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Nuclear Nonproliferation: Export Licensing Procedures for Dual-Use Items
Need to Be Strengthened (Chapter Report, 04/26/94, GAO/NSIAD-94-119).

Iraq's use of so-called dual-use equipment--items with civilian uses
that can also be used to build nuclear explosives or produce weapons
grade uranium and plutonium--has raised concerns about the effectiveness
of export controls over this material.  The United States approved more
than 1,500 licenses for dual-use items, mainly high-speed computers, to
eight countries with suspected nuclear weapons programs, significantly
increasing the risk that U.S. exports are fueling nuclear proliferation.
Weaknesses in the interagency licensing review process have resulted in
the approval of a number of sensitive license applications without
review by the Energy Department or other members of the Subgroup on
Nuclear Export Coordination, an interagency group.  U.S. government
approval of sensitive exports dictates the need for effective ways to
prevent or detect export diversions, but GAO discovered several
weaknesses in current procedures.  These include (1) inadequate criteria
for selecting prelicense checks and postshipment verifications, (2)
ineffective methods used to do these inspections, and (3) a lack of
verification of government-to-government assurances against nuclear end
uses.  GAO summarized this report in testimony before Congress; see:
Nuclear Nonproliferation: Licensing Procedures for Dual-Use Export Need
Strengthening, by Joseph E. Kelley, Director of International Affairs
Issues, before the Senate Committee on Governmental Affairs.
GAO/T-NSIAD-94-163, May 17, 1994 (20 pages).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-119
     TITLE:  Nuclear Nonproliferation: Export Licensing Procedures for 
             Dual-Use Items Need to Be Strengthened
      DATE:  04/26/94
   SUBJECT:  Nuclear proliferation
             Arms control agreements
             Interagency relations
             Foreign governments
             Technology transfer
             Licenses
             Internal controls
             International relations
             Export regulation
             Inspection
IDENTIFIER:  Argentina
             Brazil
             India
             Iran
             Iraq
             Israel
             Pakistan
             South Africa
             Dept. of Commerce Nuclear Referral List
             Dept. of Commerce Export Control Automated Support System
             Dept. of Commerce Nuclear Non-Proliferation Special Country 
             List
             Persian Gulf War
             DOE Nuclear Proliferation Watch List
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Governmental Affairs, U.S. 
Senate

April 1994

NUCLEAR NONPROLIFERATION - EXPORT
LICENSING PROCEDURES FOR DUAL-USE
ITEMS NEED TO BE STRENGTHENED

GAO/NSIAD-94-119

Nuclear Nonproliferation


Abbreviations
=============================================================== ABBREV

  ACEP - Advisory Committee on Export Policy
  ACDA - Arms Control and Disarmament Agency
  COCOM - Coordinating Committee on Multilateral Export Controls
  EARB - Export Administration Review Board
  ECASS - Export Control Automated Support System
  GAO - General Accounting Office
  NRL - Nuclear Referral List
  PLC - pre-license check
  PSV - post-shipment verification
  SNEC - Subgroup on Nuclear Export Coordination

Letter
=============================================================== LETTER


B-256585

April 26, 1994

The Honorable John H.  Glenn
Chairman, Committee on Governmental Affairs
United States Senate

Dear Mr.  Chairman: 

As you requested, we reviewed export licensing procedures for
dual-use nuclear items.  In this report, we discuss the nature and
extent of such exports, how well the U.S.  government is implementing
policies and procedures to prevent exports that pose a proliferation
risk, and the effectiveness of methods used to deter and detect
diversion of such exports to foreign nuclear proliferation programs. 
We make several recommendations to improve export license review
procedures and enhance the effectiveness of license checks. 

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days after its issue date.  At
that time, we will send copies to the Secretaries of Commerce,
Energy, State, and Defense; the Director of the Arms Control and
Disarmament Agency; and other interested congressional committees. 
Copies will also be made available to others on request. 

If you or your staff have any questions about this report, please
call me on (202) 512-4128.  The major contributors to this report are
listed in appendix V. 

Sincerely yours,

Joseph E.  Kelley
Director-in-Charge
International Affairs Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Iraq's extensive use of so-called dual-use equipment in its nuclear
weapons program has raised concerns about the effectiveness of export
controls over these items.  At the request of the Chairman, Senate
Committee on Governmental Affairs, GAO (1) determined the nature and
extent of U.S.  nuclear-related dual-use exports to countries of
proliferation concern, (2) assessed U.S.  policies and procedures for
reviewing license applications for items that pose a proliferation
risk, and (3) examined some U.S.  methods used to deter and detect
the diversion of exports to foreign nuclear proliferation programs. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Nuclear-related dual-use items consist of equipment, materials, and
technical data that have civilian uses but that can also be used for
the design, fabrication, testing, and production of nuclear
explosives or special nuclear material (such as weapons grade uranium
or plutonium).  The United States controls exports of these items to
help prevent the proliferation of nuclear weapons. 

By law, the Department of Commerce, in consultation with other
agencies, is responsible for controlling nuclear-related dual-use
exports.  Commerce's Export Administration Regulations require an
"individual validated license" for (1) items identified as having
potential significance for nuclear explosives development, (2) items
controlled for other than nuclear proliferation reasons but destined
for nuclear end users or end uses, and (3) items that the exporter
knows or has reason to know will be used in proscribed nuclear
activities. 

Commerce is required to refer all requests for such licenses to the
Department of Energy, although in practice Energy has delegated some
of its review authority to Commerce.  When either agency believes a
license request should be reviewed by other agencies, or denied, it
is referred to the Subgroup on Nuclear Export Coordination, an
interagency working group, and to higher levels if necessary. 

To deter and detect the diversion of nuclear-related dual-use exports
to proliferation activities, Commerce or other consulting agencies
may request pre-license checks or post-shipment verifications. 
Pre-license checks are used to establish the legitimacy of the end
user or verify the intended end use of the export; post-shipment
verifications are used to ascertain whether exported items are being
used appropriately.  The U.S.  government may also seek assurances
from foreign governments that items will not be diverted to nuclear
uses. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The U.S.  government has approved a significant number of
nuclear-related dual-use licenses to 36 countries identified as
posing a potential proliferation concern.  Computers and other items
with wide civilian uses account for the largest share of these
exports.  In contrast, items with critical applications in nuclear
explosives development and few nonnuclear uses have only rarely been
approved. 

Most licensing decisions for eight countries GAO focused on were
consistent with the goal of minimizing proliferation risk.  However,
from fiscal years 1988 to 1992, over 1,500 licenses were approved for
organizations in these countries involved in or suspected of being
involved in developing nuclear explosives or special nuclear
material.  These approvals increase the risk, in some cases
significantly, that U.S.  exports could contribute to nuclear
proliferation, although GAO has no evidence that these exports did
support proliferation activities.  GAO also found weaknesses in the
interagency licensing review process that have resulted in approval
of a number of sensitive license applications without review by
Energy or other members of the Subgroup on Nuclear Export
Coordination. 

U.S.  government approval of sensitive exports dictates the need for
effective ways to prevent or detect export diversions, but GAO
identified several weaknesses in current procedures.  These include
(1) inadequate criteria for selecting pre-license checks and
post-shipment verifications, (2) ineffective methods used to perform
these inspections, and (3) lack of verification of
government-to-government assurances against nuclear end uses. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      SIGNIFICANT NUMBER OF
      LICENSES APPROVED TO
      COUNTRIES OF PROLIFERATION
      CONCERN
-------------------------------------------------------- Chapter 0:4.1

From fiscal years 1985 to 1992, the United States issued about
336,000 nuclear-related dual-use licenses for exports valued at $264
billion.  Of these, about 55,000 (16 percent) were for items valued
at $29 billion exported to the 36 countries that the United States
has identified as posing a potential proliferation concern. 

Computers accounted for 86 percent of nuclear-related dual-use
licenses to these 36 countries.  Also licensed in large numbers were
common industrial and scientific equipment such as measuring and
calibrating equipment, oscilloscopes, lasers, and numerically
controlled machine tools.  Items with few nonnuclear applications,
such as maraging steel (used in the process to enrich uranium), were
only rarely licensed. 


      SOME LICENSES APPROVED TO
      SENSITIVE END USERS
-------------------------------------------------------- Chapter 0:4.2

U.S.  policy governing nuclear-related dual-use licenses is to
prevent exports that could support nuclear proliferation without
impeding legitimate exports.  GAO's review indicated that decisions
for most of the licenses from fiscal years 1988 to 1992 for eight
countries of particular proliferation concern--Argentina, Brazil,
India, Iran, Iraq, Israel, Pakistan, and South Africa--were
consistent with the goal of minimizing proliferation risk.  Approved
licenses generally involved destinations and items of little or no
apparent proliferation concern.  License requests that were denied
were typically for technically significant items or involved end
users associated with nuclear proliferation activities. 

However, of the 24,048 licenses approved for these eight countries,
1,508 (6 percent) were for end users involved in or suspected of
being involved in nuclear weapons development or the manufacture of
special nuclear materials.  These licenses were approved because
agency officials believed that the items would not be used to support
nuclear proliferation activities.  A number involved items that,
because of their technical significance, present a higher risk of
diversion to proscribed nuclear activities.  Others involved
sensitive end users that have played key roles in their countries'
nuclear weapons development programs and for which U.S.  officials
have denied a large number of dual-use licenses. 


      EXPORT CONTROL REFERRAL
      PROCEDURES HAVE WEAKNESSES
-------------------------------------------------------- Chapter 0:4.3

The Commerce Department did not always refer nuclear-related dual-use
license applications to the Department of Energy as required by
regulations.  From fiscal years 1988 to 1992, Commerce unilaterally
approved the export of computers and other nuclear-related items to
countries of proliferation concern, even though these licenses should
have been referred to Energy.  Commerce also approved without Energy
consultation numerous licenses for other items going to end users
engaged in nuclear weapons activities, despite regulations requiring
referral of such licenses.  Commerce and Energy officials agreed that
many of these licenses should have been referred, and acknowledged
that referral policies should be clarified to correct the problems. 

During the same period, Energy did not forward to the Subgroup on
Nuclear Export Coordination about 74 percent of the licenses it
received from Commerce for end users of nuclear proliferation
concern.  These licenses involved items such as computers,
oscilloscopes, and lasers intended for end users suspected of
developing nuclear explosives or special nuclear material.  Energy
recommended that Commerce approve most of these licenses because it
believed that the exports were of limited technical significance and
would not support nuclear proliferation activities. 

Although Energy has discretion in determining which licenses to
forward to the Subgroup, its practice of seeking interagency
consultation on only a minority of licenses raises concerns that
other agencies may be precluded from bringing their policy
perspectives to bear on important licensing decisions.  During our
review, Defense and Arms Control and Disarmament Agency
representatives to the Subgroup identified a number of licenses that
they believed warranted interagency review but were not placed on the
Subgroup's agenda.  Moreover, agencies represented on the Subgroup
are limited in their ability to influence which licenses Energy
selects for interagency review and are unable to hold Commerce and
Energy accountable for their review decisions because they lack
consistent access to licensing information. 


      INADEQUATE METHODS FOR
      DETERRING OR DETECTING
      DIVERSIONS
-------------------------------------------------------- Chapter 0:4.4

Existing selection criteria do not provide sufficient guidance on
what checks to undertake.  During fiscal years 1991 and 1992,
Commerce selected a number of cases for inspection involving items of
low technical significance.  For example, approximately 63 percent of
nuclear-related pre-license checks in the eight countries of
proliferation concern that GAO focused on were conducted on items
that officials from the Los Alamos and Lawrence Livermore National
Laboratories indicated were of lesser proliferation concern.  In
addition, cases were selected for end users whose proliferation
credentials were already known.  For example, about 39 percent of
nuclear-related pre-license checks in the eight countries were
conducted for end users that had already been identified by the
Department of Energy as posing a nuclear proliferation concern. 
National laboratory and Defense officials indicated that pre-license
checks are less useful in cases involving well-known end users
because the existence and activities of the entities are already
established. 

GAO also found that (1) U.S.  embassy officials who perform the
pre-license checks and post-shipment verifications typically lack
technical expertise in how nuclear-related dual-use items could be
diverted; (2) Commerce's requests for inspections frequently omitted
vital information, such as the reason for the inspection or licensing
conditions; and (3) Embassy officials frequently sent foreign service
nationals to conduct inspections of their own countries' facilities. 

The U.S.  government does not systematically verify compliance with
government-to-government assurances on the use of nuclear-related
dual-use items because they are diplomatically negotiated agreements
intended to carry the weight of an official commitment by a foreign
government.  According to State Department officials, the only method
available would be a post-shipment verification, but post-shipment
verifications are not used for this purpose.  Thus, the U.S. 
government cannot be certain that exports licensed with
government-to-government assurances are being used for their intended
purposes. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO makes several recommendations to the Secretaries of Commerce,
Energy, State, and Defense, and the Director of the Arms Control and
Disarmament Agency to (1) improve review procedures for
nuclear-related dual-use licenses and (2) enhance the effectiveness
of pre-license checks and post-shipment verifications. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

As requested, GAO did not obtain official agency comments.  However,
GAO discussed the contents of the report with program officials at
Commerce, Energy, State, Defense, and the Arms Control and
Disarmament Agency.  These officials generally agreed with the
information presented in the report, although Commerce and Energy
officials disagreed with the need to change the licensing review
process to improve referrals to the Subgroup on Nuclear Export
Coordination. 


INTRODUCTION
============================================================ Chapter 1

Preventing the proliferation of nuclear weapons is a fundamental U.S. 
national security and foreign policy objective.  One means of
advancing this objective is controlling nuclear-related dual-use
exports.  However, the discovery of Iraq's reliance on foreign
imports for its nuclear weapons program has raised concerns about the
effectiveness of U.S., as well as international, control efforts. 


   WHAT ARE NUCLEAR-RELATED
   DUAL-USE EXPORTS? 
---------------------------------------------------------- Chapter 1:1

Nuclear-related dual-use exports consist of equipment, materials, and
technical data that have civilian or nonnuclear uses but can also be
used for the design, fabrication, testing, or production of nuclear
explosives or special nuclear material (such as weapons grade uranium
or plutonium).  For example, computers are nearly indispensable in
daily business and scientific activities, but can also be useful for
designing nuclear weapons.  Other dual-use items can be used for
enriching uranium, separating plutonium from spent nuclear fuel,
producing heavy water, or assisting in nuclear weapons testing. 


