Export Controls:

1998 Legislative Mandate for High Performance Computers

NSIAD-99-208: Published: Sep 24, 1999. Publicly Released: Oct 20, 1999.

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Benjamin F. Nelson
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Pursuant to a congressional request, GAO examined: (1) whether exporter notification to the Department of Commerce of proposed sales of high performance computers (HPC) to countries of concern has resulted in license applications and what final action was taken on these licenses; and (2) how Commerce is conducting post-shipment verifications of the use of high performance computers after their export to these countries.

GAO noted that: (1) under the review process required by the National Defense Authorization Act (NDAA), most of the 938 proposed exports of HPCs to what were believed to be civilian end-users in countries of concern have generally been allowed to continue without export licenses; (2) from February 3, 1998, when procedures implementing the new NDAA became effective, to March 19, 1999, reviewing agencies allowed 828 proposed HPC exports to continue without a license, but they required license applications for 101 exports because of military, proliferation, or foreign policy reasons such as human rights violations; (3) the majority of the objections made by reviewing agencies to the 101 proposed exports were based on concerns that the proposed end-users of the HPC might have been involved in military or proliferation-related activity; (4) licenses that were approved had additional conditions placed on the reexport or end-use of HPCs; (5) the majority of these applications involved China, India, and Israel; (6) after the NDAA procedures were implemented, licenses were required for nine exports of HPCs to end-users of concern who had previously received HPC exports without a license; (7) while the NDAA contains no time limit for completing post-shipment verifications, Commerce has completed verifications on 104 HPC exports, or about 27 percent of those verifications required on the 390 HPCs exported during fiscal year 1998; (8) in a report to Congress, Commerce stated that all 104 post-shipment verifications were favorable, meaning that the computer had been seen during an on-site visit and that nothing was inconsistent with the license or the license exception; (9) verification conducted by Commerce but not yet completed detected the possible diversion of two computers to a military end-user, in apparent violation of U.S. export control regulations; (10) according to Commerce, the main reasons why these post-shipment verifications were not conducted were that: (a) Chinese policy prior to June 1998 did not permit post-shipment verifications to be made; or (b) the exports did not meet the requirements agreed upon in a June 1998 memorandum of understanding between the Department of Commerce and China's Ministry of Foreign Trade and Economic Cooperation; and (11) although the NDAA requires post-shipment verifications on all HPCs exported since November 18, 1997, whether licensed or not, Commerce believes that it is futile to seek to visit HPCs exported to China before the end-use visit arrangement or without end-user certificates.

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