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entitled 'Export Controls: More Thorough Analysis Needed to Justify 
Changes in High Performance Computer Controls' which was released on 
August 02, 2002.



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Report to Congressional Committees:



August 2002:



export controls:



More Thorough Analysis Needed to Justify Changes in High Performance 

Computer Controls:



GAO-02-892:



Contents:



Letter:



Results in Brief:



Background:



Report Does Not Adequately Justify Changes in Control

Threshold:



Other Key Issues Relevant to the Decision to Raise Control Thresholds 

Not Addressed in the Report:



Conclusions:



Matter for Congressional Consideration:



Agency Comments and Our Evaluation:



Scope and Methodology:



Appendixes:



Appendix I: Comments from the Department of Commerce:



Appendix II: Comments from the Department of Defense:



Appendix III: Comments from the Department of State:



Appendix IV: GAO Contact and Staff Acknowledgements:



Table:



Table 1:



Figure :



Figure 1: Changes in the U.S. Export Control Threshold for High 

Performance Computers, 1993-2002 (Measured in MTOPs):



Abbreviations:



MTOPS: millions of theoretical operations per second:



Letter:



August 2, 2002:



The Honorable Carl Levin

Chairman

The Honorable John W. Warner 

Ranking Minority Member

Committee on Armed Services

United States Senate:



The Honorable Paul S. Sarbanes

Chairman

The Honorable Phil Gramm 

Ranking Minority Member

Committee on Banking, Housing, and Urban Affairs

United States Senate:



The Honorable Robert Stump

Chairman 

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives:



The Honorable Henry J. Hyde

Chairman 

The Honorable Tom Lantos

Ranking Minority Member

Committee on International Relations

House of Representatives:



The United States controls the export of high performance computers for 

national security and foreign policy reasons. U.S. export control 

policy seeks to balance U.S. economic interests in promoting high 

technology exports with national security interests in maintaining a 

military advantage over potential adversaries. High performance 

computers have both civilian and military applications, operate at or 

above a defined performance threshold (measured in millions of 

theoretical operations per second [MTOPS]), and require an export 

license to particular destinations such as China, India, and Russia. 

The President has periodically changed, on the basis of technological 

advances, the threshold above which licenses are required.



In January 2002, the President announced that the control threshold 

above which computers exported to countries such as China, India, and 

Russia would increase from 85,000 MTOPS to 190,000 MTOPS. When the 

President changes the threshold, the National Defense Authorization Act 

of 1998[Footnote 1] requires that the President provide a justification 

to Congress. The justification should, at a minimum, address the extent 

to which computers capable of performance between the established and 

newly proposed level of performance are available from other countries, 

address all their potential military uses, and assess the impact of 

such uses on U.S. national security interests. A related law also 

requires that we assess the executive branch’s proposed 

changes.[Footnote 2] The justification for the President’s January 2002 

change to the control threshold for high performance computers was 

presented in a December 28, 2001, report to Congress. Thus, we (1) 

assessed the President’s justification for the decision as presented in 

the December 2001 report and (2) identified other issues relevant to 

the decision to change the control threshold.



To address these issues, we reviewed the statutory requirements for the 

justification, the documentation used by executive branch officials to 

support the conclusions presented in the report, and export control 

regulations pertaining to high performance computers. In addition, we 

obtained information from the 10 manufacturers listed in the 

President’s report on the availability of high performance computers 

having the specifications described in the report. The information 

obtained from the manufacturers was supplemented with additional 

information obtained from a leading information technology industry 

market research organization. We also interviewed officials from the 

Departments of Commerce, Defense, and State who were responsible for 

producing the President’s report.



Results in Brief:



The report justifying the changes in control thresholds for high 

performance computers focused on the availability of high performance 

computers. However, we found that the justification did not fully 

address the requirements of the National Defense Authorization Act of 

1998.



* The report’s prediction that computers capable of performing at the 

new threshold will be widely available through foreign and domestic 

companies by early 2002 has not materialized. We found that only 1 of 

10 companies cited in the report produces computers with this 

capability. Other companies do not plan to do so until 2003, or later, 

and some do not plan to do so at all. The President’s report was not 

supported by an assessment of foreign availability of high performance 

computers.



* The report contains little relevant analysis of the potential 

military uses of computers with performance capabilities between the 

old and new thresholds.



* The report does not adequately address what impact computers that 

perform at levels between the old and new thresholds would have on 

national security. The report states that high performance computers 

would be of little or no value to countries of concern not having the 

requisite knowledge and experience in using these computers to advance 

their military capabilities. However, the report did not discuss the 

usefulness of these computers to countries such as China and Russia 

that have already demonstrated the ability to use high performance 

computers. Finally, the report lacks potentially valuable information 

on the national security impact of the new threshold because the 

executive branch has not completed mandated national security 

assessments of the impact of the transfer of technology, including high 

performance computers.



Although not required by law, the December 2001 report did not address 

several key issues related to the decision to raise the threshold.



* The report did not mention that the unrestricted export of computers 

with performance capabilities between the old and new thresholds will 

allow countries of concern to obtain computers that they have had 

difficulty constructing on their own.



* The report also did not mention that the United States has been 

unable to monitor the end-uses of many of the computers that it exports 

to destinations such as China. Consequently, the true end-uses and end-

users of these computers and their impact on U.S. national security are 

unknown.



* The inadequacies of the report are further compounded by continued 

use of a flawed measure, MTOPS. As noted in our prior report,[Footnote 

3] U.S. government officials and industry officials said this measure 

is outdated and does not adequately account for the performance 

capability in today’s computers.



* The report does not acknowledge the multilateral process used to make 

prior changes in high performance computer control thresholds. Changes 

in control thresholds on dual-use goods (that is, goods with both 

military and civilian uses) are coordinated through the Wassenaar 

Arrangement--a voluntary forum of 33 countries established to reach 

multilateral agreements about which dual-use goods merit special 

scrutiny and reporting.[Footnote 4] Since the United States 

unilaterally raised the control threshold without obtaining the 

consensus of other Wassenaar Arrangement members, State Department 

officials said it may become more difficult in the future to reach 

multilateral consensus on other important export control issues.



In responding to our draft report, the Department of Commerce disagreed 

with our findings and conclusions and stated that the administration 

conducted a thorough review prior to raising the licensing thresholds 

on high performance computers. We disagree and note that the 

President’s justification focused on only one of three elements 

required by law--the market availability of high performance computers. 

Further, we found that the market availability assessment was not 

adequate since only 1 of 10 companies capable of producing high 

performance computers at the higher threshold planned to market such 

computers in 2002. More importantly, the justification did not address 

the two remaining elements required by law--an analysis of all the 

potential military uses of high performance computers and the impact of 

such uses on U.S. national security interests.



The Department of State agreed that several shortcomings exits in the 

President’s justification. However, State said these shortcomings do 

not invalidate the key finding that high performance computer can no 

longer be effectively controlled because countries can cluster or link 

computers together to achieve higher capabilities. State’s position, 

which was not reflected in the President’s report, contrasts with an 

October 2001 Department of Defense analysis that concluded that a 

clustered system does not provide comparable capabilities as a stand-

alone high performance computer.