   WHY AND HOW NUCLEAR-RELATED
   DUAL-USE EXPORTS ARE CONTROLLED
---------------------------------------------------------- Chapter 1:2

The United States controls nuclear-related dual-use exports to meet
U.S.  statutory requirements and fulfill international obligations to
prevent nuclear weapons proliferation.  Controls are intended to
signal U.S.  opposition to proliferation, increase costs to countries
developing nuclear explosives, and buy time for diplomacy to work. 
The United States is a signatory to the Nuclear Non-Proliferation
Treaty, which prohibits nonnuclear states from acquiring nuclear
weapons and nuclear weapons states from assisting them. 

Section 309(c) of the Nuclear Non-Proliferation Act of 1978 requires
the President to publish procedures for the Department of Commerce to
control nuclear-related dual-use exports.  The act covers all items
under Commerce's jurisdiction which, if used for other than their
intended purposes, could be of significance for nuclear explosive
activities. 

The procedures established pursuant to the Nuclear Non-Proliferation
Act are contained in Commerce's Export Administration Regulations
(15 C.F.R.  Part 778).  Under these regulations, exporters are
required to seek an "individual validated license" for commodities
and technical data controlled for nuclear proliferation
reasons--items on the Nuclear Referral List (NRL).  This list is
updated periodically.  Exporters are also required to obtain an
individual validated license for any item if the exporter knows or
has reason to know that the item will be used in proscribed nuclear
weapons activities, including

  designing, developing, fabricating, or testing nuclear weapons or
     nuclear explosive devices or

  designing, constructing, fabricating, or operating facilities, or
     components for facilities, for (1) chemical reprocessing of
     irradiated special nuclear or source material; (2) producing
     heavy water; (3) separating isotopes of source and special
     nuclear material; or (4) fabricating nuclear reactor fuel
     containing plutonium. 

Those countries that have not acceded to the Nuclear
Non-Proliferation Treaty or are suspected of engaging in nuclear
proliferation activities appear on the "Nuclear Non-Proliferation
Special Country List," contained in a supplement to the Export
Administration Regulations (see app.  I).  This list is intended for
use as a basic guide for agency officials when reviewing
nuclear-related licenses.  As of 1992, 36 countries were on the
list.\1

The regulations also establish interagency review procedures for
licenses subject to nuclear proliferation controls.  Commerce is
required to refer all requests for such licenses to the Department of
Energy.  When either Commerce or Energy believes that a particular
application should be reviewed by other agencies, or denied, the
application is to be referred to an interagency working group--the
Subgroup on Nuclear Export Coordination (SNEC).  When the SNEC cannot
reach a consensus, license requests are escalated to higher
interagency groups such as the sub-Cabinet-level Advisory Committee
on Export Policy (ACEP), and then to the President. 

During the licensing review process, Commerce and other reviewing
agencies can request a pre-license check (PLC) or a post-shipment
verification (PSV).  The purpose of a PLC is to determine whether an
overseas person or firm would be a reliable recipient of
U.S.-controlled goods and technical data.  A PSV is used to confirm
that licensed goods exported from the United States actually were
received by the party named on the license and are being used in
accordance with license provisions.  The U.S.  government may also
seek assurances from foreign governments that items will not be
diverted to nuclear uses. 


--------------------
\1 On October 6, 1993, the Commerce Department announced an interim
rule removing 11 countries from the Special Country List, including
Argentina, Brazil, and South Africa. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:3

We reviewed U.S controls over nuclear-related dual-use exports at the
request of the Chairman, Senate Committee on Governmental Affairs. 
Specifically, we (1) determined the nature and extent of
nuclear-related dual-use exports to countries of proliferation
concern, (2) assessed U.S.  policies and procedures for reviewing
proposed nuclear-related dual-use exports that present a
proliferation risk, and (3) examined some methods used to deter and
detect the diversion of exports to foreign nuclear proliferation
programs. 

To address these objectives, we analyzed data from Commerce's Export
Control Automated Support System (ECASS), a computerized export
licensing database.  We obtained computer records for all dual-use
license applications for the 36 countries on the Nuclear
Non-Proliferation Special Country List for fiscal years 1985 to 1992. 

To determine the reliability of the data, we assessed the relevant
general and application controls for the system and found them to be
generally adequate.  Commerce officials told us that data are less
reliable for fiscal years 1985 to 1987, before the introduction of
automated data entry.  Commerce reported that since fiscal year 1988,
data entry reliability has approached 100 percent with the addition
of electronic license application filing and optical character reader
technology.  We did not systematically sample licensing records to
test data accuracy, but did verify specific examples cited in the
report. 

To determine the nature and extent of nuclear-related dual-use
exports to countries that pose a proliferation concern, we devised,
in consultation with Commerce, a methodology to identify all license
applications for fiscal years 1985 to 1992 that were subject to
nuclear proliferation controls.  We also analyzed licensing patterns
of Nuclear Referral List commodities and changes to the list. 

For this report, we define nuclear-related dual-use exports to
include all items appearing on the NRL each year, along with any
other items that were referred by Commerce to Energy for nuclear
proliferation review.  Although we believe that our methodology
provides a sufficient basis for the analyses and conclusions in this
report, the methodology has three limitations that affect the
accuracy of the data presented.  First, ECASS data allow us to
identify NRL items by commodity classification number only.  As a
result, the number of nuclear-related licenses is overstated because
a small number of NRL commodity classifications also contain items
not controlled for nuclear proliferation reasons.  Additionally, some
commodities may be included even though they have technical
characteristics that exempt them from controls.  Finally, our
methodology assumes that Commerce always followed procedures for
referring to Energy all non-NRL license applications for items
intended for nuclear end uses or end users.  Because Commerce did not
always follow these procedures (as discussed in ch.  4) a number of
such licenses are not included in our totals.  We do not believe that
these limitations, which are offsetting, are large enough to
significantly alter the data we present. 

To assess the policies for reviewing nuclear-related dual-use license
applications, we analyzed licensing decisions for eight countries on
the Special Country List-- Argentina, Brazil, India, Iran, Iraq,
Israel, Pakistan, and South Africa.  We selected these countries for
one or more of the following reasons:  (1) except for Iran, Iraq, and
very recently South Africa, they are not parties to the Nuclear
Non-Proliferation Treaty; (2) their actions have indicated a desire
to obtain nuclear weapons; and (3) they have the technical capability
to obtain enriched uranium or plutonium for use in a nuclear
explosive device.\2 We also examined pertinent regulations and policy
guidelines in effect during the time of our review;\3 reviewed the
minutes of SNEC and ACEP meetings; reviewed various intelligence
reporting on proliferation programs; and discussed licensing
decisions with officials at the Departments of Commerce, Energy,
State, and Defense, and the Arms Control and Disarmament Agency
(ACDA). 

To assess the license review process, we reviewed the Commerce
database and the minutes of interagency meetings to identify license
applications referred by Commerce to Energy and from Energy to
interagency review bodies during fiscal years 1988 to 1992.  We
compared referrals from Commerce to Energy with regulations and
Commerce and Energy procedures, and discussed the results with agency
officials.  We discussed Energy's referral process with SNEC
representatives from each of the agencies and reviewed proposals from
the Department of Defense and ACDA to reform the referral process. 
Finally, we compared licensing recommendations made by the SNEC with
the final licensing decisions as contained in the ECASS database to
determine the extent to which Commerce followed SNEC licensing
recommendations. 

To assess methods for deterring and detecting the diversion of
nuclear-related dual-use items, we (1) reviewed Commerce criteria and
guidelines for selecting and conducting pre-license checks and
post-shipment verifications and discussed their appropriateness with
Commerce, State, Defense, and Los Alamos and Lawrence Livermore
National Laboratory officials; (2) compiled data from Commerce on the
numbers of PLCs and PSVs conducted during fiscal years 1991 and 1992;
(3) met with and obtained documents from U.S.  embassy and consulate
officials in Germany, Israel, South Africa, India, Pakistan, and Hong
Kong;\4 and (4) observed several PLCs conducted by U.S.  embassy and
consulate officials in Hong Kong and Pakistan.  We also compiled data
on government-to-government assurances obtained during fiscal years
1988 to 1991, and determined the extent to which the U.S.  government
verified compliance with these assurances. 

We conducted our work from January 1992 to October 1993 in accordance
with generally accepted government auditing standards. 

As requested, we did not obtain official agency comments.  However,
we discussed the contents of the report with program officials at
Commerce, Energy, State, Defense, and ACDA.  These officials
generally agreed with the information presented in the report,
although Commerce and Energy officials disagreed with the need to
change the licensing review process to improve referrals to the SNEC. 


--------------------
\2 As noted earlier, Argentina, Brazil, and South Africa are
currently less of a proliferation concern.  Argentina and Brazil have
committed themselves to placing their nuclear materials under
International Atomic Energy Agency safeguards.  South Africa signed
the Nuclear Non-Proliferation Treaty in 1991 and apparently destroyed
its nuclear weapons stockpiles. 

\3 Subsequent to the completion of our review, on March 9, 1994, the
Commerce Department published an interim rule in the Federal Register
revising the lists of proscribed nuclear activities, licensing
factors, and items on the NRL (see chs.  1 and 3) to conform more
closely to guidelines published by the Nuclear Suppliers Group, a
multilateral organization that has established common control
procedures for nuclear-related dual-use exports. 

\4 We visited Germany and Hong Kong because they are countries
suspected of serving as transshipment points for items of
proliferation concern. 


NATURE AND EXTENT OF
NUCLEAR-RELATED DUAL-USE EXPORTS
============================================================ Chapter 2

During the past several years, the Department of Commerce approved a
significant number of nuclear-related dual-use export licenses for
countries that pose a proliferation concern--the 36 countries on the
Special Country List.  The majority of these licenses involved NRL
items, such as computers, with numerous civilian uses.  NRL items
with especially critical nuclear applications and relatively few
nonnuclear uses have been licensed in small numbers or not at all. 

The volume of licenses for NRL items has declined since fiscal year
1987, although less for Special Country List destinations than for
other countries.  This decline is due in large measure to the easing
of licensing requirements for computers, which occurred in 1987 and
again in 1990.  License applications for computer exports should
further decline in the future because of additional liberalization
steps. 


   SIGNIFICANT NUMBER OF
   NUCLEAR-RELATED DUAL-USE
   LICENSES APPROVED TO COUNTRIES
   OF PROLIFERATION CONCERN
---------------------------------------------------------- Chapter 2:1

From fiscal years 1985 through 1992, Commerce approved 54,862
nuclear-related dual-use export licenses to the 36 countries on the
Special Country List.  These licenses constituted 16 percent of the
336,389 nuclear-related dual-use licenses approved worldwide during
this period.  Exports covered by these licenses were valued at
approximately $29.3 billion, compared to approximately $264 billion
for all nuclear-related dual-use licenses.  Ninety-three percent of
nuclear-related dual-use licenses for Special Country List
destinations during the 8-year period were for NRL items, compared
with 98 percent for all destinations.\1

As shown in figure 2.1, five of the eight countries we focused on
accounted for 77 percent of the licenses approved for Special Country
List destinations.  The other three countries, Iraq, Iran, and
Pakistan, accounted for 5 percent of the licenses for Special Country
List destinations. 

   Figure 2.1:  Distribution of
   Licenses Approved for Special
   Country List Destinations
   (Fiscal Years 1985-92)

   (See figure in printed
   edition.)

Commerce approved the great majority of nuclear-related dual-use
license applications submitted during this period.  During the 8-year
period, Commerce approved 87 percent of such licenses to Special
Country List destinations, denied 1.2 percent, and returned 11.8
percent without action (meaning that the exporter failed to provide
sufficient information or withdrew the application, or Commerce
determined that the item did not require a validated license).\2 This
approval rate was only slightly lower than that for all countries--on
average, Commerce approved 89.1 percent of nuclear-related dual-use
licenses during this period, denied 1.5 percent, and returned 8.9
percent without action. 


--------------------
\1 As discussed in chapter 1, nuclear-related dual-use licenses also
include non-NRL items if the licenses were referred to Energy for
review because of concerns regarding the end use or end user. 

\2 A small number of licenses were also still pending, canceled, or
suspended. 


   A MAJORITY OF ITEMS ON THE NRL
   HAVE BEEN LICENSED FOR EXPORT
---------------------------------------------------------- Chapter 2:2

The U.S.  government generally licenses for export the large majority
of NRL items, although critical items with few nonnuclear uses were
licensed less frequently or not at all.  Of the 92 categories of
items listed in the Export Administration Regulations since fiscal
year 1985 as controlled for nuclear proliferation reasons,\3 59 were
licensed to Special Country List destinations between fiscal years
1985 and 1992.  Worldwide, 67 of the 92 NRL items were licensed
during this period.  (See app.  II for the list of NRL items as of
1992.)

Computers account for the largest share of nuclear-related dual-use
licenses.  Between fiscal years 1985 and 1992, 86 percent of such
licenses approved to Special Country List destinations involved
computers and computer-related equipment, compared with 77 percent
for all countries.  Computers account for this large share because of
their extensive civilian applications. 

Other NRL items have also been licensed in large numbers, both
worldwide and to Special Country List destinations.  Table 2.1 shows
the number of licenses approved for the 10 NRL items--other than
computers--licensed in greatest numbers to Special Country List
destinations since fiscal year 1985.  (See app.  III for additional
information on NRL items licensed to Special Country List
destinations.) In general, these items were also the ones most
commonly licensed to all countries during this period. 



                          Table 2.1
           
              NRL Commodities Besides Computers
           Licensed in Greatest Numbers to Special
           Country List Destinations (Fiscal Years
                           1985-92)

Commodity                                           Licenses
--------------------------------------------------  --------
Measuring/calibrating/testing equipment\a              2,480
Cathode ray oscilloscopes                              1,101
Electronic equipment (including flash X-rays)\b          965
Lasers                                                   958
Communications switching equipment\a                     769
Pressure measuring instruments                           680
Numerical control equipment                              453
Fibrous and filamentary materials                        389
Electron tubes                                           262
Lower speed photography equipment                        149
------------------------------------------------------------
\a Since fiscal year 1992, these items have not been controlled for
nuclear proliferation reasons. 

