The United States generally exports military items and services either through (1) U.S. government sales under the Foreign Military Sales (FMS) program or (2) direct commercial arms sales by individuals and business entities. The Arms Export Control Act authorizes the President to control the export of all defense articles and services and to designate items that are to be controlled under the U.S. Munitions List. The President delegated the control of exports of Munitions List items to the Secretary of State and the implementation of the FMS program to the Secretary of Defense. As part of its responsibilities, the State Department regulates direct commercial arms sales through export licenses and reviews and approves arms sales under the FMS program. Within the Department of Defense (DOD), the Defense Security Cooperation Agency is responsible for overall administration of the FMS program, while the military departments implement individual sales under the program. The Arms Export Control Act generally excludes sales under the FMS program from the requirement for munitions export licenses. Specific policies and controls have been established for the transfer of classified military intelligence and critical military technology and defense articles. A presidential executive order prescribed a uniform system for classifying, safeguarding, and declassifying national security information. The National Disclosure Policy was established to provide a framework for the approval or denial of the transfer of classified military information to foreign governments and international organizations. A decision to disclose or transmit information must satisfy several criteria. These include that the transmission of information be consistent with U.S. foreign policy and U.S. military and security objectives and result in benefits to the United States. In addition, the foreign recipient must afford the information substantially the same degree of protection as the United States provides it, and the information must be limited to what is necessary to fulfill the prescribed purpose. Although the policy prohibits the transmission of certain classified information, technology, and defense articles to foreign countries, it provides a process by which exceptions may be granted. Procedures established under the National Disclosure Policy are also used to consider the release of unclassified military information to foreign entities. The United States and other nations have agreed to limit the spread of certain types of arms and technologies by establishing various international agreements, or regimes. For example, in 1987 the United States and several major trading partners created the Missile Technology Control Regime (MTCR) to control the proliferation of missiles and related technology. This regime, implemented through national legislation in each of the member countries, consists of common export policy guidelines that include a list of controlled items. There are two categories of controlled items. Category I items are rarely approved for export. They include complete missile systems and subsystems such as rocket engines and guidance sets. Category II items comprise a wide range of commodities, including test equipment and propellants. These items are evaluated on a case-by-case basis and typically denied for sale if destined for use in weapons of mass destruction. The U.S. government controls the two categories of items through the U.S. Munitions List or through the Commerce Control List. The Missile Technology Export Control committee is a U.S. interagency working group that reviews proposed U.S. exports of missile technology and evaluates them in terms of MTCR and U.S. nonproliferation policy. The U.S. government has a complex process with many participants to determine what technology may be transferred as part of a proposed sale. An interagency committee oversees the National Disclosure Policy and considers exceptions to the policy when classified military information is involved in the proposed transfer. The committee does not approve actual foreign military sales but provides authority to transmit the classified information associated with sales. In addition, military departments with responsibility over certain weapon systems and technologies have administrative processes to make disclosure decisions within their jurisdictions. Each military department has its own process for making disclosure decisions within its authority and for preparing proposed FMS agreements. The National Disclosure Policy Committee is responsible for formulating, issuing, administering, and monitoring the implementation of the National Disclosure Policy, as well as considering exceptions to the policy. Although the committee is responsible for determining what classified military information may be transmitted to a foreign government, it does not approve the actual sale that transfers the information. The committee may discuss actual sales in the context of considering exceptions to the policy. The committee consists of general members and special members who represent heads of various federal agencies, DOD components, and each military department. General members vote on all issues and include the Secretaries of State, Defense, Army, Navy, and Air Force and the Chairman of the Joint Chiefs of Staff. Special members usually vote only on those issues in which they have a direct interest. The committee is co-chaired by the State Department and DOD. The committee has a process for reviewing exceptions to the National Disclosure Policy. As illustrated in figure 1, the committee’s executive secretary distributes any request for an exception to policy to all relevant members. The committee’s procedures allow a 30-day time frame for reaching final decisions. The members present a position within 10 working days. If there is not unanimous agreement on the