The Departments of Commerce, Defense, and State did not comment on our 

draft report recommendation that they comply with existing statutes and 

complete a thorough assessment of availability, military significance, 

and the national security impact of the changes to high performance 

computer controls. The Department of Commerce did not respond to our 

recommendation. The Department of Defense did not address our findings 

or conclusions but stated that its ongoing study of export control 

issues was consistent with our recommendations. The Department of State 

said it did not agree with certain recommendations but did not specify 

which of our recommendations it agreed or disagreed with. The 

departments have also not complied with similar recommendations made in 

prior GAO reports.[Footnote 5] Accordingly, in the report, we have 

included a Matter for Congressional Consideration. To help ensure that 

a thorough assessment of these issues is completed, Congress may wish 

to consider requiring that the executive branch fully comply with 

existing statutes before the executive branch alters or eliminates the 

export control threshold for high performance computers.



Background:



The United States controls high performance computers and related 

components (for example, microprocessors) through the Export 

Administration Act of 1979 and the implementing Export Administration 

Regulations.[Footnote 6] The act authorizes Commerce to require firms 

to obtain licenses for the export of sensitive items that may be a 

national security or foreign policy concern. The Departments of 

Defense, Energy, and State assist Commerce, which administers the act, 

by reviewing export applications and supporting Commerce in its reviews 

of export control policy.



Since 1993, the President has revised U.S. export control levels for 

high performance computers seven times, including the revisions 

announced in January 2002. These revisions have resulted in a nearly 

thousandfold increase in the export control threshold over the 8-year 

period; most of these changes have occurred over the last 2 years (see 

fig. 1). The latest effort to revise the threshold was initiated in 

response to a letter from the Computer Coalition for Responsible 

Exports.[Footnote 7]



Figure 1: Changes in the U.S. Export Control Threshold for High 

Performance Computers, 1993-2002 (Measured in MTOPs):



[See PDF for image]



Note: The use of separate MTOPS levels for military and civilian end-

users was discontinued in 2000.



Sources: GAO analysis of prior reports used to justify changes in the 

control threshold and U.S. Export Administration Regulations.



[End of figure]



Beginning in 1996, the executive branch organized countries into four 

computer “tiers,” with each tier above tier 1 representing a 

successively higher level of concern related to U.S. national security 

interests. Current U.S. export control policy places no license 

requirements on tier-1 or tier-2 countries, primarily those in Western 

Europe, Japan, Asia, Africa, Latin America, and Central and Eastern 

Europe.[Footnote 8] Exports of computers above a specific performance 

level to tier-3 countries such as China, India, Israel, Pakistan, and 

Russia require a license. Exports of high performance computers to 

tier-4 countries such as Iran, Iraq, and North Korea are essentially 

prohibited.



To help inform congressional decision makers about changes in U.S. 

export controls on computers, the National Defense Authorization Act of 

1998 requires that the President report to Congress the justification 

for changing the control threshold for exports of high performance 

computers to certain sensitive countries.[Footnote 9] The report must, 

at a minimum, (1) address the extent to which high performance 

computers with capabilities between the established level and the newly 

proposed level of performance are available from foreign countries, (2) 

address all potential uses of military significance to which high 

performance computers between the established level and the newly 

proposed level could be applied, and (3) assess the impact of such uses 

on U.S. national security interests.



In addition, section 1402 of the National Defense Authorization Act of 

2000 requires the President to annually assess the cumulative impact of 

licensed transfers of military-sensitive technologies to countries and 

entities of concern and possible countermeasures that may be necessary 

to overcome the use of such technologies. Section 1406 requires the 

President, in consultation with the Secretaries of Defense and Energy, 

to conduct a comprehensive review of the national security implications 

of exporting high performance computers to China with annual updates 

through 2004.[Footnote 10] In January 2000, the President delegated the 

responsibility for producing these reports to the Secretaries of 

Defense and Energy.[Footnote 11]



As required by law, we reviewed prior justifications for changing the 

export control thresholds on high performance computers. We found that 

the changes were not adequately justified. For example, previous 

reports failed to address all uses of military significance to which 

high performance computers could be applied at the new thresholds, or 

the impact of such uses on national security, as required by law. In 

response to these deficiencies, we recommended that the Secretary of 

Defense report on the national security threat and proliferation impact 

of U.S. exports of high performance computers to countries of concern.

[Footnote 12]



Report Does Not Adequately Justify Changes in Control Threshold:



The Department of Commerce stated that the December 2001 decision to 

raise the control threshold for high performance computer exports was 

based on thorough analysis. However, we found the justification did not 

adequately meet the three criteria required by law. First, the report 

stated that computers based on Intel Corporation’s Itanium processor 

and capable of performing at the 190,000 MTOPS level would be widely 

available in early 2002.[Footnote 13] This assertion was not based on 

any formal analyses and has proven to be inaccurate. Second, the report 

provided little analysis of all the potential military uses of these 

computers. Third, the report did not assess the impact of the uses of 

these computers on U.S. national security. Although the report asserts 

that high performance computers would be of limited value to countries 

of concern not having the demonstrated knowledge and experience in 

using these computers, the report did not discuss the national security 

implications of exporting computers to countries of concern, such as 

China and Russia, that have a demonstrated ability to use them. 

Further, several laws and a Defense Department directive have mandated 

other studies that could be used to better understand the national 

security implications of the export of high performance computers and 

other technologies; however, the Department of Defense has not 

completed such studies.



190,000 MTOPS Computers Are Not Widely Available:



The December 2001 report inadequately addressed the first criterion of 

the National Defense Authorization Act of 1998 in its discussion of the 

extent to which high performance computers with capabilities between 

the established level and proposed level of performance are available 

from other countries. The executive branch’s report stated that the 

decision to raise the licensing threshold level to 190,000 MTOPS was 

based on the wide availability by early 2002 of new computer servers 

containing 32 Intel Corporation Itanium processors.[Footnote 14] Such 

servers approach a composite theoretical performance of 190,000 MTOPS. 

Contrary to assertions made in the report, however, Itanium-based 
computers 

with performance capabilities in the 190,000 MTOPS range are not widely 

available. We found that the report’s finding of availability was not 

based on an independent analysis but rather on information provided by 

industry. According to Defense officials responsible for producing the 

report, industry representatives told them that (1) the market would be 

flooded with 32-way, Itanium-based servers in early 2002, (2) the 

People’s Republic of China is the long-term market of importance, and 

(3) U.S. industry is concerned that, if the threshold is not raised, 

foreign competitors will capture the market.