\b Flash X-rays constitute only a small number of the 965 licenses
approved for electronic equipment. 

Source:  Department of Commerce. 

The NRL items most commonly licensed have a variety of applications
for nuclear weapons development, including weapons testing, uranium
enrichment (isotopic separation), implosion systems development, and
weapons detonation.  According to Energy officials, these items are
in greater demand than the rest of the NRL because they have wide
civilian applications.  For example, fibrous and filamentary
materials are used to manufacture tennis rackets and fishing poles,
while oscilloscopes have innumerable uses in the electronics
industry. 

In contrast, NRL items with relatively few nonnuclear uses were
approved in small numbers or not at all, especially to Special
Country List destinations.  Generally, licenses for these items were
approved in such small numbers because there were few license
applications.  Table 2.2 lists the items and shows the number of
approved licenses between fiscal years 1985 and 1992, both worldwide
and to Special Country List destinations. 



                          Table 2.2
           
            Licenses Approved for NRL Commodities
           With Least Nonnuclear Uses (Fiscal Years
                           1985-92)


                                                     Special
                                             All     Country
Commodity                              countries        List
------------------------------------  ----------  ----------
Beryllium                                    484           9
High-speed cameras (including streak         376          53
 and framing cameras) and related
 equipment\a
Pipes/valves/heat exchangers                  61          13
Piping, fittings, valves                      42          20
Pumps for molten metal                        15           7
Valves (UF6 resistant)/power                  15           2
 generating equipment
Aluminum/titanium tubing                      12           0
Spin/flowing machines                          8           2
Centrifugal balancing machines                 4           1
Centrifuge rotor assembly units                2           0
Maraging steel                                 1           1
Electrolytic cells (fluoride)/UF6              1           0
 production plants
Compressors and blowers                        1           1
Phosphor-bronze mesh packings                  0           0
Mechanical testing power equipment             0           0
------------------------------------------------------------
\a Streak and framing cameras constituted an extremely small number
of the licenses approved under this Commodity Control List entry;
most included film, cinema recording cameras, and image intensifiers. 

Source:  Department of Commerce. 

According to Energy officials, demand for these items is far smaller
relative to other NRL items.  In addition, our analysis confirms that
not only do few end users have any need for these items, but in most
instances only legitimate end users apply for them.  According to
Energy officials, illegitimate end users know these items will be
denied because of their critical applications in nuclear weapons
development, such as testing of implosion systems, manufacturing of
gas centrifuge components, and production of heavy water. 


--------------------
\3 As of fiscal year 1993, 80 commodity classification numbers were
listed as controlled for nuclear proliferation reasons; another 12
have been controlled at one time or another since fiscal year 1985. 


   DECLINING TREND OF NRL LICENSES
---------------------------------------------------------- Chapter 2:3

Since fiscal year 1987, the volume of individual validated licenses
for NRL items has declined, although less for Special Country List
destinations than for other countries.  The number of NRL licenses
worldwide declined 81 percent from fiscal years 1987 to 1992,
compared with a 65-percent drop in NRL licenses to Special Country
List destinations, as shown in figure 2.2. 

   Figure 2.2:  Licenses for NRL
   Items to Worldwide and Special
   Country List Destinations
   (Fiscal Years 1987-92)

   (See figure in printed
   edition.)

This decline in approved NRL licenses is due to the liberalization in
export controls that occurred during the late 1980s.  The United
States eased licensing requirements for computers in 1987 and again
in 1990, and also took other liberalization steps in accord with
decisions reached by the Coordinating Committee on Multilateral
Export Controls (COCOM).\4 In June 1990 COCOM exempted some items
from export licensing requirements when the items were destined for
COCOM member states.  Because some of these items were also on the
NRL, this exemption resulted in fewer total licenses; it did not
affect licenses to Special Country List destinations because these
countries are not members of COCOM.  Also in June 1990, COCOM removed
some commodities from its control list that were also on the NRL,
thereby liberalizing licensing requirements for NRL exports not only
to COCOM members but to all countries.\5

Of all of these actions, the liberalization in computer licensing
requirements has had the greatest impact:  computers represented 92
percent of the decline in licenses for NRL items to Special Country
List destinations and 86 percent of the decline for all countries. 

On October 6, 1993, the Commerce Department published an interim rule
further easing licensing requirements for computer exports.  Under
the new policy, only supercomputers (as they are currently defined)
will require an export license for nuclear proliferation reasons and
only when exported to Special Country List destinations.\6 This new
policy will almost certainly result in a substantial decline in the
number of computer license applications.  We estimate that if these
policy changes had been in effect in fiscal year 1992, there would
have been approximately 86 percent fewer license applications for
computer exports to countries on the Special Country List. 

In formulating this new policy, the executive branch sought to
promote U.S.  computer exports by reducing the licensing burden and
bringing U.S.  export controls more in line with those of other
countries. 


--------------------
\4 COCOM, comprised of the United States and its western allies, was
established to control exports to the Soviet bloc. 

\5 Additional changes have been made in the NRL since June 1990, but
these have not resulted in net changes in licensing requirements.  As
many commodities have been added to the NRL as have been dropped. 

\6 Licenses will still be required for lower level computers destined
for Iran and Syria, in accord with existing foreign policy export
controls.  Such exports could be denied for nuclear proliferation
reasons if it can be clearly established that they would be used to
support nuclear weapons activities. 


DUAL-USE NUCLEAR LICENSING POLICY
AND ITS IMPLEMENTATION
============================================================ Chapter 3

Most licensing decisions for eight countries of particular concern
were consistent with the U.S.  goal of minimizing proliferation risk. 
However, over 1,500 nuclear-related dual-use licenses were approved
by the U.S.  government to end users in these countries involved or
suspected of being involved in nuclear proliferation activities. 
Some licenses involved technically significant items or facilities
that have been denied licenses in other cases because of the risk of
diversion to nuclear proliferation activities.  These approvals,
although generally consistent with U.S.  policy implementation
guidelines, do present a relatively greater risk that U.S.  exports
could contribute to nuclear weapons proliferation. 


   U.S.  NUCLEAR-RELATED EXPORT
   POLICY GUIDANCE
---------------------------------------------------------- Chapter 3:1

It is U.S.  policy to prevent exports that would contribute to
nuclear weapons proliferation, but without impeding legitimate
exports.  In accord with this policy, Commerce and other agencies
with whom it consults conduct a case-by-case review of license
applications using the following licensing factors: 

  stated end use of the item;

  significance of the item for nuclear purposes;

  availability of the item from non-U.S.  sources;

  types of assurances against nuclear explosive use; and

  nonproliferation credentials of the destination country. 

The Subgroup on Nuclear Export Coordination has developed more
detailed guidelines that agencies can follow in their case-by-case
reviews.  Specifically, the guidelines permit agency officials to
review with a "presumption of approval" all applications except those
that involve the following circumstances: 

  Exports to Special Country List destinations if there is any
     evidence that they will be used for proscribed nuclear
     activities such as the design, manufacturing, or testing of
     nuclear weapons. 

  Exports to any country if they involve (1) an unsafeguarded nuclear
     activity;\1 (2) a foreign naval nuclear propulsion program with
     which the United States does not cooperate; (3) items that
     present a high risk of diversion; or (4) a nuclear activity in a
     country for which the United States has a policy of nuclear
     noncooperation. 

These guidelines are intended to balance U.S.  nonproliferation
policy objectives with legitimate commercial interests.  They seek to
minimize the risk that U.S.  exports could support nuclear
proliferation activities, while providing licensing officials wide
latitude to approve exports for other activities.  For example, in
certain circumstances licenses will be approved for Special Country
List destinations even if the end user is involved in proscribed or
unsafeguarded nuclear activities, so long as (1) the end user is also
involved in non-proscribed activities, (2) the exports are intended
and are appropriate for those non-proscribed uses, and (3) U.S. 
officials are able to develop conditions that would provide the
necessary degree of confidence that the items will not be diverted. 


--------------------
\1 Safeguards include inspections and other measures taken by the
International Atomic Energy Agency to detect the diversion of nuclear
material from peaceful nuclear activities. 


   LICENSING OUTCOMES FOR EIGHT
   COUNTRIES OF CONCERN
---------------------------------------------------------- Chapter 3:2

To assess the implementation of U.S.  licensing policy, we analyzed
licensing decisions for nuclear-related dual-use exports to eight
countries of proliferation concern for fiscal years 1988 to 1992. 
The eight countries are Argentina, Brazil, India, Iran, Iraq, Israel,
Pakistan, and South Africa.  During this period, the United States
reviewed 27,567 nuclear-related dual-use license applications for the
eight countries and approved 24,048, or approximately 87 percent, as
shown in table 3.1. 



                          Table 3.1
           
            Licensing Outcomes for Nuclear-Related
           Dual-Use Exports for Eight Countries of
                Concern (Fiscal Years 1988-92)

              Applicatio
Country               ns   Approvals     Denials     Other\a
------------  ----------  ----------  ----------  ----------
Argentina          2,644       2,433    4 (0.2%)  207 (7.8%)
                             (92.0%)
Brazil             7,476       6,966   29 (0.4%)  481 (6.4%)
                             (93.2%)
India              3,978       3,050   69 (1.7%)         859
                             (76.7%)                 (21.6%)
Iran                 721         366   86(11.9%)         269
                             (50.8%)                 (37.3%)
Iraq\b               410         253   20 (4.9%)         137
                             (61.7%)                 (33.4%)
Israel             6,603       5,929   44 (0.7%)  630 (9.5%)
                             (89.8%)
Pakistan             808         650   27 (3.3%)         131
                             (80.4%)                 (16.2%)
South Africa       4,927       4,401   10 (0.2%)         516
                             (89.3%)                 (10.5%)
============================================================
Total             27,567      24,048    289 (1%)       3,230
                               (87%)                   (12%)
------------------------------------------------------------
Note:  Percentages may not add to 100 due to rounding. 

\a Includes licenses returned to the exporter without action, still
pending, canceled, or suspended. 

\b Data through August 2, 1990.  All pending applications were
returned without action. 

Source:  Department of Commerce. 

The four countries that accounted for the great majority of license
applications (Brazil, Israel, South Africa, and India) have the
largest and/or most technically advanced economies in the group and
the greatest demand for nuclear-related dual-use items.  The small
volume of applications for Iran and Iraq and relatively lower
approval rates are due to the less-developed nature of their
economies and the more stringent application of U.S.  licensing
policy.  The United States has embargoed all exports to Iraq since
the Persian Gulf War, and since fiscal year 1992 has tightly
restricted exports of proliferation items to Iran. 


   MOST LICENSING OUTCOMES
   CONSISTENT WITH GOAL OF
   MINIMIZING RISK
---------------------------------------------------------- Chapter 3:3

In general, the licensing decisions summarized in table 3.1 were in
accord with the overall goal of minimizing the risk that U.S. 
exports could be used to support nuclear proliferation.  Most
licenses that were approved entailed little or no apparent
proliferation risk, while those that were denied represented an
unacceptable risk because of the types of items or end users
involved. 

Approximately 90 percent of the 24,048 approved licenses were for
exports to hospitals, banks, factories, and other civilian and
governmental institutions that did not appear on the Department of
Energy's Nuclear Proliferation Watch List.\2 Computers accounted for
a large number (17,106) of the licenses to these end users. 

Conversely, most of the 289 denied licenses represented an
unacceptable proliferation risk because they involved (1) technically
significant items going to end users or countries where the risk of
diversion to proscribed activities was viewed as particularly high;
(2) end users involved in unsafeguarded nuclear activities or foreign
naval nuclear propulsion programs; or (3) end users engaged in
nuclear activities in countries for which the United States has a
policy of nuclear noncooperation.  The following are examples of
licenses denied based on the risk of diversion. 

  A license for two three-axis turning machines capable of
     manufacturing nuclear weapons components to the Saddam General
     Establishment in Iraq. 

  Nineteen licenses for high-powered computers to a military end user
     in Israel. 

The following are examples where applications were denied because the
recipients were primarily involved in unsafeguarded nuclear
activities or a foreign naval nuclear propulsion program. 

  Seven license applications for computers, radiation detection
     equipment, nuclear reactor equipment, bellows valves, and an
     oscilloscope to Israel's unsafeguarded nuclear program. 

  All but 1 of 12 license applications for exports to an
     unsafeguarded nuclear research center in India.\3

  Six licenses to a military end user in Brazil involved in naval
     nuclear propulsion research. 

It has been U.S.  policy not to cooperate with the nuclear programs
in India, Iran, Iraq, Israel, Pakistan, and South Africa, resulting
in denial of some licenses.  For example, licenses involving
computers, measuring and calibration equipment, and other NRL items
were denied for the Iraqi Atomic Energy Commission, a nuclear end
user in India, and a nuclear power plant in Pakistan.  According to a
State Department official, the United States has adopted a policy of
nuclear noncooperation for some countries because of concerns that
technology for civilian nuclear programs could be diverted to nuclear
weapons development. 


--------------------
\2 The Watch List identifies end users of nuclear proliferation
concern.  Some of the end users on the Watch List are classified as
"sensitive" because they are involved in proscribed nuclear weapons
or fuel cycle activities; other end users are involved in
non-sensitive nuclear activities or export diversion. 

\3 By mistake, Commerce did approve 1 non-NRL license to the center
for 12 circuit boards valued at $30. 


   SOME LICENSES APPROVED DESPITE
   HIGHER PROLIFERATION RISKS
---------------------------------------------------------- Chapter 3:4

Although most of the licensing decisions for the eight countries we
reviewed were in accord with the goal of minimizing proliferation
risk, we did identify a number of licenses that were approved for
exports to end users engaged in, or suspected of being engaged in,
nuclear weapons proliferation.  In approving these licenses,
officials concluded that the items would not be used in proscribed
nuclear activities.  We have no evidence that such exports have
contributed to nuclear proliferation; however, they do pose a
relatively greater proliferation risk because of the end users
involved. 


