A dual-control system was established for tier 3 countries, such as Russia and China. The government has 10 days to assess and object to a proposed HPC sale. Key Study Used as Basis for Changing HPC Controls Had Limitations

The Stanford study, used as a key element by the executive branch in its decision to revise HPC export controls, had significant limitations. The Stanford Study Lacked Evidence of HPC Uncontrollability

The Stanford study accumulated information from computer companies on U.S. HPC market characteristics and concluded—without empirical evidence or analysis—that computers between 4,000 and 5,000 MTOPS were already available worldwide and uncontrollable and that computers at about 7,000 MTOPS would be widely available and uncontrollable by 1997.Using the findings from the Stanford study, executive branch officials set the computer performance control thresholds for each tier. The report recommended that such an analysis be done. Despite the study’s limitations and recommendations to gather better data in the future on other countries’ use of HPCs for military and other national security purposes, the executive branch raised the MTOPS thresholds for HPC export controls and established the four-tier export control structure. Licensing and Export Enforcement Since the Revision

The executive branch’s January 1996 export control revision (1) increased thresholds for requiring licenses, which resulted in a reduction in the numbers of licensed HPCs; (2) shifted some of the government’s end-use screening responsibility from the government to the computer industry, until this policy was revised in 1998; and (3) required HPC manufacturers to keep records of the end users of their HPC exports. Under current law, Commerce is required to conduct PSVs for all HPC exports over 2,000 MTOPS to tier 3 countries. U.S. government officials agreed that the way PSVs of computers have been traditionally conducted have reduced their value because such PSVs establish only the physical presence of an HPC. Using the EAA’s general description of foreign availability as our criteria, our analysis showed that subsidiaries of U.S. companies dominate the overseas sales of HPCs. In particular, the study used to justify the decision did not assemble empirical data or analysis to support the conclusion that HPCs below specific performance levels were uncontrollable and widely available worldwide. Defense said that our recommendation concerning the assessment of national security threats and proliferation impact of U.S. exports to countries of concern was done in connection with the 1995 decision to revise HPC export controls, and that it would consider additional options to safeguard exports of HPCs as part of its ongoing review of export controls. What our report actually states is that (1) the Stanford study did not assess the capabilities of countries of concern to use HPCs for military and other national security applications, as required by its tasking and (2) the executive branch did not undertake a threat analysis of providing HPCs to countries of concern. To identify similarities and differences between U.S. and foreign government HPC export controls, we discussed with officials of the U.S. embassies and host governments information on foreign government export controls for HPCs and the extent of cooperation between U.S. and host government authorities on investigations of export control violations and any HPC diversions of HPCs to sensitive end users. HPCs to China and India were exported with no individual licenses. 3.
Why GAO Did This Study

Pursuant to a legislative requirement and a congressional request, GAO reviewed concerns that U.S. national security interests may have been compromised by sales of unlicensed high performance computers (HPC) to China and Russia, focusing on: (1) the basis for the executive branch's revision of HPC export controls; (2) changes in licensing activities and the implementation of certain U.S. licensing and export enforcement requirements since the revision; and (3) the current foreign availability of HPCs, particularly for certain countries of national security concern.

What GAO Found

GAO noted that: (1) a Stanford University study on foreign availability of HPCs was a key element in the decision to revise HPC export controls; (2) however, GAO's analysis of the study showed that it had 2 significant limitations; (3) first, the study lacked empirical evidence or analysis to support its conclusion that HPCs were uncontrollable based on worldwide availability and insufficient resources to control them; (4) second, the study did not assess the capabilities of countries of concern to use HPCs for military and other national security applications; (5) the study's principal author said that U.S. government data were insufficient to make such an assessment, and the study recommended that better data be gathered so that such an analysis could be done in the future; (6) the executive branch did not undertake a threat analysis of providing HPCs to countries of concern, but raised the computing power thresholds for HPC export controls and established a four-tier control structure; (7) the 1996 revision to HPC export controls had three key consequences; (8) the number of computer export licenses issued declined from 395 in fiscal year 1995 to 42 in 1997; (9) U.S. HPC exporters were charged with responsibilities previously conducted by the government, including screening and reporting on the end use and end user of HPCs; (10) the regulation required HPC manufacturers to keep records of the end users of all their HPC exports over 2,000 million theoretical operations per second (MTOPS); (11) to date, information on these exports reported to the government has been incomplete; (12) responsibility for postshipment verification (PSV) checks remained with the government; (13) however, because of how PSVs for computers are implemented, their value is reduced because they verify the physical location of a HPC, but not how it is used; (14) subsidiaries of U.S. computer manufacturers dominate the overseas HPC market, and they must comply with U.S. controls; (15) three Japanese companies are global competitors of U.S. manufacturers, two of which told GAO that they had no sales to tier 3 countries such as Russia and China; (16) Japan, Germany and the United Kingdom each have export controls on HPCs similar to those of the United States, according to foreign government officials; (17) Russia, China, and India have developed HPCs, but the capabilities of their computers are believed to be limited; and (18) thus, GAO's analysis suggests that HPCs over 2,000 MTOPS are not readily available to tier 3 countries from foreign sources without restrictions.