Although not required by law, Commerce could have independently 

verified industry’s assertions as to the availability of the servers by 

conducting foreign availability assessments. Foreign availability 

assessments identify foreign sources of items subject to U.S. national 

security export controls, such as high performance computers, and are 

the principal mechanism recognized in the U.S. Export Administration 

Regulations for determining the availability of controlled items. These 

assessments determine whether items of comparable quality are available 

in quantities from non-U.S. sources that would render U.S. export 

controls on the items ineffective.[Footnote 15] Commerce officials 

stated that no foreign availability study was conducted because 

industry had made its case informally.[Footnote 16] Instead of 

conducting a study to establish that these servers would be widely 

available by early 2002, Commerce stated that it conducted interagency 

meetings and discussions with industry as well as an analysis of the 

worldwide availability of high performance computers. Commerce stated 

that it also reviewed the Internet sites of the computer manufacturers 

mentioned in the report. In commenting on a draft of our report, the 

Department of Commerce asserted that it completed a market analysis of 

the worldwide availability of high performance microprocessors and 

computer clustering capabilities, and held discussions with other 

executive branch agencies and foreign governments. However, the 

President’s report did not cite or include this market analysis nor did 

the department provide additional information to document this 

completed analysis in response to our request.



We reviewed the documentation that Commerce obtained from the Internet 

and other sources and found little additional evidence about the 

availability of 32-way, Itanium-based servers beyond the information 

contained in the Computer Coalition for Responsible Exports’ August 

2001 letter requesting a change in the export control threshold. The 

information provided did not indicate that the 10 companies listed in 

the President’s report planned to introduce 32-way servers or that the 

servers would be widely available in early 2002. We also contacted the 

companies listed in the report and found that, as of May 2002, only one 

of the companies--Unisys Corporation--was producing a 32-way, Itanium-

based server (see table 1).



Table 1: Companies Cited by the President’s December 2001 Report as 

Producing 32-way, Intel Itanium-based Servers in Early 2002:



Company: Bull; Country: France; Is the company producing a 32-way, 

Itanium-based server?: No.



Company: Compaq; Country: United States; Is the company producing a 32-

way, Itanium-based server?: No.



Company: Dell; Country: United States; Is the company producing a 32-

way, Itanium-based server?: No.



Company: Fujitsu-Siemens; Country: Japan/Germany; Is the company 

producing a 32-way, Itanium-based server?: No.



Company: Hitachi; Country: Japan; Is the company producing a 32-way, 

Itanium-based server?: No.



Company: Hewlett Packard; Country: United States; Is the company 

producing a 32-way, Itanium-based server?: No.



Company: IBM; Country: United States; Is the company producing a 32-

way, Itanium-based server?: No.



Company: Mitsubishi; Country: Japan; Is the company producing a 32-way, 

Itanium-based server?: No.



Company: NEC; Country: Japan; Is the company producing a 32-way, 

Itanium-based server?: No.



Company: Unisys; Country: United States; Is the company producing a 32-

way, Itanium-based server?: Yes.



Sources: President’s December 2001 report to Congress and GAO analysis.



[End of table]



Information obtained from the companies listed in the President’s 

report contradicts the assertion that 32-way, Itanium-based servers 

will be widely available in early 2002. Representatives we interviewed 

stated that their companies would not introduce these servers in 2002 

or had no plans to manufacture these servers due to the lack of 

software and a market for such powerful servers. An official from a 

leading information technology market research firm stated that 

Itanium-based technology is far too new to allow a reasonable 

determination of its impact on the server market. Furthermore, 

according to the research firm’s information, no 32-way, Itanium-based 

servers were shipped in the first quarter of 2002.



Finally, the report noted that a significant market exists for high-end 

servers of up to 32 processors. However, Commerce data indicate that 

the market for computers with performance capabilities in the 190,000 

MTOPS range in countries of concern is small and that the loss of sales 

in these countries should not materially affect U.S. manufacturers. In 

2001, Commerce received 16 export license applications for computers 

with performance capabilities at or above 85,000 MTOPS; all but one was 

approved. Six of the approved applications were for sales to China. 

Moreover, Japan--the other leading exporter of high performance 

computers--did not sell any of these systems to China, Russia, or India 

in 2001, according to the Department of Defense.



Report Did Not Assess All Potential Uses of Military Significance:



As in previous reports used to justify changes in the control 

threshold, the December 2001 report did not meet the second criterion 

of the National Defense Authorization Act of 1998: to address all 

potential uses of military significance to which computers with 

performance capabilities between the old control threshold and the new 

threshold could be applied. The report stated that the U.S. government 

uses computers in virtually all military and national security 

applications, including the design, development, and production of 

weapon systems, military operations, cryptoanalysis, and nuclear 

weapons design and simulation. Defense officials to whom we spoke 

stated that Defense does not maintain an inventory of all U.S. national 

security-related computer applications, that the value of such a list 

is questionable, and that it may be impossible to construct such a 

list. The President’s report provides little information about which 

military applications can be run on computers with capabilities between 

the old and new threshold. The report pointed out that the majority of 

U.S. military and national security applications are run on computers 

below 190,000 MTOPS. Using information provided by Defense, we found 

that computers operating at or below 190,000 MTOPS meet 

98 percent of Defense’s military computational requirements. Defense 

officials responsible for preparing the report said that the level of 

control selected--190,000 MTOPS--was driven by the market and what the 

administration believes it can control, not by the military and 

national security applications that could be run on high performance 

computers.



Assessment of Impact on National Security Not Conducted:



The President’s report did not discuss the impact on U.S. national 

security of countries such as Russia and China obtaining high 

performance computing power up to the new control threshold, as 

required by law. Such a national security assessment has been a long-

term, executive branch requirement. For example, section 1402 of the 

National Defense Authorization Act of 2000 requires the President to 

annually assess the cumulative impact of licensed transfers of 

military-sensitive technology to countries and entities of concern and 

to identify possible countermeasures that may be necessary to overcome 

the use of such technologies. In addition, section 1406 of the act 

requires assessments of the national security implications of exporting 

high performance computers to China with annual updates through 2004. 

In addition, a 1985 Department of Defense directive requires annual 

assessments of the total effects of technology transfers.[Footnote 17] 

We found that Defense had not completed the studies required by the law 

or its directive. Moreover, Defense has not yet implemented our prior 

recommendation to report on the national security threat and 

proliferation impact of U.S. exports of high performance computers to 

countries of concern.[Footnote 18] Although the Departments of Defense 

and Commerce stated that they are already engaged in reviews of similar 

issues, the agencies could not furnish plans or other documentation on 

how they are implementing our recommendation.



Instead of addressing the national security implications associated 

with the export of high performance computers, the President’s report 

simply stated that high performance computers would be of little or no 

value to countries of concern not having the requisite knowledge and 

experience in using these computers to advance their military 

capabilities. However, the report did not discuss the usefulness of 

these computers to countries such as China and Russia that have 

demonstrated the ability to use high performance computers. The 

report’s assertion that countries of concern will not benefit from the 

acquisition of high performance computers also contradicts statements 

made in other reports published by the executive branch and statements 

made by Defense officials responsible for producing the President’s 

report, as indicated in the following examples.