      LICENSES APPROVED TO
      SENSITIVE END USERS
-------------------------------------------------------- Chapter 3:4.1

Of the 24,048 licenses approved for our eight countries of concern,
more than 1,500 licenses were approved to "sensitive" end users
involved or suspected of being involved in proscribed nuclear
activities,\4 as shown in table 3.2.  These exports were valued at
$350 million.  (App.  IV contains more detailed information on these
licenses.)



                          Table 3.2
           
            Approvals of Nuclear-Related Dual-Use
           Licenses to Sensitive End Users in Eight
           Countries of Concern (Fiscal Years 1988-
                             92)

                                                     Percent
Country           Applications    Approvals\a       approved
---------------  -------------  -------------  -------------
Argentina                   50             39             78
Brazil                     401            322             80
India                      317            202             64
Iran                        21              5             24
Iraq\b                      89             31             35
Israel                   1,075            880             82
Pakistan                     9              3             33
South Africa                31             26             84
============================================================
Total                    1,993          1,508             76
------------------------------------------------------------
\a Does not include licenses for non-NRL items approved without
referral to the Department of Energy (see ch.  4). 

\b Through August 2, 1990. 

Source:  Department of Commerce, Department of Energy. 

In reviewing these licenses, officials were to weigh the technical
significance of the items in combination with the country and the end
user.  They concluded that there was little or no risk of diversion
to proscribed and/or unsafeguarded nuclear activities.  Generally,
the end users for these 1,508 licenses were government agencies,
research organizations, universities, and defense companies that,
while participating in proscribed and/or unsafeguarded nuclear
activities, are also engaged in other activities.  Moreover, 241 of
these licenses involved non-NRL items.  According to the Chairman of
the SNEC, non-NRL items generally have little or no significance for
nuclear explosive purposes and, therefore, present only a small
proliferation concern.  Most of the remaining 1,267 licenses involved
computers and computer parts, measuring and calibrating equipment,
lasers, pressure measuring instruments, fibrous materials, and
oscilloscopes. 

In some instances, decisions to approve licenses for sensitive end
users were also influenced by special country considerations--for
example, the close bilateral relationship between the United States
and Israel.  In some of these cases, approval decisions were
contingent on government-to-government assurances against misuse or
other licensing conditions (such as exporter reporting) designed to
deter and detect diversions. 


--------------------
\4 We are including end users characterized as "sensitive" on the
Department of Energy's Watch List, plus several end users linked to
Israel's unsafeguarded nuclear program and certain Iraqi state
establishments. 


      SPECIFIC CASES THAT
      CONSTITUTE HEIGHTENED
      PROLIFERATION RISK
-------------------------------------------------------- Chapter 3:4.2

Although we have no evidence that any items exported under these
1,508 licenses have been used to support nuclear proliferation
activities, some of these licenses may constitute a heightened
proliferation risk by virtue of the items or end users involved.  A
number involved items that, because of their technical significance,
present a higher risk of diversion to proscribed nuclear activities. 
Others involved sensitive end users for which U.S.  officials have
denied a large number of dual-use licenses because there was a risk
of diversion to proscribed nuclear activities.  These end users have
been or are suspected to be key players in their countries' nuclear
weapons programs. 


         EXAMPLE:  MACHINE TOOL TO
         PAKISTAN
------------------------------------------------------ Chapter 3:4.2.1

In late 1989, the U.S.  government approved a license to a military
end user in Pakistan for two four-axis grinding machines capable of
manufacturing critical nuclear weapons components.  According to the
Department of Energy's Nuclear Proliferation Watch List, the end user
is involved, among other things, in sensitive nuclear activities,
such as the design, manufacture, or testing of nuclear weapons or
production of special nuclear materials. 

The license was originally denied on grounds that there was an
unacceptable risk of diversion to nuclear weapons development. 
However, the SNEC subsequently recommended approval based on (1) the
exporter's argument that a diversion of the machine tool was unlikely
and (2) the Department of Energy's conclusion that while the
equipment was capable of contributing to sensitive nuclear
activities, such capability would not necessarily translate into a
diversion.  The decision to approve the grinding machines, valued at
$1.5 million, came after the SNEC had recommended denial of less
valuable NRL licenses to the same end user, including measuring and
calibrating equipment valued at under $10,000 and kevlar fabric
valued at under $2,000.  The SNEC had recommended denial of these
licenses on grounds that there was an unacceptable risk of diversion
to nuclear proliferation activities.  Moreover, the license for the
grinding machines was approved on the condition that the exporter
provide the SNEC with periodic reports on the status of the item;
however, according to Commerce officials, no such reports have ever
been provided. 


         EXAMPLE:  COMPUTERS TO
         ISRAEL
------------------------------------------------------ Chapter 3:4.2.2

During fiscal years 1988 to 1992, the United States issued 238
licenses for computers to certain Israeli end users linked to the
unsafeguarded Israeli nuclear program.  While the U.S.  government
denied some licenses for high-powered computers for these end users,
the computers that were approved were generally more powerful than
any exported to sensitive end users in other countries of concern. 
They were also more powerful than those used to develop many of the
weapons in the U.S.  nuclear arsenal. 

According to a State Department official, while the United States
does not support the Israeli nuclear program, it has approved such
computer exports because of the overall U.S.-Israeli relationship and
the U.S.  policy of maintaining Israel's qualitative military
superiority over its neighbors.  In addition, the decision to approve
some of these computer exports was influenced by the foreign
availability of the equipment.  For 62 of the 238 licenses, the
United States received government-to-government assurances against
nuclear use.  According to a State Department official, there is no
evidence that Israel has violated its assurances, although the U.S. 
government has not verified compliance (see ch.  5). 


         EXAMPLE:  COMPUTERS AND
         EQUIPMENT TO IRAQ
------------------------------------------------------ Chapter 3:4.2.3

The U.S.  government approved 23 licenses during fiscal years 1988
and 1989 for computer equipment to end users later determined by the
United Nations to be involved in Iraq's nuclear weapons program. 
Three of the licenses were for personal computers to the Iraqi Atomic
Energy Commission (the headquarters for the Iraq nuclear weapons
program), while six were for minicomputers and personal computers to
Iraqi state establishments involved in uranium enrichment activities. 
According to a U.S.  government assessment, Iraq may have made use of
such computers to perform nuclear weapons design work, as well as to
operate machine tools which may have been used in fabricating nuclear
weapons, centrifuges, and electromagnetic uranium enrichment
components. 

Although it was U.S.  policy not to support Iraq's efforts to acquire
nuclear weapons, it was also U.S.  policy to support benign trade
with Iraq as a way to improve relations between the two countries and
assist in rebuilding Iraq's economy following the Iran-Iraq War. 
According to a State official, prior to the Persian Gulf War U.S. 
licensing officials were concerned about Iraq's nuclear activities,
but were not aware of the existence of its uranium enrichment
programs.  As a result, while most licenses for the Iraqi Atomic
Energy Commission and certain other state establishments were denied,
some involving moderately capable computers were approved.  At the
time these licenses were approved, only the Iraqi Atomic Energy
Commission was identified as a sensitive end user; other Iraqi state
establishments were not identified as potentially involved in nuclear
weapons activities. 


         EXAMPLE:  VARIOUS NRL
         ITEMS TO INDIA
------------------------------------------------------ Chapter 3:4.2.4

The United States approved 33 licenses to a nuclear research center
in India that operates an unsafeguarded reactor and unsafeguarded
isotopic separation facilities.  According to testimony by the
Director of Central Intelligence before the Senate Governmental
Affairs Committee, the center is also involved in thermonuclear
weapons design work.  A State Department official told us that it is
U.S.  policy not to cooperate with the Indian nuclear program, but
the United States attempts to separate its concerns about the Indian
nuclear program from other aspects of the U.S.-Indian relationship. 

Of the 33 licenses approved, 14 were for such NRL items as computers,
laser equipment, and pressure measuring equipment.  According to an
Energy official, these licenses were approved because they involved
technically insignificant items with legitimate uses for civilian
research and because, in the official's view, there was little
likelihood that the items would be diverted to proscribed nuclear
activities.  Other licenses for the center, involving more
technically significant NRL items, have been denied. 

The U.S.  government also approved six licenses involving NRL items
such as computers and equipment for ammonia production for Indian
fertilizer factories.  These factories also make heavy water as a
by-product, which is important to the Indian nuclear program because
India's unsafeguarded nuclear reactors require it to operate.  Heavy
water production is a proscribed activity and is subject to
International Atomic Energy Agency safeguards.  According to a State
Department official, the United States approves licenses for Indian
fertilizer manufacturers collocated with heavy water production
facilities if the exports will not contribute to heavy water
production. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:5

Short of denying all exports to countries or end users of concern,
U.S.  licensing decisions will continue to require judgment and the
balancing of proliferation concerns against legitimate trade
interests and other U.S.  objectives.  While the United States has
denied licenses believed to pose an unacceptable proliferation risk,
it has approved other licenses for end users involved in or suspected
of being involved in nuclear weapons activities.  Officials approved
these licenses because they believed the items would not support
proliferation activities, even though other licenses to these same
end users were denied.  In some cases, decisions to approve these
licenses were influenced by assurances against misuse, or specific
methods (such as exporter reporting) to verify compliance with U.S. 
licensing conditions, but such assurances are not routinely verified
(see ch.  5) and in at least one instance required exporter reporting
has not been done. 

We have no evidence that any of these exports have been used in
nuclear explosives programs.  However, they constitute a higher
nuclear proliferation risk--some significantly higher--than most of
the other licenses that were approved because of the sensitivity of
the items involved or the role of the end users in unsafeguarded
nuclear activities. 


THE INTERAGENCY REVIEW SYSTEM
SHOULD BE STRENGTHENED
============================================================ Chapter 4

The interagency process for reviewing license applications has
weaknesses that have prevented some nuclear-related dual-use licenses
from receiving adequate review.  We found that the Commerce
Department did not always send to Energy all those licenses requiring
referral and that Energy recommended approval of a majority of
licenses for end users engaged in nuclear weapons activities without
subjecting them to interagency review.  Such recommendations by
Energy do not violate regulations, but do limit the opportunity for
the Department of Defense and the Arms Control and Disarmament Agency
to see all licenses they believe warrant their review. 


   THE INTERAGENCY REVIEW PROCESS
---------------------------------------------------------- Chapter 4:1

Regulations pursuant to the Nuclear Non-Proliferation Act of 1978
establish an interagency review process for nuclear-related dual-use
licenses involving the Departments of Commerce, Energy, State, and
Defense, and ACDA.  The act specifies that Commerce must consult with
these agencies as needed when making licensing decisions.  Figure 4.1
illustrates the path a license application takes during the review
process, depending on whether the license involves an NRL or non-NRL
item. 

Referral procedures are designed to allow licenses to be reviewed by
agencies with relevant technical expertise as well as different
perspectives on nuclear proliferation issues.  Energy advises
Commerce because of its technical expertise in nuclear weapons
research and development.  In turn, Defense, State, and ACDA bring
national defense, foreign policy, and arms control considerations
into license decision-making.  By participating in interagency review
groups such as the SNEC, these agencies can attempt to block any
export that in their view would not be in the national interest. 


      COMMERCE AND ENERGY REVIEW
-------------------------------------------------------- Chapter 4:1.1

The regulations require Commerce to refer nuclear-related dual-use
license applications to Energy, but in practice Energy has delegated
some of its review authority, enabling Commerce to decide some
licenses on its own.\1 Energy's intent in such delegations is to
decrease the volume of license applications it reviews, so those
licenses that do not pose a proliferation risk can be processed more
quickly. 

In accord with these delegations, license applications involving more
than half of the items on the NRL can be decided by Commerce without
consultation unless they involve a nuclear end use or end user or
certain countries designated by Energy as being of significant
proliferation concern.  License applications for another fifth of the
NRL are referred to Energy only if intended for a Special Country
List destination or to certain other countries, or involve a nuclear
end use or end user. 

Energy has not delegated its authority to review applications for the
more sensitive categories of nuclear-related dual-use licenses. 
Energy also has retained its authority to review license applications
for non-NRL items involving nuclear end uses or end users. 


--------------------
\1 These delegations, first issued in 1985, constitute written
memorandums of understanding between the Departments of Commerce and
Energy. 


      REFERRALS TO THE SNEC AND
      OTHER INTERAGENCY REVIEW
      GROUPS
-------------------------------------------------------- Chapter 4:1.2

Regulations require that licenses be referred to the SNEC if either
Commerce or Energy believes that a particular license should be
reviewed by other agencies or denied.  The SNEC is an interagency
working group consisting of voting representatives from Commerce,
Energy, Defense, State, and ACDA.\2

When the SNEC cannot reach consensus, license applications are
escalated to the Advisory Committee on Export Policy--an Assistant
Secretary-level interagency review group consisting of voting
representatives from the SNEC agencies.  ACEP votes by majority,
although dissenting agencies can escalate licenses to a higher level
interagency group--the Export Administration Review Board
(EARB)--which in turn can send licenses to the President.  Although
Commerce is the licensing authority, it will, according to Commerce
officials, follow the recommendations of Energy, the SNEC, ACEP, or
EARB in making its licensing determinations. 


--------------------
\2 Also in attendance at SNEC meetings are nonvoting representatives
from the Central Intelligence Agency, the National Security Council,
and the Joint Chiefs of Staff.  While the Nuclear Regulatory
Commission is a statutory member of the SNEC, it does not vote on
dual-use licenses. 


   RESULTS OF REVIEW PROCESS
---------------------------------------------------------- Chapter 4:2

From fiscal years 1988 to 1992, Commerce decided without Energy
consultation about 50 percent of the 34,281 nuclear-related dual-use
license applications to Special Country List destinations.  Of the
licenses Commerce referred, Energy made recommendations to Commerce
on about 93 percent without subjecting them to interagency review. 

Table 4.1 shows the results of license reviews by Energy and
succeeding review levels.  The SNEC and ACEP cause a higher
proportion of licenses to be denied than Energy because these groups
review more sensitive licenses\3 and Energy is generally required to
refer to the SNEC those licenses that it believes should be denied. 



