Export Controls: Regulatory Change Needed to Comply with Missile Technology Licensing Requirements (31-MAY-01, GAO-01-530)
The United States and several major trading partners created the
Missile Technology Control Regime, to control the spread of
missile technology in 1987. To carry out the U.S. commitment to
the agreement, Congress passed the National Defense Authorization
Act of Fiscal Year 1991, which amended two U.S. export control
statutes: the Export Administration Act and the Arms Export
Control Act. Two federal agencies, the Department of Commerce and
the Department of State, are responsible for implementing the
regulations for controlling missile technology exports. This
report discusses whether the regulations for controlling the
export of Missile Technology Control Regime items (1) are
consistent with U.S. law and (2) provide a consistent U.S. policy
on the control of missile technology. GAO found that Commerce's
export regulations are inconsistent with the National Defense
Authorization Act of Fiscal Year 1991 amendment to the Export
Administration Act. That amendment requires an individual export
license for all controlled dual-use missile equipment and
technology to all countries. However, Commerce's regulations do
not require licenses for the export of controlled missile
equipment and technology to Canada. Commerce did not cite any
section of this statute or its legislative history to justify the
inconsistency between its regulations and the statutory
requirement. GAO found that State's export regulations are
consistent with the National Defense Authorization Act of Fiscal
Year 1991 amendment to the Arms Export Control Act. The
inconsistency between Commerce's regulatory exemption and the
Export Administration Act along with different interpretations by
Commerce and State of congressional intent, contributes to a
divided U.S. government policy toward Canada and toward missile
proliferation.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-530
ACCNO: A00931
TITLE: Export Controls: Regulatory Change Needed to Comply with
Missile Technology Licensing Requirements
DATE: 05/31/2001
SUBJECT: Dual-use technologies
Export regulation
Exporting
Foreign policies
Foreign trade agreements
Licenses
Missiles
Canada
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GAO-01-530
Report to the Chairman and Ranking Member, Subcommittee on Readiness and
Management Support, Committee on Armed Services, U. S. Senate
United States General Accounting Office
GAO
May 2001 EXPORT CONTROLS Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements
GAO- 01- 530
Page 1 GAO- 01- 530 Export Controls
May 31, 2001 The Honorable James Inhofe Chairman The Honorable Daniel Akaka
Ranking Member Subcommittee on Readiness and
Management Support Committee on Armed Services United States Senate
Concerned about missile proliferation, the United States and several major
trading partners in 1987 created an international voluntary agreement, the
Missile Technology Control Regime, to control the spread of missiles and
their related technologies. Congress passed the National Defense
Authorization Act for Fiscal Year 1991 to fulfill the U. S. government?s
Missile Technology Control Regime commitments. 1 This act amended two
governing U. S. export control statutes: the Export Administration Act of
1979, as amended, which regulates the export of dual- use items (those
having both military and civilian applications), and the Arms Export Control
Act, as amended, which regulates the export of military items. The
Department of Commerce licenses most dual- use items, while the Department
of State licenses military items. Congress is currently considering the
passage of a new Export Administration Act because the current statute is
set to expire in August 2001. 2
Given the current interest in export controls and in missile technology
proliferation, you asked us to determine whether regulations for controlling
the export of Missile Technology Control Regime items (1) are consistent
with U. S. law and (2) provide a consistent U. S. policy on the control of
missile technology.
1 P. L. 101- 510, Nov. 5, 1990. 2 The Export Administration Act of 2001,
Senate Bill 149.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 530 Export Controls
The Department of Commerce?s export regulations are not consistent with the
National Defense Authorization Act for Fiscal Year 1991 amendment to the
Export Administration Act for missile technology controls. That amendment
requires an individual export license for all controlled dualuse missile
equipment and technology to all countries. However, the Department of
Commerce?s regulations do not require licenses for the export of controlled
missile equipment and technology to Canada. The Department of Commerce did
not cite any section of this statute or its legislative history to justify
the inconsistency between its regulations and the statutory requirement.