* Reports published in 2000 that were used to justify previous 

increases in the export control threshold for high performance 

computers stated that Russia and China have the expertise necessary to 

use these computers for national security applications such as the 

construction of submarines, advanced aircraft, composite materials, or 

a variety of other devices.[Footnote 19]



* A 2001 report by the Department of Energy’s National Nuclear Security 

Administration concluded that the availability of overall computing 

power to a nuclear weapons design program is critical.[Footnote 20] 

Acquisition of computers with higher performance levels allows a 

nuclear weapons program to conduct studies faster and enables studies 

that cannot be conducted on systems of lower performance, thus 

shortening the time for design and development to full-scale testing. 

The report further concludes that computers with an effective 

performance of 

10,000 MTOPS or greater would be of significant use to China’s 

designers in examining likely gaps in their nuclear weapons programs.



* A 2001 executive branch assessment concluded that the increased use 

of high performance computers in the weapons of mass destruction 

programs of countries of concern could severely complicate U.S. efforts

to monitor and assess such programs.[Footnote 21] The use of these 

computers can reduce and even eliminate many traditional observable 

weapons production activities such as large manufacturing operations 

and live weapons tests.



According to the Defense officials responsible for preparing the 

December 2001 report, the level of computing power used to solve a 

particular problem is based on the level of computing power available. 

If more powerful computers are available, they are used. The greater 

the power of the available computer, the faster the problem can be 

solved. Consequently, the computers exported under the new threshold 

will allow countries of concern to solve more quickly more complex 

problems in weapons systems design.



Other Key Issues Relevant to the Decision to Raise Control Thresholds 

Not Addressed in the Report:



Although not required by law, the President’s December 2001 report did 

not address several key issues related to the decision to raise the 

threshold. These issues include the ability of countries of concern to 

construct high performance computers on their own, U.S. government 

difficulties in monitoring the end-use of computers exported to 

countries of concern, the use of MTOPS as a measure of individual 

computer performance, and the impact of establishing a new licensing 

threshold outside the Wassenaar Arrangement process.



The report did not acknowledge the difficulty that some countries of 

concern have encountered in clustering smaller machines together to 

achieve greater computing power. However, as we have reported before, 

it may be more difficult to operate custom-built clustered systems than 

to build them, according to experts.[Footnote 22] For example, without 

vendor-supplied software to automate key functions on a clustered 

system, everything must be done manually, making computing labor 

intensive and less reliable than if it were performed on a vendor-

manufactured system. With the higher thresholds, countries of concern 

will not have to rely on more inefficient clustered systems to obtain 

greater computing capabilities.[Footnote 23]



* The report did not address the difficulty that the U.S. government 

has had in effectively monitoring the high performance computers that 

are exported to countries of concern.[Footnote 24] Monitoring exported 

equipment for proper use is a key element of the U.S. export licensing 

process. Approved export licenses for high performance computers 

typically stipulate conditions, such as where the computer must be 

located and how it should be used. The conditions are designed to deter 

the end user from using the computer inappropriately or from 

transferring the computer to another location. Monitoring of these 

conditions is to be accomplished through required end-use checks 

conducted by U.S. government personnel.[Footnote 25] In our prior 

report, we found that U.S. government personnel in China tasked with 

this job have been unable to conduct many checks.[Footnote 26] In 

testimony before the U.S.-China Security Review Commission on January 

17, 2002, Commerce’s Assistant Secretary for Export Enforcement stated 

that the Chinese government dictates the schedule for conducting end-

use checks.[Footnote 27] As a result, more than 700 outstanding checks 

remain to be completed, according to Commerce.



* The inadequacies of the President’s report are compounded by the 

continued use of MTOPS to determine the performance capabilities of 

computers. Although industry and government no longer consider MTOPS a 

valid measure of computer performance, the executive branch continues 

to use it. In our 2000 report on high performance computers, we 

recommended that executive branch agencies comprehensively assess ways 

to address the shortcomings of computer export controls,

including the development of new performance measures.[Footnote 28] The 

President’s December 2001 report stated that the executive branch is 

conducting a comprehensive review of export controls on computer 

hardware. According to the report, this interagency review will, among 

other things, attempt to identify a controllable class of high-end 

computer systems of greater military sensitivity and alternative 

metrics for controlling such systems. However, Defense officials stated 

that the study has no deadline and no formal terms of reference.



* The report did not acknowledge the multilateral process established 

under the Wassenaar Arrangement--a forum of 33 countries established in 

1996 to reach multilateral agreements on which dual-use goods merit 

special scrutiny and reporting. Changes to control thresholds on dual-

use goods are coordinated through the Wassenaar Arrangement. The 

arrangement uses a consensus-based approach to establish control 

thresholds on these goods. The United States unilaterally raised the 

MTOPS licensing threshold to 190,000 without first obtaining the 

consensus of other Wassenaar Arrangement members. Due to actions taken 

by the United States, the U.S. licensing threshold is now

190,000 MTOPS, while the control thresholds of other Wassenaar member 

states remain at 28,000. Consequently, U.S. exporters have a 

competitive advantage over their international competitors because U.S. 

exporters are not required to obtain an export license for a wider 

range of computers. According to State Department officials, the 

unilateral U.S. action may complicate future efforts to reach consensus 

in the Wassenaar forum on other important export control issues.



Conclusions:



The report justifying the decision to decontrol high performance 

computers was not based on a thorough analysis and did not fully 

address the requirements of the National Defense Authorization Act of 

1998. Since the report’s conclusions are based on inaccurate 

information provided by the computer industry and an inadequate 

assessment of national security issues, the decision to raise the 

export control threshold is analytically weak and appears to be 

premature, given market conditions. By providing greater access to more 

powerful computers through the removal of any export-licensing 

requirement, the United States could allow countries of concern to 

pursue computer applications having military uses with a greater degree 

of rigor and reliability. A more thorough analysis of the foreign 

availability and the national security impact of transferring 

technology to countries of concern would have provided a better 

analytical basis for making changes in the control threshold. Given the 

level of high performance computing power that the United States 

approves for export, such studies of the cumulative effect of computer 

and related technology exports will be increasingly important in 

determining the impact of such exports on U.S. national security and in 

making future decisions about adjusting export control thresholds.



Matter for Congressional Consideration:



In our draft report, we recommended that the Departments of Commerce, 

Defense, and State comply with existing statutes and complete a 

thorough assessment of the foreign availability, military significance, 

and the national security impact of changes to high performance 

computer controls. Prior GAO reports have made similar recommendations. 

Since the departments have not responded to our earlier recommendations 

on this issue or clearly indicated whether they agreed with the 

recommendations made in our draft report, we have included a Matter for 

Congressional Consideration.



To help ensure that a thorough assessment of these issues is completed, 

Congress may wish to consider requiring that the executive branch fully 

comply with the provisions of the National Defense Authorization Acts 

of 1998 and 2000 before the executive branch alters or eliminates the 

export control thresholds for high performance computers.