                          Table 4.1
           
             Licensing Decisions by Review Level
                    (Fiscal Years 1988-92)

                   Total
                licenses    Approved      Denied     Other\a
------------  ----------  ----------  ----------  ----------
Energy            15,828      14,205    101 (1%)       1,515
                               (90%)                   (10%)
SNEC               1,140   695 (61%)   112 (10%)   333 (29%)
ACEP                 104    30 (29%)      6 (6%)   68\ (65%)
EARB                19\b    17 (89%)     2 (11%)      0 (0%)
President              3      0 (0%)    3 (100%)      0 (0%)
============================================================
Total             17,094      14,947    224 (1%)       1,916
                               (87%)                   (11%)
------------------------------------------------------------
Note:  Percentages may not add to 100 due to rounding. 

\a Includes licenses that were returned without action, still
pending, canceled, or suspended. 

\b All 19 licenses, for computer exports to certain Israeli end
users, were reviewed in 1991; according to Commerce data, the EARB
reviewed no licenses in fiscal year 1992. 

Sources:  Department of Commerce and the SNEC. 

We reviewed SNEC licensing decisions from fiscal years 1988 to 1991
and identified only two cases where Commerce approved licenses even
though a majority of other SNEC agencies had voted that they be
denied.  They both occurred in fiscal year 1990. 

The two licenses involved (1) a flash X-ray system to an end user
suspected of engaging in proscribed nuclear activities and (2) a
low-speed computer to an end user which at the time was a known
diverter.  Some agencies voting for denial at the SNEC wanted these
licenses escalated to a committee of the National Security Council,
but Commerce approved them without escalation because it did not
recognize the authority of the National Security Council committee. 
Commerce believed that agencies voting for denial should have
escalated these licenses to ACEP.  At the time, the ACEP escalation
process was informal--it had not yet been established by
regulations.\4


--------------------
\3 Most licenses reviewed by the SNEC involve one of the eight
countries discussed in chapter 3. 

\4 The process by which licenses can be escalated from the SNEC to
ACEP and higher level review was published in the Federal Register in
February 1991. 


   COMMERCE DOES NOT REFER ALL
   LICENSES TO ENERGY THAT IT
   SHOULD
---------------------------------------------------------- Chapter 4:3

Most of the nuclear-related dual-use licenses Commerce decided
without Energy review did not have to be referred because they were
covered by Energy delegations of authority.  However, from October
1987 to May 1992, Commerce approved about 130 licenses for NRL items
going to Special Country List destinations without obtaining Energy
review, even though no Energy delegations of authority applied. 

Of these NRL licenses, more than three-quarters were for computers
going primarily to Argentina, Brazil, India, Israel, and South
Africa, and in a small number of instances to Iran and Iraq. 
Additionally, 23 of these computer licenses involved end users on
Energy's Nuclear Proliferation Watch List, including some end users
listed as "sensitive" because of their possible involvement in
proscribed nuclear activities.  The other NRL licenses involved spark
gaps, thyratrons, oscilloscopes, and other items, some to sensitive
Watch List end users. 

In addition to the NRL licenses, Commerce approved without Energy
review nearly 1,500 licenses for non-NRL items going to end users on
Energy's Watch List, even though regulations require Energy review of
non-NRL licenses involving nuclear end users.  The large majority of
these licenses were for Argentina, Brazil, India, Israel, and South
Africa, although 26 were for Iraq, Pakistan, and Iran.  Of these
licenses, about 500 were for sensitive end users. 


      REASONS GIVEN FOR
      NON-REFERRAL
-------------------------------------------------------- Chapter 4:3.1

Commerce officials acknowledged that Energy should have been
consulted on most of the approximately 130 NRL licenses.  According
to these officials, an inexperienced licensing officer was
responsible for a large number of the computer licenses that were not
referred as required.  Additionally, most of the licenses were
reviewed prior to the adoption in October 1991 of a "two-person
sign-off rule," whereby the decisions of one licensing officer must
be reviewed by another licensing officer. 

In the case of the non-NRL licenses, Commerce officials told us they
had the discretion to decide which licenses involving Watch List end
users should be referred and which should not.  They said that
although Energy's initial intent in providing the Watch List was that
all licenses would be referred, this policy had eroded over time
because of repeated messages from Energy that it did not wish to see
certain licenses.  As a result, Commerce licensing officers now use
the Watch List as a general guide and do not routinely forward all
license applications involving Watch List end users to Energy. 

Nonetheless, Commerce officials acknowledged that some of the non-NRL
licenses did involve end users of "true" proliferation concern and
should have been referred to Energy.  An Energy licensing official
agreed with Commerce that many of the non-NRL licenses should have
been referred, although he understands why Commerce believes it has
some discretion.  However, the Energy official told us that Commerce
improperly exercised that discretion, particularly for the licenses
for end users listed on the Watch List as sensitive.  Officials from
both agencies acknowledged that the referral policy for licenses to
Watch List end users should be clarified. 


      IMPACT OF COMMERCE'S FAILURE
      TO REFER LICENSES
-------------------------------------------------------- Chapter 4:3.2

Commerce's failure to properly refer licenses increases the risk that
a U.S.  export could support a nuclear proliferation program.  Energy
or other reviewing agencies could, if given the opportunity, vote to
deny some licenses Commerce fails to refer. 

On the basis of our analysis, we believe many of the approximately
130 NRL licenses would have been approved by Energy had they been
referred.  For instance, of the computer licenses, most are similar
to cases that were approved by Energy.  However, seven of them, based
on similar past cases, could have been escalated to the SNEC, where
five might have been approved and two might have been denied
depending on the end use, the specific facilities receiving the
exports, or other policy considerations.  Analyzing the other NRL
licenses is more difficult because we were unable to assess the
technical significance of the items; however, other licenses for such
items have been approved by Energy under similar circumstances. 

We cannot be certain whether any of the approximately 500 non-NRL
licenses involving sensitive end users would actually have been
denied if Commerce had referred them.  However, we found that Energy
and the SNEC had recommend denial of a small number of similar
licenses in the past, a few involving sensitive end users that were
also listed among the approximately 500 licenses Commerce did not
refer to Energy. 


   REFERRALS TO THE SNEC
---------------------------------------------------------- Chapter 4:4

Energy has discretion in deciding which license applications it
should forward to the SNEC.  Two agencies on the SNEC, the Department
of Defense and the ACDA, have expressed concern over Energy's
exercise of its discretion and the lack of visibility over licenses
not referred, leading to proposals to reform the review process. 


      ENERGY REFERRAL GUIDELINES
      AND ACTIONS
-------------------------------------------------------- Chapter 4:4.1

Regulations generally require that if Energy believes Commerce should
deny a license, it must refer that license to the SNEC.  However,
according to an Energy official, in some instances Energy does not
refer licenses to the SNEC that it wants denied because the SNEC
already has a policy that such licenses should be denied.\5

If Energy believes a license should be approved, it reviews SNEC
referral policies to decide whether the license application should be
referred.  Generally, the SNEC has directed Energy to refer licenses
for which there is a risk of diversion to nuclear end uses, in
addition to certain licenses for specific end users.  Energy
officials told us they also refer other licenses that they would
recommend be approved if they believe other SNEC agencies would want
to review them. 

Under these guidelines, from fiscal years 1988 to 1992, Energy
referred to the SNEC only 26 percent of the license applications it
received from Commerce for end users listed as sensitive on its
Nuclear Proliferation Watch List.  Of the licenses not referred by
Energy, 79 percent were ultimately approved, less than 1 percent were
denied, and the remainder were generally returned without action. 

Most license applications for sensitive end users that Energy
referred to the SNEC involved NRL items; few non-NRL licenses for
sensitive end users were referred.  According to an Energy official,
license applications for sensitive end users that were not referred
to the SNEC generally involved items that would not contribute to a
country's nuclear program.  In addition, Energy officials said these
licenses posed no risk of diversion because they were intended for
use in non-proscribed activities. 


--------------------
\5 Energy provides periodic reports to the SNEC on those licenses it
denied without interagency consultation. 


      DEFENSE AND ACDA CONCERNS
      ABOUT ENERGY REFERRALS
-------------------------------------------------------- Chapter 4:4.2

Although the State Department representative to the SNEC said he was
satisfied with Energy referrals, Defense and ACDA officials stated
that not all nuclear-related dual-use licenses that could be of
concern to various SNEC agencies are being referred to the SNEC.  In
addition, Defense and ACDA officials said they have only a limited
ability to hold Energy accountable for its licensing recommendations
because they lack access to licensing information. 

At our request, Defense and ACDA representatives to the SNEC reviewed
a list of licenses that in June 1991 Energy recommended be approved
without SNEC review.  They identified several licenses that they
believed warranted such review. 

Defense and ACDA officials stated that although they would not
necessarily have voted to deny all of these licenses, they were
concerned that Energy reviewed them without interagency consultation. 
They believe Energy has a policy perspective that could lead it to
recommend approval of some licenses that Defense and ACDA want
denied.  For example, according to Defense officials, Energy
emphasizes technical factors, such as the sophistication of the item
and its appropriateness for the stated end use, while downplaying
political developments within a country or the statements of its
leaders.  Defense officials also believe that Energy does not fully
appreciate the potential utility of low-technology NRL items or
non-NRL items to nuclear proliferation activities in less developed
countries. 

Defense's and ACDA's complaints regarding the SNEC agenda stem in
part from the fact that these agencies vote to deny nuclear-related
dual-use licenses more often than other agencies.  For example, for
the licenses escalated to ACEP between March 1991 and July 1992,
Defense and ACDA voted at the SNEC for denial 63 and 50 percent of
the time, respectively, while Energy voted for denial 47 percent of
the time, Commerce 13 percent, and State 8 percent.  Defense never
voted to approve any of these licenses; in those cases where it did
not to vote to deny, it decided to defer its position until further
discussion at the ACEP. 

Although technically all agencies are allowed to place license
applications on the SNEC agenda, in most instances only Commerce and
Energy have the ability to do so because they are the only agencies
with access to all nuclear-related dual-use license applications.\6
Other SNEC agencies can request that Energy refer certain types of
licenses, but Energy will only do so if directed by a consensus vote
at the SNEC, which is generally difficult to achieve. 

Other SNEC agencies are also limited in their ability to hold
Commerce and Energy accountable for their licensing decisions because
they rarely are given information on licenses decided without
interagency review.  Although guidelines from the SNEC chairman
recommend that Energy report periodically to the SNEC on licenses
that are approved, Energy officials said they provide such
information to the SNEC only on an ad hoc basis because of resource
constraints and because in their view it is unclear what would be
gained by distributing such data.  Our review confirmed that Energy
has not provided the SNEC with information on licenses approved
without SNEC review since October 1991. 


--------------------
\6 Agencies may have access to some license applications because they
are referred for other reasons.  For example, Defense receives
licenses involving computers and other electronic equipment for
certain Special Country List destinations. 


      PROPOSALS FOR REFORMING THE
      ENERGY REFERRAL PROCESS
-------------------------------------------------------- Chapter 4:4.3

To better ensure that the right licenses reach the SNEC agenda,
Defense proposed in February 1992 that Energy refer to the SNEC all
licenses for items controlled multilaterally by the Nuclear Suppliers
Group when destined for certain countries that are not in this
group.\7 The SNEC did not accept Defense's proposal because
representatives from Commerce, State, and Energy did not agree that
these types of licenses were of sufficient concern to warrant SNEC
review.  Defense also proposed that Energy provide information on all
approved licenses not reviewed by the SNEC, but the SNEC rejected
this as well. 

To provide more transparency to the process, ACDA has proposed that
all licenses referred from Commerce to Energy be referred
simultaneously to other SNEC agencies.  Commerce opposed this on the
grounds that (1) it would be duplicative and costly, and could add to
license processing time, if each agency reviewed every license and
(2) it is of questionable value given that other SNEC agencies do not
possess expertise or intelligence information beyond that available
at Commerce and Energy. 


--------------------
\7 The Nuclear Suppliers Group is a multilateral group that imposes
licensing requirements on certain items for nuclear proliferation
reasons. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:5

Although Commerce referred most licenses in accord with Energy
delegations of authority, from October 1987 to May 1992 not all
licenses were referred to Energy as required.  Commerce's failure to
refer some licenses to Energy as required increases the chance that a
license will be improperly approved for lack of adequate technical
review.  Commerce's adoption of a two person sign-off rule should
partially address the cause of its failure to refer some NRL
licenses.  However, there is no agreement between Commerce and Energy
on the proper use of the Nuclear Proliferation Watch List in making
referral decisions.  Until Commerce and Energy take steps to clarify
what licenses should be referred, Commerce may still fail to refer
some non-NRL licenses for sensitive nuclear end users, even though
regulations require referral of such licenses and Energy wishes to
review them. 

Although Energy has discretion in determining which licenses to
forward to the SNEC, its practice of seeking interagency consultation
on only a minority of licenses for sensitive end users raises
concerns that other agencies may be precluded from bringing their
policy perspectives to bear on important licensing decisions.  During
our review, Defense and ACDA representatives to the SNEC identified a
number of licenses--some involving nuclear-capable items destined for
end users of proliferation concern--that they believed warranted SNEC
review but were not placed on the SNEC agenda.  These agencies are
limited in their ability to influence which licenses Energy selects
for interagency review and are unable to hold Commerce and Energy
accountable for their review decisions because they lack consistent
access to licensing information. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:6

We recommend that the Secretary of Energy reach agreement with the
Secretary of Commerce on guidelines for referral of licenses
involving end users on the Nuclear Proliferation Watch List. 

To ensure that the most sensitive licenses are referred to the SNEC,
we recommend that (1) the Secretaries of Commerce and Energy provide
periodic reports to the SNEC on those nuclear-related dual-use
licenses approved without interagency review and (2) the Secretaries
of Commerce, Energy, State, and Defense and the Director of the Arms
Control and Disarmament Agency (the voting members of the SNEC) use
licensing information contained in these reports to establish
mutually acceptable guidelines for selection of licenses for
interagency review. 