Additionally, we found nothing in the legislative history to indicate that
Congress intended to allow controlled missile items to be exempt from
licensing requirements. According to Department of Commerce officials,
Congress is aware of this exemption through an annual report on foreign
policy export controls and, to their knowledge, Congress never intended to
end the regulatory exemption for missile- related exports to Canada when the
law was passed. The Department of State?s export regulations are consistent
with the National Defense Authorization Act for Fiscal Year 1991 amendment
to the Arms Export Control Act. While that amendment did not mandate that
the Department of State require licenses for missile technology items, other
provisions of the Arms Export Control Act provide the Department
discretionary authority to require licenses or provide exemptions.
In implementing the acts as they relate to controlled missile technology,
both the Departments of Commerce and State were initially consistent with
each other by continuing the long- standing policy of exempting controlled
items from licensing requirements if those items were being exported to
Canada for use in Canada. This consistent policy toward Canada changed in
April 1999 when the Department of State began requiring a license for
controlled missile technology, as well as other military items, exported to
Canada. The Department of State changed its policy because of concerns about
the unauthorized re- export of certain items from Canada to countries of
concern. In addition to its concerns about re- exported items, Department of
State officials cited, among other reasons, the provisions in the Export
Administration Act as evidence that Congress did not intend any licensing
exemptions for any controlled missile technology items and technologies.
Because of the inconsistency between the Department of Commerce?s regulatory
exemption and the Export Administration Act, we recommended that the
Department of Commerce revise its regulations or seek a statutory change to
specifically allow for licensing exemptions. Results in Brief
Page 3 GAO- 01- 530 Export Controls
Since the Department of Commerce did not agree with our recommendation, we
have added a matter for congressional consideration.
In 1987, the United States and six allies founded the Missile Technology
Control Regime (MTCR). 3 The Regime seeks to limit the proliferation of
rocket and unmanned air vehicle systems capable of delivering nuclear,
biological, and chemical weapons of mass destruction and their associated
equipment and technology. The Regime is a voluntary agreement among member
countries with a shared interest in controlling missile proliferation.
Members agree to adhere to a common export policy for items and technologies
that are specified in an annex to the agreement, which is updated
periodically. These MTCR items range from complete missile systems to
missile- related components that may also have civil applications. Member
countries also agree to control these items and technologies in accordance
with their national legislation.
The United States fulfills its MTCR commitments through its existing export
control system and governing statutes. The U. S. export control system, and
therefore the U. S. implementation of the Regime?s controls, is divided
primarily between two departments. The Department of Commerce, under the
authority of the Export Administration Act of 1979 controls exports of most
dual- use items and technologies. 4 The Department of Commerce controls
dual- use items through the Export Administration Regulations and identifies
those items on the Commerce Control List. 5 The Department of State, under
the authority of the Arms Export Control Act, controls exports of munitions
items and technologies, which are those designed, developed, configured,
adapted, or modified solely for military applications. 6 The munitions items
under the Department of State?s licensing jurisdiction are controlled
through the International Traffic in Arms Regulations and identified on the
U. S.
3 The other founding members of the Regime are Canada, France, Germany,
Italy, Japan, and the United Kingdom. Since 1987, 26 additional countries
have become members of the Regime, bringing the total number of member
countries to 33.
4 50 U. S. C. App. secs. 2401 et seq. 5 15 C. F. R. secs. 730- 774. 6 22 U.
S. C. secs. 2751 et seq. Background
Page 4 GAO- 01- 530 Export Controls
Munitions List, which the Department of State develops with the concurrence
of the Department of Defense. 7
The National Defense Authorization Act for Fiscal Year 1991 amended the
Export Administration Act of 1979 to require an individual validated license
for any export of dual- use MTCR goods or technology to any country. The
Department of Commerce implemented the statutory requirements through its
Export Administration Regulations by including MTCR annex items in the
Commerce Control List and generally requiring a license to export or re-
export those items and technologies related to the design, development,
production, or use of missiles. However, these regulations provide an
exemption to the statutory licensing requirement for MTCR annex items and
technologies exported to Canada. 8 Department of Commerce officials did not
cite any section of the statute or its legislative history to justify the
inconsistency between the statutory requirements and the Department?s
regulations. In addition, we found nothing in the amended act or its
legislative history to suggest that Congress intended to exempt MTCR items
exported to Canada from licensing requirements. Department officials said
the license exemption predated the amendment and they assumed Congress did
not intend to end the licensing exemption. They told us the Department
annually reports to Congress on its foreign policy export controls,
including the exemption for missile technology exports to Canada, and
Congress has not objected to the continuation of this export exemption.