Agency Comments and Our Evaluation:



We received written comments on a draft of this report from the 

Departments of Commerce, Defense, and State, which are reprinted in 

appendixes I, II, and III. The Commerce Department disagreed with our 

findings and conclusions and said that the executive branch conducted a 

thorough review of U.S. export controls on high performance computers 

prior to the President’s January 2002 decision to raise the licensing 

thresholds. Commerce stated that this review included significant input 

from all relevant agencies, consultations with other Wassenaar 

Arrangement partners, as well as an analysis of the worldwide 

availability of high performance computers and computer clustering. 

Commerce also said the United States continues to seek a means to 

control computers of the greatest strategic importance. The Department 

of Defense said it is conducting a study of computer export controls 

consistent with our recommendations and the requirements of law. The 

Department of State said it agreed that several shortcomings exist in 

the executive branch’s justification to raise the licensing thresholds 

for high performance computers. While agreeing that there were some 

gaps in the study, State said it did not believe that these 

shortcomings invalidated a key finding that high performance computers 

can no longer be controlled effectively, due to advances in clustering 

computers together to achieve higher capabilities.



We have added information to the report to more fully describe the 

information that Commerce gathered from industry. However, we disagree 

that the administration conducted a thorough review of U.S. export 

controls prior to the President’s January 2002 decision to raise the 

licensing thresholds. As noted in our report, the President’s 

justification focused on only one of three elements required by law--

the availability of high performance computers. Additionally, the 

availability assessment was not adequate since only 1 of 10 companies 

capable of producing high performance computers planned to market such 

computers in 2002. As noted in Commerce Department data, the current 

market for computers at the 190,000 MTOOPS level is relatively small 

and is not developing as quickly as anticipated. Accordingly, the 

disparity between market conditions and industry’s assertions about the 

widespread availability of such computers should have prompted Commerce 

to conduct an independent foreign availability assessment as allowed by 

the Export Administration Regulations. However, Commerce did not 

conduct this important analysis because senior Commerce officials 

informed GAO that the department did not have the resources to complete 

such assessments.



The President’s report did not fully address the two remaining elements 

required by law--identifying all potential uses of military 

significance and the national security implications of high performance 

computer exports. As noted in our report, Defense Department 

information shows that computers operating at or below 190,000 MTOPS 

meet 98 percent of Defense’s military computational requirements. 

Therefore, the President’s justification to raise the MTOPS licensing 

threshold should have included an assessment of the effects on national 

security.



The State Department’s comments clearly articulated the executive 

branch’s position on high performance computers--”high performance 

computers can no longer be controlled effectively” because high 

performance computing capacity is widely available. While our report 

found State’s assertion on availability is not supported by current 

market conditions, State’s comments demonstrate that preceived market 

conditions and related trends in computer clustering served as the 

primary basis for the decision to raise the control threshold for high 

performance computers. Regarding State’s comments on computer 

clustering, we note that State’s position contrasts with an October 

2001 Department of Defense analysis that concluded that a clustered 

system does not provide comparable capabilities as a stand-alone high 

performance computer. The State and Commerce Departments cited no 

analysis as to how these powerful computers could enhance the military 

capabilities of countries of concern or affect U.S. national security 

interests. These important analyses are required by law but not 

addressed in the President’s report.



Scope and Methodology:



To assess the President’s justifications for raising the export control 

threshold from 85,000 MTOPS to 190,000 MTOPS, we reviewed the statutory 

requirements related to the President’s justification and the 

regulations that pertain to the export of high performance computers. 

Further, we reviewed documentation used as the basis for the report’s 

assertions. The documentation included the letter and associated 

attachments addressed to Commerce from the Computer Coalition for 

Responsible Exports that prompted the change in the threshold. We also 

examined information available on the Internet about the computer 

server products offered by the 10 manufacturers mentioned in the 

President’s report and contacted the manufacturers to obtain additional 

information. The information obtained from the manufacturers was 

supplemented with information obtained from a leading information 

technology industry research organization, including reports 

pertaining to the availability of Intel Itanium-based servers. Finally, 

we interviewed Commerce, Defense, and State officials responsible for 

producing the report. The National Security Council, which plays a key 

role in coordinating the interagency process for changing export 

controls on high performance computers, declined to discuss the 

President’s report with us.



We performed our work from February 2002 through July 2002 in 

accordance with generally accepted government auditing standards.



We are sending this report to interested congressional committees and 

the Secretaries of Commerce, Defense, and State. We will also make 

copies available to other interested parties on request. In addition, 

the report will be available at no charge on the GAO Web site at http:/

/www.gao.gov.



Please contact me at (202) 512-8979 if you or your staff have any 

questions concerning this report. Another GAO contact and staff 

acknowledgments are listed in appendix IV.



Joseph Christoff, Director

International Affairs and Trade:



Signed by Joseph Christoff:



[End of section]



Appendixes:



[End of section]



Appendix I: Comments from the Department of Commerce:



THE SECRETARY OF COMMERCE Washington, D.C. 20230:



JUL 16 2002:



Mr. Joseph A. Christoff:



Director, International Affairs and Trade United States General 

Accounting Office Washington, D.C. 20548:



Dear Mr. Christoff:



Thank you for the opportunity to comment on the draft General 

Accounting Office (GAO) report entitled Export Controls: More Thorough 

Analysis Needed to Justify Changes in High Performance Computer 

Controls (Job Code 320102).



The Bush Administration conducted a thorough review of U.S. export 

controls on high performance computers (HPCs) prior to the President’s 

January 2002 decision to raise the licensing threshold on HPC exports 

to Tier 3 countries. This review included significant input from all 

relevant agencies, including the Departments of State and Defense, on 

the national security impact of modifying existing controls. The 

Administration’s review also involved consultations with our Wassenaar 

Arrangement partners, as well as an analysis of the worldwide 

availability of HPCs, including comparable computing capability based 

on widespread availability of high performance microprocessors and 

computer clustering capabilities, and an analysis of the computer 

industry in the global marketplace.



As President Bush announced in January 2002, the change in the control 

threshold from 85,000 million theoretical operations per second (MTOPS) 

to 190,000 MTOPS advances the goal of updating the U.S. export control 

system so that it protects national security and, at the same time, 

allows America’s high-technology companies to compete in the current 

global marketplace.



In addition to this interim step of raising the control level for HPC 

exports to Tier 3 countries, the Administration is continuing a more 

comprehensive review of export controls on computer hardware. As you 

know, however, statutory change is needed to replace or eliminate the 

MTOPS control metric.



Enclosed are more detailed comments. Thank you again for requesting the 

Department of Commerce’s views on the draft report.



Sincerely, Donald L. Evans:



Signed by Donald L. Evans:



Enclosures:



Department of Commerce Comments on the Draft GAO Report “Export 

Controls: More Thorough Analysis Needed to Justify Changes in High 

Performance Computer Controls”:



General Comments:



The Department of Commerce disagrees with the GAO draft report’s 

conclusion that the Bush Administration’s decision to change the 

threshold for the licensing of High Performance Computers (HPCs) was 

based on inadequate analysis. Prior to making that decision, the 

Administration considered the criteria specified in the National 

Defense Authorization Act of 1998 (NDAA). It also considered additional 

factors that Commerce believes are also highly relevant in determining 

the effectiveness of export controls for HPCs.