METHODS USED TO DETER AND DETECT
DIVERSIONS HAVE LIMITATIONS
============================================================ Chapter 5

The U.S.  government's methods for deterring and detecting diversions
of nuclear-related dual-use items have several limitations.  First,
selection criteria for pre-license checks and post-shipment
verifications do not provide sufficient focus to ensure useful
selection of nuclear-related inspections.  Second, the methods used
to perform these inspections hamper their effectiveness.  Finally,
the U.S.  government does not systematically verify compliance with
government-to-government assurances on the use of nuclear-related
dual-use items because they are diplomatically negotiated agreements
intended to carry the weight of an official commitment. 


   FEW NUCLEAR-RELATED DUAL-USE
   LICENSES ARE SUBJECTED TO
   INSPECTION
---------------------------------------------------------- Chapter 5:1

Only a small proportion of the nuclear-related dual-use licenses
referred to the Department of Energy have been subjected to PLCs and
PSVs.  During fiscal years 1991 and 1992, Commerce conducted PLCs for
221 (2.6 percent) of the 8,370 nuclear-related dual-use licenses
referred to Energy.  During the same period, 56 PSVs were conducted
on already exported items. 

More than half of the PLCs and PSVs were conducted in the eight
countries of particular proliferation concern.  Figure 5.1 shows the
distribution of PLCs among the eight countries, the other 28
countries on the Special Country List, and all other countries. 

   Figure 5.1:  Geographic
   Distribution of Nuclear-Related
   Dual-Use PLCs (Fiscal Years
   1991-92)

   (See figure in printed
   edition.)

Table 5.1 shows the actual number of inspections (both PLCs and PSVs)
conducted in each of the eight countries.  Brazil, India, Israel,
South Africa, and Pakistan accounted for the highest volume of
checks. 



                          Table 5.1
           
             Nuclear-Related Dual-Use Inspections
           Conducted in Countries of Proliferation
                Concern (Fiscal Years 1991-92)

Country                     PLCs          PSVs         Total
------------------  ------------  ------------  ============
Argentina                      9             1            10
Brazil                        31             3            34
India                         24             8            32
Iran                           1             0             1
Iraq                           0             0             0
Israel                        23             4            27
Pakistan                      15            11            26
South Africa                  19            11            30
============================================================
Total                        122            38           160
------------------------------------------------------------
Over 60 percent of these inspections related to computers.  Other
commodities were checked infrequently.  Other items checked five
times or more in these countries included oscilloscopes, numerical
control units, fibrous material, and pressure measuring equipment. 


      MOST INSPECTIONS HAVE
      FAVORABLE RESULTS
-------------------------------------------------------- Chapter 5:1.1

Most nuclear-related dual-use PLCs and PSVs conducted during fiscal
years 1991 and 1992 had favorable results--meaning that Commerce
determined, based on information provided by officials conducting
inspections, that the end-user was a reliable recipient of U.S. 
technology.  (See fig.  5.2.)

   Figure 5.2:  Results of
   Nuclear-Related Dual-Use PLCs
   and PSVs (Fiscal Years 1991-92)

   (See figure in printed
   edition.)

A total of 47 of these PLCs and PSVs involved end users on the
Department of Energy's Watch List, and 35 of these had favorable
results. 

Not all unfavorable PLCs resulted in the denial of license
applications.  Of the 21 license applications that received
unfavorable PLCs for all countries in fiscal years 1991 and 1992,
seven were ultimately approved.  Two of these seven licenses involved
end users on the Watch List. 

A Commerce official stated that six of the seven licenses were
approved despite the unfavorable PLC results after additional
conditions were attached.  For instance, the licenses specified that
the items could not be used for a nuclear end use or that they could
not be transferred to another end user without prior permission from
the U.S.  government.  The remaining license involved an unfavorable
PLC that revealed the end user had ordered switching equipment in a
quantity far in excess of its needs.  When the firm reduced the
amount of the item ordered, the license was approved. 

In the case of one of the seven licenses, involving an unfavorable
PLC on an end user in Israel, subsequent exports to the end user also
were approved.  A Commerce official told us the subsequent exports
were approved after the addition of licensing conditions or when the
Israeli government provided assurances that the items would not be
misused. 


   SELECTION CRITERIA LACK
   SPECIFIC GUIDANCE FOR
   NUCLEAR-RELATED DUAL-USE
   INSPECTIONS
---------------------------------------------------------- Chapter 5:2

Commerce has provided general criteria for selecting which export
licenses should be subject to a PLC or PSV, but the criteria do not
sufficiently focus on nuclear-related dual-use licenses.  A Commerce
official said the agency has not provided guidance on applying the
criteria more specifically to such licenses.  Rather, the current
inspection system was designed more generally to cover all
proliferation and military-related dual-use items.  Without this
focus, however, Commerce cannot be certain that the licenses
presenting the greatest nuclear proliferation risk are selected for
inspection. 


      COMMERCE'S SELECTION
      CRITERIA
-------------------------------------------------------- Chapter 5:2.1

According to a Commerce official, any U.S.  government agency with
export control responsibilities may request an inspection; however,
most originate with export enforcement officials at Commerce.  The
SNEC also requests inspections if it believes they are needed to
assist its decision-making process. 

Commerce officials use a list of general criteria to guide selection
of licenses that require a PLC or PSV.  These criteria encompass

  new consignees or exporters;

  items that would be denied for certain end uses or to suspicious
     end users;

  items having potential for use in nuclear, chemical, or biological
     warfare, and those with military or missile technology
     applications;

  large volume licenses (quantity of items or dollar value) for
     resale purposes where the equipment or technology involved would
     not be approved to countries or end users in close proximity to
     the ultimate consignee;

  suspicious ultimate consignees (those that previously have received
     unfavorable inspections, whose business is not consistent with
     the items or the end use listed on the license application, or
     where other derogatory information is known);

  conditions attached to the license; or

  items for which illegal acquisition attempts have been made. 


      WEAKNESSES IN SELECTION
      CRITERIA
-------------------------------------------------------- Chapter 5:2.2

According to Defense and national laboratory officials, priority
consideration for selecting PLCs and PSVs should be given to the most
sensitive nuclear-related dual-use items.  However, the selection
criteria do not highlight such items, or even distinguish the
relative importance of items having uses in nuclear, chemical, or
biological weapons, or with military or missile technology
applications.  These officials also noted that PLCs are most valuable
when they involve end users that are not well-known.  The selection
criteria do not provide guidance covering this point. 

Laboratory officials told us that, while overall selection of PLCs
and PSVs was fairly good, during fiscal years 1991 and 1992 more PLCs
and PSVs should have been performed for particularly sensitive NRL
items in countries of proliferation concern.  According to these
officials, such sensitive items include neutron generators/tubes,
fibrous material, high-strength materials useful in gas centrifuges
(such as maraging steel and beryllium), equipment that is corrosion
resistant to uranium hexaflouride, high explosives, and high-speed
photographic equipment.  One laboratory official noted that 15
licenses were approved for exports of fibrous material to Israel in
fiscal year 1991.  However, no PLCs were conducted on license
applications involving this item.  As another example, 26 licenses
were approved for corrosion-resistant sensing elements to India in
fiscal year 1992.  However, only three PLCs were conducted on these
license applications. 

In addition, approximately 63 percent of nuclear-related PLCs in the
eight countries of proliferation concern were conducted on items
national laboratory officials identified as being of lesser
proliferation concern.  The majority of these PLCs were for
computers.  However, laboratory officials said computers are less
critical for nuclear weapons development than some other NRL items
and should have low priority for PLC and PSV selection unless the
computer has a high data processing speed. 

Defense and national laboratory officials, as well as embassy
officials who conduct PLCs, said PLCs on unknown end users are
valuable for verifying their existence, commercial viability, and
ability to use the items as proposed on the license applications. 
However, during fiscal years 1991 and 1992, Commerce performed PLCs
on some known end users, including foreign subsidiaries of U.S. 
firms and end users already suspected of participating in proscribed
activities.  In addition, about 39 percent of nuclear-related PLCs in
the eight countries of proliferation concern were performed on
Department of Energy Watch List end users. 

PLCs are less useful in cases involving well-known end users, the
officials said, because the existence and activities of the entities
are already established.  PSVs, however, may be useful for these end
users to verify the location of licensed items and conformance with
end-use statements and licensing conditions.  During fiscal years
1991 and 1992, about 37 percent of nuclear-related PSVs in the eight
countries of proliferation concern were performed on Energy Watch
List end users. 


   METHODS FOR CONDUCTING
   INSPECTIONS ARE NOT EFFECTIVE
---------------------------------------------------------- Chapter 5:3

Commerce has issued general guidance on how to conduct PLCs and PSVs,
but has not developed specific guidance for conducting
nuclear-related dual-use inspections.  In the countries we visited,
inspections were generally done in accordance with Commerce guidance;
however, we found limitations in the way they were conducted that
hamper their effectiveness. 


      HOW INSPECTIONS ARE
      CONDUCTED
-------------------------------------------------------- Chapter 5:3.1

To initiate a PLC or PSV, Commerce sends a request cable containing
information on the case to the appropriate overseas post.  Embassy
officials at the post are typically designated to conduct the
inspections.  In some circumstances, Commerce may send teams of
export enforcement officials to selected countries to conduct
inspections. 

Procedures for conducting PLCs and PSVs are generally the same. 
Initially, the embassy official is responsible for collecting
background information on the end user.  This may involve a review of
previous inspections conducted on the end user or an examination of
financial reports to determine the end user's credit history and
ownership. 

Once background information is collected, the embassy official is
required to visit the end user and interview the chief executive
officer or other high-ranking employees.  Following the visit, the
embassy official is to submit a reply cable to Commerce detailing the
information collected and stating whether the end user is considered
a reliable recipient of U.S.  technology.  On the basis of this
report, Commerce determines whether the inspection result was
favorable or unfavorable. 


      SOME INSPECTIONS HAVE PROVEN
      INEFFECTIVE
-------------------------------------------------------- Chapter 5:3.2

In several instances, embassy officials did not uncover derogatory
information on end users determined through other sources to be
involved in nuclear proliferation activities. 

  In March 1988, the U.S.  embassy in Pakistan conducted a PLC for
     the proposed export of a computer to an end user located on the
     premises of a military facility in Pakistan.  Although embassy
     officials did not visit the end user, citing time and budget
     constraints, the reply cable stated that the end user was a
     reliable recipient of U.S.  technology.  A subsequent PLC
     conducted during fiscal year 1991 reported the same finding for
     an oscilloscope export.  The Energy Watch List, however,
     indicates that the military facility is involved in sensitive
     nuclear activities. 

  In May 1989, the U.S.  embassy in Iraq conducted a PLC for the
     proposed export of a machine tool to Bader General
     Establishment.\1 Inspectors toured the facility and viewed the
     plant where the machine tool would be used.  The reply cable
     stated that Bader General Establishment was a reliable recipient
     of U.S.  technology.  However, after the Persian Gulf War, U.N. 
     inspections revealed that the facility was a primary contributor
     to Iraq's nuclear weapons program. 

  In December 1990, the U.S.  embassy in Israel conducted a PLC at a
     government commission for a proposed export to an end user
     involved in Israel's unsafeguarded nuclear program.  The
     inspecting official, an Israeli national, interviewed the
     commission's public relations official as well as a
     representative from the end user.  The U.S.  embassy
     subsequently recommended approval of the application based on
     the results of the PLC. 


--------------------
\1 The application by this Iraqi government entity was ultimately
returned without action. 


      LIMITATIONS IN METHODS FOR
      CONDUCTING INSPECTIONS
-------------------------------------------------------- Chapter 5:3.3

Several limitations in the methods for performing PLCs and PSVs may
hamper their effectiveness.  Specifically, we found that

  inspecting officials lack technical expertise in how
     nuclear-related dual-use items may be diverted,

  Commerce's requests for inspections omit vital information,

  foreign service nationals conduct many inspections, and

  some inspection reports do not provide an assessment of the end
     user's reliability. 

In addition, U.S.  embassy and consulate officials may have
difficulty gaining access to end-user facilities. 


         EMBASSY OFFICIALS
         TYPICALLY LACK TECHNICAL
         EXPERTISE
------------------------------------------------------ Chapter 5:3.3.1

Inspecting officials we interviewed said that they lacked technical
expertise in how nuclear-related dual-use items could be diverted to
proliferation activities and that they had not received training in
how to conduct inspections for these items.  They said that without
such expertise and training, it is difficult for them to effectively
detect potential or actual attempts to divert these items to a
nuclear weapons program. 

Laboratory and Defense officials said embassy officials should have
some expertise on technical aspects of nuclear-related dual-use items
and investigative techniques.  They said suitable training should
include (1) briefings on fuel-cycle technologies and the basics of
weapon design, (2) trips to U.S.  government nuclear laboratories and
manufacturers of nuclear-related dual-use items, and (3) instruction
from law enforcement and intelligence officials on how to detect and
track procurement networks.  They suggested that training could be
provided by the national laboratories or during annual export control
training seminars currently offered at posts in countries of
proliferation concern. 


         COMMERCE'S REQUEST CABLES
         OMIT VITAL INFORMATION
------------------------------------------------------ Chapter 5:3.3.2

Embassy officials told us that the information provided by Commerce
in its request cables is often inadequate.  For example, the cables
frequently do not state why the inspection is being requested, that
the case is of nuclear nonproliferation concern, or what special
conditions have been attached to the license.  The officials
indicated that without this information, inspectors cannot focus
their efforts on the most critical factors in the case.  Further,
they cannot take into consideration the unique technical
characteristics of nuclear-related dual-use items. 

According to national laboratory and Defense officials, Commerce
could improve the information provided to embassy officials by
including the reasons for conducting the inspection and a briefing or
set of questions specifically designed for each case.  They suggested
that a set of reference materials for use in conducting
nuclear-related dual-use inspections could be also developed.  The
materials, for instance, could include background information on the
commodity, photographs, a description of other equipment typically
found in the environment, and summaries of how the equipment could be
adapted for use in a nuclear weapons program. 


