sensitive and should be placed on the MTCR control list, then we  should explain the basis for this position. We are not suggesting that  unlisted items should be added to the MTCR control list to deal with  the issue we identified in the New Zealand example. As indicated in  our recommendation, the vehicle to address this gap would be an  expansion of Commerce’s catch-all provision whereby license reviews  would be required when the exporter knows or has reason to know  that items not on the Commerce Control List might be used by  nonstate actors for missile proliferation purposes.  7.  Commerce states that the United States and MTCR members  effectively control the items of greatest significance for cruise missiles  and UAVs that pose concerns for U.S. national security. We agree that  MTCR covers items of greatest significance for cruise missiles and  UAVs that pose concerns posed by national missile programs.  However, Commerce needs to recognize the potential for nonstate  actors, particularly terrorists, to legally acquire unlisted items for use  in missile proliferation.  8.  Commerce acknowledges that its enforcement authority is limited  concerning items not listed on the Commerce Control List and entities  not named on the terrorist lists. Nonetheless, it asserts that it could  take specific actions if it learned that U.S. items had been shipped to  proliferators or terrorists that were developing weapons with these  components. However, it is not clear how this information would come  to Commerce’s attention because current regulations do not require, or  inform, an exporter to seek a license review in this type of situation.  9.  Commerce agrees to consider whether the catch-all provision  sufficiently protects U.S. national security interests. We agree that  such a review in consultation with the Technical Advisory Committees  and interagency community would be an important first step in  identifying the sufficiency of the provision to cover nonstate actors  and ways to modify it to address the gap. Consequently, we have  modified our recommendation accordingly.  10.  The gap that we identified in our report is in the catch-all provisions.
We are not suggesting that additional items be added to the control  lists. Currently, the catch-all regulations require an exporter to submit  a license application when he knows or has reason to know that an  unlisted item would be used for missile proliferation purposes.  However, this provision applies only to specific missile proliferation  projects or countries identified on a narrow list in the regulations. The  New Zealand citizen was not covered under the catch-all provisions.
section_title: Appendix III: Comments from the Department of Defense
section_title: Appendix IV: Comments from the Department of State
paragraphs: The following are GAO’s comments on the Department of State letter  dated November 19, 2003.
subsections: section_title: GAO Comments
paragraphs: 1.  State said that it has conducted over 1,200 Blue Lantern checks on  exports of all types and developed derogatory information in almost  200 cases over the past 3 years. However, these checks and cases  involved both pre-license checks and PSVs and included more than  cruise missile or UAV items, according to State’s most recent end-use  monitoring report. For example, 428 checks initiated by State in fiscal  year 2002—of which 50 checks resulted in unfavorable  determinations—included firearms and ammunition, electronics and  communications equipment, aircraft spare parts, bombs, spare parts  for tanks and military vehicles, and night vision equipment.  2.  State also said that the Blue Lantern program (1) effectively verifies  the end use and end users of export applications when questions arise,  (2) has deterred diversions, (3) helped disrupt illicit supply networks,  (4) helped State make informed licensing decisions, and (5) ensured  exporter compliance with law and regulations. State added that the  historical context of assessing the parties to the export weighs into  every licensing decision and its importance cannot be discounted. We  agree that the Blue Lantern program can have a positive impact when  State has the information needed to allow it to act. This statement  affirms our point that it is important to obtain such information  through improved monitoring, particularly PSVs. However, given the  limited number of either pre- or post-shipment Blue Lantern checks  focused to date on cruise missile and UAV-related transfers, we  question whether sufficient information has been obtained in this area.  3.  State said that it was unclear why our report’s analysis excluded pre- license checks as part of State’s efforts to ensure compliance with  arms export regulations. As noted above, we did ask for such  information and learned that State conducted few pre-license checks  for its cruise missile and UAV transfers. While we agree with State that  pre-license checks are critical to providing assurances that licenses are  issued to legitimate, reliable entities and for specified programs or end  uses, they obviously cannot verify that exports are received by the  legitimate end user or used in accordance with the terms of the license  after shipment. We agree that seeking and receiving assurances prior  to licensing and shipment is a critical function that might mitigate the  need for a PSV check in many cases. However, State implies that pre- license and other actions of the licensing process mitigated the need to  conduct PSV checks for all but 4 of its 786 licenses for cruise missile,  UAV, or related technology. These included 129 licenses to non-MTCR  countries, such as Egypt, Israel, and India.  4.  State said that our report did not articulate the criteria we used to  determine what exports are UAV-related. State provided the criteria  we used to determine what State-licensed exports were cruise missile  or UAV-related. State officials queried their licensing database to  search for specific category codes and 12 keywords. The resulting  report that State provided to us contained 400 pages with 1,300 entries.  We have added this information to our Scope and Methodology section  to clarify that State provided us with these criteria, the data generated  from applying the criteria, and information on Blue Lantern pre-license  and PSV checks for these licenses.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the individual named above, Jeffrey D. Phillips, Stephen M.  Lord, Claude Adrien, W. William Russell IV, Lynn Cothern, and Richard  Seldin made key contributions to this report.