Over the past three years, Commerce has regularly consulted with an 

industry advisory panel, the Information Security Technical Advisory 

Committee (ISTAC), on HPC market and technological developments. We 

augmented these ongoing consultations with meetings with specific 

companies, reviews of foreign competitors based on publicly available 

information, and interagency consultations, including discussions with 

the intelligence community. In addition, we have continued to consult 

with our Wassenaar Arrangement partners on the issue of the export 

licensing threshold for HPCs. The Administration’s review of control 

levels has taken into account these various consultations and 

additional information.



Commerce’s analysis identified a number of emerging trends that are 

driving the world computer market. Technological factors, such as the 

ease with which lower performance computers can be clustered together 

to achieve higher performance and rapid increases in the capabilities 

of mass produced, off-the-shelf microprocessors, have emerged as key 

market and technology drivers. The fact that companies can cluster 

together large numbers of low-level computers to achieve performance 

above current control levels renders the controls less effective. The 

GAO recognized this in a recent report, stating that “the current 

export control system for high performance computers, which focuses on 

controlling individual machines, is ineffective because it cannot 

prevent countries of concern from linking or clustering many lower 

performance, uncontrolled computers to collectively perform at higher 

levels than current export controls allow.” (Export Controls: System 

for Controlling Export of High Performance Computing Is Ineffective, “ 

GAO-01-10, December 18, 2000, at S.) Thus, the ability to cluster low-

level computers has had a profound effect on the ability of the United 

States to effectively control the export of high performance computing 

power. However, the static review criteria of the NDAA do not address 

these emerging trends.



The issue of controllability of computer hardware in today’s world of 

rapid technological advancement and global production is reflected in 

the fact that the majority of Wassenaar Arrangement participants are in 

favor of removing computer hardware from the Wassenaar control list 

altogether. In contrast, the U.S. position has been to continue to seek 

a means to control computers of the greatest strategic importance.



Other Comments:



* The draft report fails to acknowledge a basic premise of the 

President’s report - that the volume production of Intel’s 64-bit 

Itanium processor, coupled with readily available computer clustering 

equipment and software, provides widespread high performance computing 

capability. While the market for such products may not have 

materialized as quickly as anticipated, effective controls must take 

into account widespread computing capability.



* The draft report states that the executive branch continues to use 

MTOPS to determine the performance capabilities of computers, despite 

the fact that MTOPS is no longer a valid measure of computer 

performance. While the Administration is continuing to explore 

alternatives to the MTOPS control metric, GAO should note that the use 

of the MTOPS control metric is statutorily required by the NDAA.



* The draft report states that the President’s report does not 

acknowledge the process in the Wassenaar Arrangement for revising 

controls. While there is no statutory requirement to address 

multilateral controls, it should be noted that the vast majority of 

Wassenaar participants favor computer decontrol. The draft report also 

incorrectly states that the United States unilaterally raised its 

computer control threshold to 190,000 MTOPS, while the Wassenaar 

control threshold remains at 28,000 MTOPS. In fact, the U.S. control 

threshold remains consistent with the Wassenaar level, with a license 

exception available for exports of HPCs of up to 190,000 MTOPS to a 

certain group of countries (Tier 3). Moreover, at the Wassenaar Plenary 

in December 2001, the U.S. Government informed its partners that it 

could not support the European Union proposal to entirely eliminate the 

MTOPS control parameter for HPCs because, in part, we are required by 

the NDAA to use MTOPS as the control parameter. Instead, we urged other 

members to support raising the Wassenaar control level to 190,000 

MTOPS.



* The most recent review of export controls on HPCs was not prompted 

solely by a request from a trade association representing the computer 

industry, as stated in the draft report. The review also was prompted 

by a proposal of a majority of Wassenaar participants to remove 

multilateral export controls on HPCs and by the Administration’s 

continuing desire to adjust export controls to changing global, 

economic, and technological circumstances.



* While the President’s report does not mention the monitoring of end 

users of HPCs, the U.S. Government is committed to such monitoring for 

HPCs, and other items, that it exports to countries such as China.In 

fact, Commerce recently conducted post-shipment verifications on 

several more HPC exports to China.



* More generally, our commitment to monitoring the end-uses of a 
variety 

of sensitive items is evidenced by the notice published in the Federal 

Register on June 14, 2002, listing certain persons in foreign countries 

for which we have been unable to conduct pre-license checks or post-

shipment verifications for reasons beyond our control.Identification on 

this list constitutes a “red flag” that exporters should consider 

before engaging in business transactions with the persons listed.Nine 

of the eleven entities on this list are located in China.



* We offer no specific comments on the part of your draft report 

concerned with the military uses of high speed computers and the impact 

that such uses may have on the national security, because this topic is 

more appropriately addressed by the Department of Defense.



[End of comments]



The following are GAO’s comments on the Department of Commerce’s letter 

dated July 16, 2002.



GAO Comments:



1. We disagree that the Commerce Department conducted a thorough review 

of U.S. export controls prior to the President’s January 2002 decision 

to raise the licensing thresholds. As noted in our report, the 

President’s justification focused on only one of three elements 

required by law--the availability of high performance computers. The 

justification did not adequately identify uses of military significance 

or the national security impact of changing the thresholds.



2. We agree that this raises a legal issue, which we mentioned in our 

testimony on high performance computers on March 15, 2001. Once a new 

measure is decided upon, the executive branch could work with Congress 

to allow use of other measures. Section 221 of H.R. 2581, would repeal 

the National Defense Authorization Act provisions dealing with export 

controls on high performance computers. These controls are expressed in 

MTOPS.



3. We agree that countries of concern can cluster or link together 

lower performance computers to achieve higher computing capabilities. 

However, clustering still comes at a cost in terms of speed and 

difficulties in operating the clustered systems. Raising the control 

threshold to 190,000 MTOPS effectively eliminates these costs and 

allows countries of concern to easily purchase high performance 

computers.



4. Defense Department officials stated that high performance computers 

performing at or below 190,000 MTOPS meet 98 percent of the Department 

of Defense’s computational requirements. Therefore, it is difficult to 

understand Commerce’s assertion that the United States continues to 

seek a means to control computers of the greatest strategic importance.



5. This comment acknowledges that Commerce used market conditions as 

the sole criterion for changing the control thresholds for high 

performance computers. The act also requires an assessment of how these 

powerful computers could enhance the military capabilities of countries 

of concern or affect U.S. national security interests. These topics 

were not addressed in the President’s report.