         FOREIGN SERVICE NATIONALS
         CONDUCT INSPECTIONS
         WITHOUT SUPERVISION
------------------------------------------------------ Chapter 5:3.3.3

At several posts, including Hong Kong, India, Pakistan, Germany, and
Israel, foreign service nationals were conducting nuclear-related
dual-use inspections.\2 In some cases, these individuals were
unaccompanied by U.S.  embassy officials.  For example, at the U.S. 
Consulate in Hong Kong, a foreign service national has been
responsible for performing, without direct supervision, all
nuclear-related dual-use inspections for the past 17 years. 
According to U.S.  officials at the U.S.  Embassy in Israel, a
foreign service national who was a former employee of the Israeli
Foreign Service has been primarily responsible for conducting
inspections.  Officials said that until the beginning of 1992, this
individual conducted the majority of inspections without an
accompanying U.S.  official. 

Reliance on foreign service nationals to conduct inspections in
countries of proliferation concern raises concerns about internal
control weaknesses and the potential for compromise of the foreign
service national by the host government.  National laboratory and
Defense officials stated that the use of foreign service nationals
presents potential conflicts of interest and that foreign service
nationals should not be allowed to draw official conclusions about
the reliability of end users. 

During the time we conducted our fieldwork, Commerce issued new
guidance on the use of foreign service nations.  The guidance
recommends against allowing them to perform nuclear-related dual-use
inspections.  However, it leaves the decision on who should perform
the inspections to the discretion of the posts. 


--------------------
\2 Foreign service nationals are citizens of foreign countries
employed by the U.S.  government to assist in overseas post
operations. 


         SOME REPORTS FAIL TO
         PROVIDE RELIABILITY
         ASSESSMENT
------------------------------------------------------ Chapter 5:3.3.4

Embassy officials do not always report on the reliability of end
users as required by Commerce.  For example, some reply cables we
reviewed only reported what information was gathered and recommended
that headquarters officials "consider the above information, as well
as any which may be available from other U.S.  government agencies,
in making a decision on the license application."

Embassy officials in Germany said they viewed their role as
presenting information, not making judgments about reliability. 
National laboratory and Defense officials told us that if embassy
personnel receive sufficient training to conduct nuclear-related
dual-use inspections, they should be able to draw conclusions on
whether the end user is reliable. 


         ACCESS TO SOME FOREIGN
         FACILITIES IS DIFFICULT
         OR IMPOSSIBLE
------------------------------------------------------ Chapter 5:3.3.5

In addition to methodological weaknesses, difficulties in obtaining
access to end-user facilities limit the usefulness of some
inspections.  Embassy officials in some countries have difficulty
obtaining immediate access to foreign facilities or cannot obtain
access at all because the host government is sensitive about
inspections infringing on its sovereignty.  India, for example, has a
memorandum of understanding with the U.S.  government that places
limits on U.S.  officials' ability to conduct inspections involving
nuclear-related dual-use exports.  In Germany, U.S.  officials told
us they are not allowed independent access to end users to conduct
PSVs and must rely on the German Customs Service for these
inspections.  U.S.  officials said they are allowed to conduct PLCs
on prospective German end users. 

National laboratory and Defense officials said that site visits to
end-user facilities are an essential component of useful PLCs and
PSVs because they allow inspecting officials to assess end-user
reliability by viewing facility operations during a PLC or verifying
the location and end uses of an item during a PSV.  However, they
pointed out that the usefulness of inspections is limited in cases
where access is delayed or denied because end users engaged in
proliferation activities gain time to legitimize their operations
before the inspectors arrive. 


   COMPLIANCE WITH
   GOVERNMENT-TO-GOVERNMENT
   END-USE ASSURANCES IS NOT
   VERIFIED
---------------------------------------------------------- Chapter 5:4

For some nuclear-related dual-use licenses, the U.S.  government
obtains assurances from the host government that the licensed items
will not be used for specified nuclear purposes or retransferred
without prior U.S.  government consent.  According to State, Defense,
and ACDA officials, the U.S.  government does not systematically
verify compliance with these end-use assurances because they are
diplomatically negotiated agreements intended to carry the weight of
an official commitment by a foreign government.  Thus, it cannot be
certain that the licensed exports are being used only for their
intended purposes. 


      OBJECTIVES OF OBTAINING
      END-USE ASSURANCES
-------------------------------------------------------- Chapter 5:4.1

Government-to-government end-use assurances are diplomatically
negotiated agreements between the U.S.  and foreign governments
pledging that end users of U.S.  technology will not misuse or divert
sensitive items.  While end-use assurances are not a guarantee
against diversion, according to a State Department official, they
carry the weight of an official commitment by the foreign government
and therefore provide the United States with added confidence that
U.S.  exports will be used as stated on the license applications. 

The SNEC generally determines which export licenses should be
approved on condition that the U.S.  government obtain end-use
assurances prohibiting specified nuclear activities.\3 According to
the State and ACDA representatives to the SNEC, there are no formal
criteria for determining when to seek an end-use assurance;
assurances are used based on the proposed end use and end user, the
risk of diversion to nuclear weapons activities, and the recipient
country's nonproliferation stance. 

In cases involving supercomputers, security plans may be attached to
government-to-government end-use assurances designating procedures
for preventing misuse of the computers.  These plans preclude use of
the computers in nuclear activities and may include provisions
concerning such things as the use of guards, and computer usage logs
and software to monitor computer programming.  The restrictiveness of
the security plan depends upon the country of destination, the
processing speed of the supercomputer, and the type of end use. 


--------------------
\3 ACEP and the EARB have also on occasion requested assurances. 


      NUMBER OF END-USE ASSURANCES
      OBTAINED
-------------------------------------------------------- Chapter 5:4.2

Table 5.2 shows the number of government-to-government assurances
obtained during fiscal years 1988 to 1992 that prohibited specified
nuclear end uses. 



                          Table 5.2
           
             Government-to-Government Assurances
            Prohibiting Specified Nuclear End Uses
              by Country (Fiscal Years 1988-92)

Country         1988    1989    1990    1991    1992   Total
------------  ------  ------  ------  ------  ------  ======
Argentina          2       1       0       0       0       3
Brazil             0       0       0       0      12      12
India              2       0       1       2       0       5
Israel            78      32      30      52      30     222
Kuwait             0       0       0       0       1       1
Pakistan           1       0       0       0       0       1
Saudi Arabia       0       0       0       0       1       1
South Africa      84     137      33       2       4     260
Taiwan             2       4       3       8      21      38
============================================================
Total            169     174      67      64      69     543
------------------------------------------------------------
Source:  Department of State. 

The vast majority of these assurances were obtained for computer
exports.  In addition, all of the assurances for Brazil, Saudi
Arabia, and Kuwait, and a small number for India, South Africa, and
Taiwan, were for supercomputers and thus involved implementation of
supercomputer security plans. 

The assurances obtained from South Africa generally involved exports
to commercial or other private sector end users not of nuclear
proliferation concern.  According to a State Department official, the
high number of end-use assurances obtained from South Africa in 1988
and 1989 was largely due to the economic sanctions mandated by the
Comprehensive Anti-Apartheid Act, which included a prohibition on
nuclear cooperation; assurances from South Africa declined as these
sanctions were lifted. 

For Israel, the majority of nuclear assurances involved military end
users.  The United States obtains end-use assurances for certain
exports to Israeli military end users in lieu of conducting
inspections of these end users. 


      COMPLIANCE WITH END-USE
      ASSURANCES IS SELDOM
      VERIFIED
-------------------------------------------------------- Chapter 5:4.3

According to U.S.  officials, there is no evidence of cases where
end-use assurances have been violated; however, officials also said
there is no systematic effort to verify compliance with such
assurances because they constitute an official commitment by a
foreign government.  According to State Department officials, most
end-use assurances have no provisions for verifying compliance.  The
only exceptions are supercomputer security plans, which establish
U.S.  inspection rights because of the high sensitivity of the
exports. 

U.S.  embassy officials in Israel and South Africa questioned the
value of end-use assurances when they cannot be verified.  According
to State and ACDA officials, the only method available for
verification is a PSV, but PSVs are not used for this purpose.  An
ACDA official said efforts to use PSVs to verify end-use assurances
could have negative diplomatic consequences because the United States
could be seen as not accepting the foreign government's commitment at
face value. 

According to State Department officials, the U.S.  government has
verified adherence to supercomputer security plans in only one Indian
case in response to allegations of tampering.  Officials said no
conclusive evidence of tampering was found, but security measures
were revised to address the concerns. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 5:5

Licensing officials use the results of PLCs and PSVs to assess the
reliability of end users of nuclear-related dual-use exports and to
detect and prevent diversion of these commodities.  However,
Commerce's selection criteria are not sufficiently focused on
nuclear-related dual-use licenses to ensure that the right
inspections are being performed.  As a result, PLCs and PSVs are
selected for cases involving items of lesser proliferation concern
and end users whose proliferation credentials are already
established. 

In addition, the methods used to conduct these inspections have
limitations that reduce their usefulness.  Inspectors receive
insufficient training and guidance on performing nuclear-related
dual-use inspections, and Commerce's requests for inspections often
omit vital information.  Further, some U.S.  diplomatic posts rely on
foreign service nationals to conduct inspections.  Finally, U.S. 
personnel sometimes have difficulty gaining access to facilities to
conduct inspections.  Without access, the inspectors cannot
adequately assess the end user's reliability to receive sensitive
U.S.  technology. 

According to U.S.  officials, government-to-government assurances
regarding the end use of exports provide additional confidence that a
foreign government will not allow the diversion of items to nuclear
weapons programs.  However, the U.S.  government makes no effort to
systematically verify compliance with these end-use assurances. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 5:6

To enhance the effectiveness of PLCs and PSVs for nuclear-related
dual-use exports, we recommend that the Secretary of Commerce, in
consultation with the Secretary of Energy,

  focus selection of PLCs and PSVs by developing lists that (1)
     prioritize the most technically sensitive nuclear-related
     dual-use items and (2) identify end users whose proliferation
     credentials are already established,

  develop specific guidance for U.S.  embassy officials on how to
     conduct inspections for nuclear-related dual-use items and
     require nuclear nonproliferation training for those conducting
     PLCs and PSVs,

  direct that requests for PLCs and PSVs explain why the inspection
     is being requested and highlight special licensing conditions,
     and

  eliminate U.S.  reliance on foreign service nationals to perform
     nuclear-related dual-use PLCs and PSVs. 


NUCLEAR NONPROLIFERATION SPECIAL
COUNTRY LIST (1992) NUCLEAR
NONPROLIFERATION SPECIAL COUNTRY
LIST
=========================================================== Appendix I

Afghanistan
Albania
Algeria
Andorra
Angola
Argentina\a
Bahrain\a
Brazil\a
Burma
Chile\a
Comoros
Djibouti
Guyana
India
Iran
Iraq
Israel
Kuwait\a
Libya
Malawi\a
Mauritania
Mozambique
Niger
Oman
Pakistan
Qatar\a
Saudi Arabia\a
South Africa\a
St.  Kitts
Syria\a
Tanzania
United Arab Emirates
Vanuatu
Yemen Arab Republic\a
Zambia
Zimbabwe

\a These countries were removed from the Special Country List under
interim rules published in the Federal Register on October 6, 1993. 

Source:  Commerce's Export Administration Regulations, supplement 4
to part 778. 


NUCLEAR REFERRAL LIST (1992)
NUCLEAR REFERRAL LIST
========================================================== Appendix II


   INDUSTRIAL EQUIPMENT
-------------------------------------------------------- Appendix II:1

Arc induction furnaces
Numerical control equipment/related software
Hot isostatic presses
Dimensional inspection systems and equipment/related software
Robots
Isostatic presses/related software
Spin/flowing machines/related software
Mechanical testing power equipment
Vibration testing equipment


   MATERIALS
-------------------------------------------------------- Appendix II:2

Fibrous and filamentary materials
Crucibles
Aluminum/titanium tubing
Maraging steel
Depleted uranium
Tantalum sheet
Tungsten (parts made of)
Sensing elements of nick
Zirconium
Nickel
Lithium
Hafnium
Beryllium
High purity bismuth-209
Calcium
Radioisotopes
Magnesium
Chlorine triflouride
Boron
Wet-proofed catalyst


   URANIUM ISOTOPE SEPARATION
   EQUIPMENT AND COMPONENTS
-------------------------------------------------------- Appendix II:3

Filament winding machines/related software
Electrolytic cells (fluorine) UF6 production plants
Valves (UF6 resistant)/related technology
Pressure measuring equipment
Piping, fittings, valves/related software and technology
Pipes/valves/heat exchangers/related software and technology
Pumps for molten metal
Electron accelerators
Centrifuge rotor assembly equipment
Centrifugal balancing machines/related software and technology
Superconducting solenoidal electromagnets
Pulse amplifiers
Inverters/converters/frequency changers
UF6 mass spectrometers/related software and technology
Lasers


   HEAVY WATER PRODUCTION PLANT
   RELATED EQUIPMENT
-------------------------------------------------------- Appendix II:4

Phosphor-bronze mesh packings
Compressors and blowers


   IMPLOSION SYSTEMS DEVELOPMENT
   EQUIPMENT
-------------------------------------------------------- Appendix II:5

Flash X-ray
Multistage light gas gun
Electron tubes
Streak cameras, shutters
Photographic equipment (specified)
Electronic equipment time delay generation


   EXPLOSIVES AND RELATED
   EQUIPMENT
-------------------------------------------------------- Appendix II:6

Capacitators
Switching devices
Firing sets and HCG pulsers
Detonators


   NUCLEAR TESTING EQUIPMENT AND
   COMPONENTS
-------------------------------------------------------- Appendix II:7

High speed pulse generators
Cathode ray oscilloscopes
Computers
Photomultiplier tubes


   OTHER
-------------------------------------------------------- Appendix II:8

Helium-3
Power generating systems/neutron generator equipment/related software
and technology
Nuclear reactor equipment/software and technology

Sources:  Department of Commerce, Department of Energy. 