The National Defense Authorization Act for Fiscal Year 1991, as it applied
to the Arms Export Control Act, did not mandate that the Department of State
require licenses for missile technology items. The Arms Export Control Act,
however, provides the Department of State with discretionary authority to
determine which items, including missile technology items, require a
license, and to create licensing exemptions in its regulations. Because the
Department of State has authority to require licenses or to provide
exemptions, the Department?s regulations are consistent with the National
Defense Authorization Act for Fiscal Year 1991.
7 22 C. F. R. secs. 120- 130. 8 15 C. F. R. sec. 742. 5( a)( 1) and
Supplement No. 1 to part 738 of the Export Administration Regulations.
Commerce and State
Differ in Their Regulatory Consistency With Export Statutes
Page 5 GAO- 01- 530 Export Controls
Although the Departments of Commerce and State initially had a consistent
policy toward exempting MTCR items exported to Canada from licensing, the
Departments? policies now differ. The Department of Commerce continues to
exempt MTCR items going to Canada, whereas the Department of State currently
requires an export license for MTCR items to Canada. According to Department
of Commerce officials, the current regulatory exemption for MTCR items
exported to Canada is consistent with the U. S. government?s long- standing
policy to encourage economic cooperation with Canada. Specifically, the
Export Administration Regulations provided an export exemption for Canada
prior to the amendment of the Export Administration Act and this exemption
has been continued as a matter of policy. Furthermore, Department officials
said that after passage of the amendment in 1990, an interagency group
discussed whether Congress intended to eliminate the Canadian exemption but
did not reach consensus.
Prior to April 1999, the Department of State?s regulations also allowed most
items on the U. S. Munitions List, including MTCR items, to be exported to
Canada for use in Canada without a license. However, the Department of State
became concerned about U. S. defense equipment and technology being re-
exported from Canada to destinations such as Iran. The Department of State,
therefore, issued new regulations in April 1999 that limited the scope of
its licensing exemption for exports to Canada. 9 The revised regulations
required a license for all MTCR munitions items, as well as other munitions
items, to be exported to Canada. 10 As part of its justification for its
regulatory revision, Department of State officials cited the provisions in
the amended Export Administration Act as evidence that Congress did not
intend any licensing exemptions for MTCR dual- use items and technologies.
Based on this statutory language, the Department of State concluded that
Congress must have intended that licenses be required not only for dual- use
items but also for the more sensitive items falling under the Department of
State?s jurisdiction.
9 64 Federal Register 17531, Apr. 12, 1999. 10 In October 2000, the Canadian
government passed legislative changes followed by regulatory changes in
January 2001 to strengthen its defense export system. When it made these
changes, the Canadian government requested that the Department of State
revise its regulations to exempt MTCR items from U. S. export licensing
requirements for Canada. While the Department of State has issued new
regulations that are effective May 30, 2001, the Department has not restored
the MTCR exemption for Canada. Current Commerce
and State Policies on MTCR Export Licensing Requirements Differ
Page 6 GAO- 01- 530 Export Controls
Because the Department of Commerce?s regulations are inconsistent with the
amended Export Administration Act, we recommend that the Secretary of
Commerce
revise the Export Administration Regulations to comply with the MTCR
export licensing requirements contained in the National Defense
Authorization Act for Fiscal Year 1991 or
seek a statutory change from Congress to specifically permit MTCR items to
be exempted from licensing requirements.
If the Secretary of Commerce decides to seek a statutory change, he should
revise the Export Administration Regulations to comply with the current
statute until such time as a statutory change occurs.
Congress may wish to instruct the Secretary of Commerce on the need to bring
the Department?s regulations into compliance with the law until such time as
Congress has determined that dual- use MTCR items may be exempt from
licensing requirements.
In written comments on a draft of this report, the Department of Commerce
said it will consult with other departments and its congressional
authorizing committees on the utility of revising its regulations in light
of pending legislation. However, neither consultation with other departments
nor the consideration of pending legislation changes the basis for our
recommendation that the current law requires licenses for dual- use MTCR
exports to all countries. Since the Department of Commerce does not agree
with our recommendation, we have added a matter for congressional
consideration. The Department of Commerce?s comments are reprinted in
appendix I, along with our evaluation of them.