6. We disagree. The practical effect of raising the U.S. license 

exception level to 190,000 MTOPS is to raise the control threshold to 

this level since computers below this level (190,000 MTOPS) do not 

require an export license. Further, according to Commerce officials, 

not all Wassenaar members have license exception provisions in their 

regulations. Consequently, a disparity exists between U.S. licensing 

requirements and the control thresholds used by other Wassenaar member 

countries, as we noted in our report. Finally, according to State 

Department officials and official documents we reviewed, other 

Wassenaar members complained that the United States unilaterally 

increased its export control threshold by raising the licensing 

exception level to 190,000 MTOPS.



7. Commerce and Defense officials responsible for preparing the 

President’s December 2001 report confirmed that the effort to formally 

change the licensing threshold and prepare the justification was 

prompted by the letter from industry.



8. Commerce data indicate that there are more than 700 outstanding 

post-shipment verifications that have not been conducted in China.



9. When implemented, the Department of Commerce’s effort to “red flag” 

persons for which it has not been able to conduct prelicense checks or 

post-shipment verifications may prove to be a useful first step in 

improving its ability to counter problems associated with conducting 

checks and verifications.



[End of section]



Appendix II: Comments from the Department of Defense:



OFFICE OF THE UNDER SECRETARY OF DEFENSE 2000 DEFENSE PENTAGON 

WASHINGTON, DC 20301-2000:



JULY 8, 2002:



Mr. Joseph A. Christoff:



Director, International Affairs and Trade U.S. General Accounting 

Office:



441 G Street, N.W. Washington, D.C. 20548:



Dear Mr. Christoff:



This responds to the GAO draft report, “Export Controls: More Thorough 

Analysis Needed to Justify Changes in High Performance Computer 

Controls,” dated June 25, 2002 (GAO Code 320102/GAO-02-892).



Consistent with GAO’s recommendation and the provisions of the National 

Defense Authorization Act for Fiscal Year 2000, the Department of 

Defense, in consultation with the Central Intelligence Agency, the 

National Security Council and others, is conducting a review of 

computer export controls including evaluating alternative metrics for 

measuring computer performance.



Thank you for the opportunity to comment on this draft report.



Lisa Bronson:

Deputy Under Secretary of Defense, Technology Security Policy and 

Counterproliferation:



Signed by Lisa Bronson:



[End of section]



Appendix III: Comments from the Department of State:



United States Department of State:



Washington, D.C. 20520:



JUL 19 2002:



Dear Ms. Westin:



We appreciate the opportunity to review your draft report, “‘EXPORT 

CONTROLS: More Thorough Analysis Needed to Justify Changes in High 

Performance Computer Controls,” GAO-02-892, GAO Job Code 320102.



The Department’s comments are enclosed for incorporation, along with 

this letter, as an appendix to the GAO final report.



If you have any questions regarding this response, please contact 

Michael McCamman, International Economist, Bureau of NonProliferation 

on (202) 647-4724.



Sincerely,



Christopher B. Burnham Assistant Secretary and Chief Financial 

Officer:



Signed by Christopher B. Burnham:



Enclosure:



As stated.



cc: GAO/IAT - Mr. Bruno State/OIG - Mr. Berman State/NP - MS. Burk:



Ms. Susan S. Westin, Managing Director, International Affairs and 

Trade, U.S. General Accounting Office.



Export Controls: More Thorough Analysis Needed to Justify Changes in 

High Performance Computer Controls (GAO code 320102).



Department of State Comments on GAO Draft Report:



We believe that the GAO report identifies several shortcomings in the 

analysis substantiating the conclusions of the President’s 2002 report 

to Congress justifying a decision to raise the MTOPS level for export 

controls. While agreeing that there are some gaps in the study, the 

Department does not share the evident GAO view that these shortcomings 

invalidate the key finding that High Performance Computers can no 

longer be controlled effectively. Nor do we believe that the GAO 

comments related to “other important issues related to the decision to 

raise the threshold” fully reflect the factors and the degree to which 

the capabilities we seek to control for export are in fact now beyond 

effective control.



The GAO report points out that all but a very small percentage of DOD 

requirements are met by computers falling below export control limits, 

but does not proceed from that point to its implications for the nature 

of any continuing controls.



While GAO correctly points out the important nuclear applications for 

controlled computers, nuclear applications, and applications such as 

weapons design, do not require massive real-time processing capability 

to be accomplished effectively. The vast majority of such applications 

have been and continue to be do-able on uncontrolled computers, 

although it may take slightly longer than if a +190,000 MTOP mainframe 

is used. In this regard, the Los Alamos and Livermore National 

Laboratories have moved from centralized mainframe computers to 

distributed networks and are working to implement larger clustered 

systems, composed of generally-available workstations.



GAO recommends continued analysis of alternative control metrics other 

than MTOPS, a matter the Executive Branch agencies and industry groups 

have been investigating for over 15 years. The general consensus among 

other experts, both industry and government, is that adjusted Gflops 

has the same problems as MTOPS. Industry experts state that adjusted 

Gflops would introduce bias among existing technical approaches to 

advanced computing capacity, favoring some vendors over others. For 

this reason and others, it has already been established that a control 

approach based on adjusted Gflops would be unacceptable to Wassenaar 

Arrangement (WA) partners.



GAO points out that some countries of concern have encountered problems 

in clustering smaller machines together to achieve greater computing 

power. It is argued that proprietary software and technology are often 

necessary to aggregate uncontrolled computers to the point where they 

could be considered directly comparable to a +190,000 MTOPS mainframe. 

This is true, but does not mean that those seeking to create clustered 

computing capability to perform tasks for which they cannot import 

larger machines will not achieve that objective successfully.



It is well established that clustered computers can provide 

functionally equivalent capabilities to those provided by controlled 

machines in the vast majority of applications, although there are a few 

algorithms that do not lend themselves to efficient performance via 

clustering. Ironically, some countries subject to the existing controls 

may be among the most adept at developing this type of software and 

technology.



In summary, State accepts some of the GAO’s critique of the procedures 

used in the analysis behind the 2002 Report to Congress, and agrees 

that U.S. law must be enforced. However, it is our view that the GAO’s 

judgments on the substance of the regulatory question do not accurately 

reflect the reality that effective high performance computers are no 

longer controllable. The GAO’s own examples illustrate this point. For 

this reason and as noted above, we do not agree with certain of the GAO 

recommendations.



[End of comments]



The following are GAO’s comments on the letter from the Department of 

State dated July 19, 2002.



GAO Comments:



1. We are encouraged that executive branch agencies continue to explore 

alternatives to the current MTOPS metric. We believe the results of 

this analysis should be shared with Congress.



2. We agree that some countries subject to the existing controls may be 

among the most adept at developing clustering software and technology. 

However, this point was not included in the President’s report. The 

report simply stated that the impact of clustering will be assessed in 

the course of the executive branch’s review of computer export 

controls.



3. While computer clustering complicates efforts to maintain effective 

export controls, this point was not used as the basis for raising the 

export control thresholds for high performance computers. Also, the 

executive branch continues to debate the extent that clustering has 

rendered the current export control system ineffective. An October 2001 

Defense study found that clustered systems do not match the overall 

performance capabilities of the stand-alone systems supplied by U.S. 

vendors. This study concluded that foreign country’s use of clustered 

systems should not be used as a justification for decontrolling all 

classes of high performance computers.