proposed exception, the committee members work on achieving consensus. If they are unable to do so, the committee chairman formulates a position and informs the members within 10 working days. The chairman’s decision becomes final unless appealed to the Secretary or the Deputy Secretary of Defense by the cognizant department or agency within 10 working days. Unlike in earlier times, when the FMS program was often favored over commercial sales as the method of transfer for some sensitive weapon systems, some committee representatives told us that today they typically do not recommend that systems be sold through the FMS program and often do not address the method of sale. According to several officials, both methods of sale are equally secure in protecting technology. For example, in early 1999 the committee agreed to change a long-standing policy that required an advanced missile system to be sold through the FMS program. The revised policy allows the system to be sold either through the FMS program or directly by the contractor with State Department approval. Irrespective of the method of sale, the purchasing country must agree to security requirements, such as inventory of the equipment, and U.S. government verification that the requirements have been met. DOD’s policy is to remain generally neutral regarding the method of sale. However, the policy allows for exceptions to permit FMS-only recommendations based on criteria such as presidential directives, legislation, and national or military department policies. While military departments have recommended that certain weapon systems be sold only through the FMS program, military officials we met with had widely varying opinions about whether the FMS program affords greater control than direct commercial sales. Some officials prefer selling sensitive items through the FMS program because DOD officials are involved in implementing every aspect of the sale under that program. Other officials stated that defense contractors have strong incentives to adhere to export control laws and will ensure that sensitive items are properly controlled when sold directly by the contractor. Each military department has its own process for implementing the National Disclosure Policy and for preparing FMS agreements. The Secretary of Defense has delegated authority to implement the National Disclosure Policy to military departments and other defense agencies for information originated by or under the control of their organizations, provided such information is in compliance with disclosure policy. The military departments, in turn, have delegated some disclosure authority to the heads of commands, agencies, and major staff elements within their organizations. Major military commands we visited have delegated certain authority to disclosure officers who work with weapon program offices on international sales. Appendix I provides additional information on the differences between military departments’ disclosure and FMS agreement preparation processes. For example, the Army generally handles FMS agreement preparations at the command level with higher level approval, while the Air Force prepares FMS agreements at the Secretary level with input from other headquarters and program offices. The Army maintains disclosure as a security policy function held by the Deputy Chief of Staff for Intelligence, while the Air Force and the Navy consider disclosure an international function located with the Deputy Under Secretary of the Air Force for International Affairs and the Navy International Programs Office, respectively. DOD organizations prepare Delegation of Disclosure Authority Letters or component regulations to provide authority to disclosure officers to transmit classified military information to foreign nationals as part of weapon sales or other military activities. The disclosure letter explains classification levels, categories, scope, and limitations on information, including unclassified technical data, that may be disclosed to a foreign recipient. Some FMS program officials, in consultation with disclosure officers, refer to the disclosure letter as guidance when preparing FMS agreements. Each military department has a mechanism for verifying that the agreements do not exceed disclosure authority before referring them to the Defense Security Cooperation Agency and State Department for final approval. Disclosure letters can be subject to interpretation. In matters that require interpretation, disclosure officers contact program managers or engineers for technical assistance. At military commands we visited, the disclosure officers were in separate organizations from the FMS program management offices. For weapon systems programs that had large international sales, the disclosure officers were co-located in the program offices to facilitate decisions. Some disclosure officers told us that they want to retain a separate chain of command from the program offices so they will remain independent from those who manage the sales. The U.S. government has not established a process for ensuring that certain controlled items are fully and systematically identified when reviewing country requests for information or approving agreements to purchase items through the FMS program. While the State Department and many DOD components review proposed FMS agreements, no one organization is responsible for ensuring that all controlled items have been identified and reviewed. As a result, controlled missile-related technology has been transferred under the FMS program without proper review and approval. While the Defense Security Cooperation Agency is the principal organization through which DOD carries out its security assistance responsibilities, including administering the FMS program, it does not have the mission or expertise to identify controlled technology and make technology transfer decisions for DOD.