The Department of State did not provide formal written comments on a draft
of this report but provided technical comments, which we incorporated as
appropriate.
To determine the consistency between statutory and regulatory language
concerning MTCR exports, we compared the MTCR provisions as contained in the
National Defense Authorization Act for Fiscal Year 1991 with the Department
of Commerce?s Export Administration Regulations and the Department of
State?s International Traffic in Arms Regulations. We also requested and
received a written response from the Department of Commerce to explain its
regulatory exemption and then interviewed lawyers and other officials about
their interpretation of the statutory Recommendation for
Executive Action Matter for Congressional Consideration
Agency Comments Scope and Methodology
Page 7 GAO- 01- 530 Export Controls
requirements. In addition, we reviewed the legislative history of the MTCR
provisions in the National Defense Authorization Act for Fiscal Year 1991.
To determine whether the regulations for controlling the export of MTCR
items provide a consistent U. S. policy on the control of missile
technology, we discussed with Departments of Commerce and State officials
their regulations implementing the MTCR. We also reviewed the Department of
State?s regulatory revisions and supporting documentation.
We performed our review from November 2000 through March 2001 in accordance
with generally accepted government auditing standards.
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of this report until 30
days after its issuance. At that time, we will send copies to Senator Phil
Gramm, Chairman, Committee on Banking, Housing, and Urban Affairs; Senator
Paul Sarbanes, Ranking Member, Committee on Banking, Housing, and Urban
Affairs; Senator Jesse Helms, Chairman, Committee on Foreign Relations;
Senator Joseph Biden, Ranking Member, Committee on Foreign Relations;
Representative Henry Hyde, Chairman, Committee on International Relations;
and Representative Tom Lantos, Ranking Minority Member, Committee on
International Relations. We will also send copies to the Honorable Colin L.
Powell, Secretary of State; the Honorable Donald L. Evans, Secretary of
Commerce; and the Honorable Mitchell E. Daniels, Jr., Director, Office of
Management and Budget.
If you or your staff have questions concerning this report, please contact
me at (202) 512- 4841 or John Van Schaik from our Office of General Counsel
at (202) 512- 8184. Others making key contributions to this report were
Thomas J. Denomme, Anne- Marie Lasowski, and Johana R. Ayers.
Katherine V. Schinasi Director Acquisition and Sourcing Management Team
Appendix I: Comments from the Department of Commerce
Page 8 GAO- 01- 530 Export Controls
Appendix I: Comments from the Department of Commerce
Note: GAO comments supplementing those in the report text appear at the end
of this appendix.
Appendix I: Comments from the Department of Commerce
Page 9 GAO- 01- 530 Export Controls
See comment 4. See comment 3. See comment 2.
See comment 1.
Appendix I: Comments from the Department of Commerce
Page 10 GAO- 01- 530 Export Controls
Appendix I: Comments from the Department of Commerce
Page 11 GAO- 01- 530 Export Controls
The following are GAO?s comments on the Department of Commerce?s letter
dated May 15, 2001.
1. According to the Department of Commerce, its Canadian exemption is not
inconsistent with the Missile Technology Control Regime (MTCR) Guidelines.
Nevertheless, this exemption is inconsistent with the current U. S. law
governing exports of MTCR dual- use items.
2. As stated in our report, the Department said that it had not revised its
regulations when the National Defense Authorization Act for Fiscal Year 1991
was enacted because there was no interagency consensus to do so. However, a
lack of interagency consensus does not justify the inconsistency between the
Department?s regulations and the law. Furthermore, the Department of
Commerce was unable to provide documentation or an explanation as to why
interagency consensus was not achieved.
3. While there have been extensive discussions and multiple bills to
reauthorize the Export Administration Act over the past several years, there
have been no changes to the current governing statute that requires export
licenses for all MTCR dual- use items to all countries.
4. The question of economic impact may be an appropriate part of the debate
on requiring licenses. However, it does not affect the fact that current law
requires licenses for dual- use MTCR exports to all countries. Furthermore,
in its foreign policy report to Congress, the Department of Commerce stated
that the MTCR has limited economic impact on the majority of U. S. exports.
GAO Comments
(120053)
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