[End of section]



Appendix IV: GAO Contact and Staff Acknowledgments:



GAO Contact:



Stephen Lord (202) 512-4379:



Acknowledgments:



In addition to the individual named above, David M. Bruno, Claude T. 

Adrien, and Lynn Cothern made key contributions to this report.



[End of section]



FOOTNOTES



[1] Public Law 105-85, sections 1211, 111 stat. 1932-35.



[2] Public Law 106-554, appendix B, section 314, 114 stat. 2763A-123.



[3] See U.S. General Accounting Office, Export Controls: System for 

Controlling Exports of High Performance Computers Is Ineffective, GAO-

01-10 (Washington, D.C.: Dec. 18, 2000).



[4] The 33 participating states of the Wassenaar Arrangement are 

Argentina, Australia, Austria, Belgium, Bulgaria, Canada, the Czech 

Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, 

Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Poland, 

Portugal, the Republic of Korea, Romania, the Russian Federation, the 

Slovak Republic, Spain, Sweden, Switzerland, Turkey, Ukraine, the 

United Kingdom, and the United States.



[5] See U.S. General Accounting Office, Export Controls: Inadequate 

Justification for Relaxation of Computer Controls Demonstrates Need for 

Comprehensive Study,

 GAO-01-534T (Washington, D.C.: Mar. 15, 2001) and GAO-01-10.



[6] 50 U.S.C. appendix sections 2401 and 15 C.F.R. sections 730. Since 

it was terminated on August 20, 1994, several executive orders and one 

law have extended application of the Export Administration Act of 1979. 

Most recently, application of the act has been extended by Executive 

Order 13222, August 17, 2001 (66 Fed. Reg. 44025).



[7] The Computer Coalition for Responsible Exports is an alliance of 

American computer companies and information technology associations 

established to inform policymakers and the public about the nature of 

the computer hardware industry--its products, market trends, and 

technological advances. The cochairmen of the coalition are the 

Director of Government Affairs for Unisys Corporation and the President 

of the Information Technology Industry Council. The council represents 

the leading U.S. providers of information technology products.



[8] In 2001, tiers 1 and 2 were merged. This report refers to tier-3 

countries as “countries of concern.”



[9] The Departments of Defense, Commerce, State, and Energy prepare the 

President’s report under the coordination of the National Security 

Council.



[10] Public Law 106-65, 113 stat. 798, 801.



[11] The Department of Defense is responsible for producing the section 

1402 report. The section 1406 report is to be prepared jointly by the 

Departments of Defense and Energy.



[12] See U.S. General Accounting Office, Export Controls: Information 

on the Decision to Revise High Performance Computer Controls, GAO/

NSIAD-98-196 (Washington, D.C., Sept. 16, 1998).



[13] The term “widely available” is not defined in the President’s 

report or in the Export Administration Regulations.



[14] Intel Corporation produces the Itanium processor. A server is a 

computer that manages information resources. For example, a computer 

network server is a computer that manages the flow of transactions over 

a network. The term “32-way” refers to the number of microprocessors 

that can be linked within a given computer server.



[15] 50 U.S.C. app. section 2404 (f); 15 C.F.R. section 768.2.



[16] While conducting related studies of export control issues, we 

found that the semiconductor equipment industry had made a similar case 

about foreign availability. Commerce did not accept its findings, even 

when industry representatives provided evidence that proved that 

foreign competitors were selling equipment to controlled destinations. 

See U.S. General Accounting Office, Export Controls: Rapid Advances in 

China’s Semiconductor Industry Underscore Need for Fundamental U.S. 

Policy Review, GAO-02-620 (Washington, D.C.: Apr. 19, 2002).



[17] The 1985 Defense directive states that the department shall assess 

annually the total effect of transfers of technology, goods, services, 

and munitions on U.S. security regardless of the transfer mechanisms 

involved. (Department of Defense Directive 2040.2, sections 5.1.7 and 

7.1.15, January 1984, reissued incorporating change 1, July 5, 1985.)



[18] See U.S. General Accounting Office, Export Controls: Inadequate 

Justification for Relaxation of Computer Controls Demonstrates Need for 

Comprehensive Study, 

GAO-01-534T (Washington, D.C.: Mar. 15, 2001) and GAO-01-10.



[19] Summary of Findings with Respect to Criteria Set Forth in 

Subsections 1211(d) and (e) of the National Defense Authorization Act 

for Fiscal Year 1998 (P.L. 105-85) (Washington, D.C. February 2000). 

Summary of Findings with Respect to Criteria Set Forth in Subsections 

1211(d) and (e) of the National Defense Authorization Act for Fiscal 

Year 1998 (P.L. 105-85) (Washington, D.C. August 2000).



[20] U.S. Department of Energy, National Security Implications of 

Exporting High Performance Computers to the People’s Republic of China: 

Nuclear Weapons Review, Report Submitted to Congress Pursuant to 

Section 1406 of the National Defense Authorization Act for Fiscal Year 

2000 (Washington, D.C.: Office of Arms Control and Nonproliferation, 

National Nuclear Security Administration, U.S. Department of Energy, 

April 2001).



[21] Defense Intelligence Agency High Performance Computer Assessment 

(Washington, D.C., 2001).



[22] GAO-01-10.



[23] Officials within the Defense Department disagree over the extent 

to which clustering has rendered current export controls on high 

performance computers ineffective. Officials in the Department of 

Defense’s Offices of the Deputy Under Secretary for Science and 

Technology and the Deputy Under Secretary for Technology Security 

stated that commercially available clustering technology has advanced 

to the point that it can be used by countries of concern to construct 

computers with performance capabilities that exceed 190,000 MTOPS, thus 

making controls on all high performance computers ineffective. Defense 

Intelligence Agency and Defense Technology Security Administration 

officials disagree with this view and believe that countries of concern 

still face significant obstacles in clustering computers, making 

controls on high performance computers still effective.



[24] Licenses for exports and reexports of high performance computers 

for end-users and end-uses--other than nuclear, chemical, biological, 

missile, or military in countries of concern--will generally be 

approved. (15 C.F.R. sections 742.12(b)(3)(i)(A) and 

742.12(b)(3)(iii)). For the People’s Republic of China, the general 

licensing policy is to approve applications; however, items that would 

make a direct and significant contribution to electronic and 

antisubmarine warfare, intelligence gathering, power projection, and 

air superiority receive extended review or denial. Items may be 

approved, even though they may contribute to Chinese military 

development. (15 C.F.R. section 742.4(b)(7)).



[25] Public Law 105-85, section 1213, 111 stat. 1934.



[26] GAO-02-620.



[27] End-use checks in China are conducted on the basis of an 

arrangement for end-use visits negotiated between the U.S. and the 

Chinese governments in 1998.



[28] GAO-01-10.



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