NUCLEAR-RELATED DUAL-USE LICENSES
FOR COUNTRIES ON THE SPECIAL
COUNTRY LIST (FISCAL YEARS
1985-92) NUCLEAR-RELATED DUAL-USE
LICENSES FOR COUNTRIES ON THE
SPECIAL COUNTRY LIST
========================================================= Appendix III

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/          47,033  $32,572,549,60    41,702  $27,570,856,52
 digital, related                                    5                         8
Measuring/calibrating/           2,922     145,359,333     2,480     114,083,435
 testing equipment
Cathode ray oscilloscopes        1,376      40,085,561     1,101      24,823,379
 and components
Electronic devices/              1,167      83,943,479       965      75,496,259
 components
Lasers/optical equipment         1,125      79,498,558       958      68,219,829
Switching equipment/               826     505,445,220       769     462,971,776
 signalling systems
Specially designed                 905      10,864,429       680       7,673,766
 pressure measuring
 instruments
Numerical control                  518     126,760,703       453     112,069,437
 equipment
Fibrous/filamentary                462      91,254,425       389      79,560,930
 materials
Electron tubes and                 303      24,818,902       262      15,450,951
 specially designed
 components
Photographic equipment             166       3,085,675       149       2,700,841
 (specified)
Zirconium/nickel/lithium/          177      12,950,463       135       7,264,977
 hafnium/
 beryllium
Switching devices/                 198       5,277,560       133       4,444,828
 triggered spark
 gaps/thyratrons
Telecommunication                  117      10,557,224       108      10,466,803
 transmission equipment/
 systems
Photosensitive components           90       2,240,853        82       2,219,123
Thermoelectric materials/           94      10,464,853        81       6,382,997
 devices
Streak cameras, shutters            75       2,241,703        53       1,293,259
Sensing elements,                   92       5,008,841        53       1,103,321
 corrosion-resistant
Boron metal/compounds/              46         636,985        44         610,991
 mixtures
Photomultiplier tubes               56         260,407        43         211,970
Measuring equipment,                50       7,556,139        42       7,009,484
 precision linear/angular
Valves/neutron generator/           54      26,473,214        42      24,182,744
 power generating systems
Numerically controlled              53       2,912,476        41       2,629,168
 machines, components/
 parts for
Inverters/converters/               53         827,315        41         689,224
 frequency changers/
 generators
Nuclear reactor/nuclear             61      27,550,664        26       1,324,321
 power plant-related
 equipment
Cryogenic equipment/                31       1,211,890        24         889,527
 materials
Software for UF6 mass               25         170,478        22         157,633
 spectrometers
Vibration testing                   39      10,624,012        21       4,480,022
 equipment (specified)
Mass spectrometers                  26       1,208,266        21         999,871
Piping/fittings/valves              23         708,935        20         706,709
 made/lined with alloys
Electronic equipment for            22         296,204        20         287,579
 time delay generation
Vacuum/controlled                   28       1,685,058        13         792,095
 environment furnaces
Pipes/valves/fittings/              18         577,032        13         482,249
 heat exchangers
Flatbed microdensitometers          14         736,001        12         727,801
Presses and specialized             18       3,777,418        10       2,401,171
 controls/accessories
Helium, enriched in                 16         160,975        10         116,350
 isotope 3
Machines for turning                12       3,279,165         8       1,821,973
 optical-quality surfaces
Pumps (specified)                   12         566,478         7         390,368
Accelerator-produced/               13         461,865         7         130,686
 naturally occurring
 radioisotopes
Systolic array/neural/               9      41,025,899         7      15,025,899
 optical computers
Numerically controlled               6         715,701         6         715,701
 machine tools
Electric arc devices                 6       1,754,254         5         254,254
Magnesium containing                 7          16,315         5             115
 impurities other
 than calcium
Filament winding machines           10       2,192,800         4         405,605
Capacitors (specified)               7         176,862         3         160,804
Accelerators, particle               3       2,057,840         3       2,057,840
 (specified)
Technology for UF6 mass              4          11,700         3          11,700
 spectrometers
Tubes/pipe/fittings,                 5         633,794         2          26,556
 pressure (specified)
Cylindrical disks                    2         504,000         2         504,000
Spin and flow forming                2         640,000         2         640,000
 machines
Isostatic presses                    2       1,060,102         1         229,836
Software for numerical               1          28,410         1          28,410
 control equipment
Pulse amplifiers                     1           8,473         1           8,473
Uranium, depleted                    1          33,750         1          33,750
 (specified)
Tantalum sheet with at               1           3,024         1           3,024
 least 20-centimeter
 diameter
Chlorine triflouride                 2          10,450         1           2,800
Compressors and blowers              1           3,855         1           3,855
Centrifugal balancing                1          70,426         1          70,426
 machines
Maraging steel                       1           2,511         1           2,511
Technology for nuclear               1             200         0               0
 reactors
Vibration test equipment             1          14,500         0               0
Tungsten (parts made of)             1          48,600         0               0
Electron accelerators                1         125,000         0               0
================================================================================
NRL items subtotal              58,392  33,875,226,830    51,091  28,638,309,934
================================================================================
Non-NRL items subtotal           4,620     576,213,887     3,771     408,580,878
================================================================================
Total                           63,012  $34,451,440,71    54,862  $29,046,890,81
                                                     7                         2
--------------------------------------------------------------------------------
Source:  Department of Commerce. 


NUCLEAR-RELATED DUAL-USE LICENSES
FOR SENSITIVE END USERS IN EIGHT
COUNTRIES (FISCAL YEARS 1988-92)
NUCLEAR-RELATED DUAL-USE LICENSES
FOR SENSITIVE END USERS IN EIGHT
COUNTRIES
========================================================== Appendix IV



                                    Table IV.1
                     
                       Licenses for Sensitive End Users in
                                    Argentina

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/              23     $10,293,107        20      $9,393,007
 digital, related
Measuring/calibrating/               7         120,595         6          97,055
 testing equipment
Nuclear reactor/nuclear              4         471,270         2          42,212
 power plant-related
 equipment
Cathode ray oscilloscopes            3          75,869         2          67,468
 and components
Lasers/optical equipment             1             704         1             704
Boron metal/compounds/               1           4,231         1           4,231
 mixtures
Zirconium/nickel/lithium/            2       6,966,980         1       3,020,330
 hafnium/beryllium
Switching devices/                   1           3,229         1           3,229
 triggered spark gaps/
 thyratrons
Electron tubes and                   1           6,000         1           6,000
 specially designed
 components
Specially designed                   1           2,600         0               0
 pressure measuring
 instruments
================================================================================
NRL items subtotal                  44      17,944,585        35      12,634,236
================================================================================
Non-NRL items subtotal               6         322,344         4         278,900
================================================================================
Total                               50     $18,226,929        39     $12,913,136
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.2
                     
                       Licenses for Sensitive End Users in
                                      Brazil

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/             206    $112,563,407       167     $86,469,235
 digital, related
Measuring/calibrating/              55       2,186,770        49       1,958,201
 testing equipment
Cathode ray oscilloscopes           33         607,575        25         505,769
 and components
Electronic devices/                 12          71,925        10          56,709
 components
Fibrous/filamentary                  7      16,011,289         5      15,999,000
 materials
Lasers/optical equipment             5         181,376         4         110,734
Specially designed                   5          10,645         4           7,835
 pressure measuring
 instruments
Switching equipment/                 3         475,131         3         475,131
 signalling systems
Numerically controlled               2         279,412         2         279,412
 machines,
 components/parts for
Photomultiplier tubes                2           3,281         2           3,281
Photographic equipment               3           9,098         2           4,464
 (specified)
Telecommunication                    2          25,625         2          25,625
 transmission equipment/
 systems
Numerical control                    2          13,983         1           3,081
 equipment
Machines for turning                 1         655,650         1         655,650
 optical-quality surfaces
Thermoelectric materials/            1             420         1             420
 devices
Vacuum/controlled                    2          27,340         1           5,215
 environment furnaces
Cryogenic equipment/                 1          21,845         1          21,845
 materials
Accelerators, particle               1       2,020,200         1       2,020,200
 (specified)
Helium, enriched in                  1          33,690         1          33,690
 isotope 3
Switching devices/                   5          18,299         1           3,540
 triggered spark gaps/
 thyratrons
Vibration testing                    1         149,734         0               0
 equipment (specified)
Streak cameras, shutters             2           2,363         0               0
================================================================================
NRL items subtotal                 352     135,369,058       283     108,639,037
================================================================================
Non-NRL items subtotal              49       2,698,089        39       1,297,159
================================================================================
Total                              401    $138,067,147       322    $109,936,196
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.3
                     
                       Licenses for Sensitive End Users in
                                      India

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/              92     $30,803,597        65     $15,550,916
 digital, related
Specially designed                  20         144,942        14         107,467
 pressure measuring
 instruments
Photosensitive components            9         376,079         8         141,079
Lasers/optical equipment             8         167,580         7         165,588
Zirconium/nickel/lithium/            5          11,781         5          11,781
 hafnium/beryllium
Boron metal/compounds/               4          15,353         4          15,353
 mixtures
Electronic devices/                  4          15,610         3           6,910
 components
Measuring/calibrating/               5          87,042         3          66,305
 testing equipment
Switching devices/                   7          22,163         3          12,834
 triggered spark gaps/
 thyratrons
Cathode ray oscilloscopes            3          43,657         3          43,657
 and components
Numerical control                    2       1,681,500         2       1,681,500
 equipment
Photomultiplier tubes                1           3,376         1           3,376
Thermoelectric materials/            2             406         1             203
 devices
Cryogenic equipment/                 2          39,958         1          24,790
 materials
Pipes/valves/fittings/               1         113,640         1         113,640
 heat exchangers
Telecommunication                    2         104,590         1         102,760
 transmission equipment/
 systems
Electron tubes and                   2          86,012         1          46,722
 specially designed
 components
Dimensional inspection               1             768         0               0
 systems or devices
Nuclear reactor/nuclear              4         365,124         0               0
 power plant-related
 equipment
================================================================================
NRL items subtotal                 174      34,083,178       123      18,094,881
================================================================================
Non-NRL items subtotal             143       7,617,868        79       1,681,918
================================================================================
Total                              317     $41,701,046       202     $19,776,799
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.4
                     
                     Licenses for Sensitive End Users in Iran

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/              11      $2,747,810         5        $928,100
 digital, related
Lasers/optical equipment             1         194,682         0               0
Boron metal/compounds/               1          15,210         0               0
 mixtures
Vacuum/controlled                    1          61,120         0               0
 environment furnaces
Cathode ray oscilloscopes            1         120,415         0               0
 and components
================================================================================
NRL items subtotal                  15       3,139,237         5         928,100
================================================================================
Non-NRL items subtotal               6          57,986         0               0
================================================================================
Total                               21      $3,197,223         5        $928,100
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.5
                     
                     Licenses for Sensitive End Users in Iraq

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/              54     $23,187,634        23      $3,205,325
 digital, related
Lasers/optical equipment             3         582,602         2          52,602
Numerical control                    6       5,527,161         1         888,000
 equipment
Measuring/calibrating/               4          18,923         1           7,375
 testing equipment
Electronic devices/                  2          90,772         0               0
 components
Thermoelectric materials/            1           8,856         0               0
 devices
Cathode ray oscilloscopes            1           6,585         0               0
 and components
Telecommunication                    1          52,480         0               0
 transmission equipment/
 systems
================================================================================
NRL items subtotal                  72      29,475,013        27       4,153,302
================================================================================
Non-NRL items subtotal              17         169,663         4          10,066
================================================================================
Total                               89     $29,644,676        31       4,163,368
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.6
                     
                       Licenses for Sensitive End Users in
                                      Israel

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/             618    $234,373,453       518    $168,352,727
 digital, related
Fibrous/filamentary                 73      11,269,921        72      11,269,921
 materials
Cathode ray oscilloscopes           49       1,214,747        41       1,127,033
 and components
Lasers/optical equipment            42       1,401,797        35       1,201,728
Specially designed                  34         570,403        29         507,870
 pressure measuring
 instruments
Electronic devices/                 28         742,986        18         697,892
 components
Measuring/calibrating/              17         194,444        17         194,444
 testing equipment
Switching devices/                  16         218,631         9         118,117
 triggered spark gaps/
 thyratrons
Telecommunication                    6         359,239         6         359,239
 transmission equipment/
 systems
Photosensitive components            5          46,321         5          46,321
Numerical control                    3         126,268         3         126,268
 equipment
Vibration testing                    3         234,088         2         171,088
 equipment (specified)
Streak cameras, shutters             2         243,300         2         243,300
Flatbed microdensitometers           1          37,000         1          37,000
Thermoelectric materials/            2             532         1             352
 devices
Cryogenic equipment/                 2         245,642         1           3,930
 materials
Piping/fittings/valves               2             904         1             896
 made/lined with named
 alloys
Zirconium/nickel/lithium/            6          92,412         1           1,730
 hafnium/beryllium
Inverters/converters/                2          21,228         1          20,500
 frequency changers/
 generators
Cylindrical disks                    1         216,000         1         216,000
Electron tubes and                   1          14,000         1          14,000
 specially designed
 components
Filament winding machines            1         190,000         0               0
Capacitors (specified)               3           9,848         0               0
Nuclear reactor/nuclear              2           7,433         0               0
 power plant-related
 equipment
Sensing elements,                    1           1,410         0               0
 corrosion-resistant
Helium, enriched in                  1           1,225         0               0
 isotope 3
================================================================================
NRL items subtotal                 921     251,833,232       765     184,710,356
================================================================================
Non-NRL items subtotal             154       9,433,674       115       8,662,671
================================================================================
Total                            1,075    $261,266,906       880    $193,373,027
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.7
                     
                       Licenses for Sensitive End Users in
                                     Pakistan

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Numerical control                    1      $1,476,808         1      $1,476,808
 equipment
Computers, electronic/               4         916,906         1         635,690
 digital, related
Cathode ray oscilloscopes            2          34,479         1          14,479
 and components
Measuring/calibrating/               1           8,345         0               0
 testing equipment
================================================================================
NRL items subtotal                   8       2,436,538         3       2,126,977
================================================================================
Non-NRL items subtotal               1           1,854         0               0
================================================================================
Total                                9      $2,438,392         3      $2,126,977
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 



                                    Table IV.8
                     
                       Licenses for Sensitive End Users in
                                   South Africa

                               License                   License
Nuclear Referral List       applicatio                  approval
items                               ns    Dollar value         s    Dollar value
--------------------------  ----------  --------------  --------  --------------
Computers, electronic/              16      $8,060,243        15      $6,420,463
 digital, related
Lasers/optical equipment             7          11,996         5           9,506
Measuring/calibrating/               3          88,955         2          59,349
 testing equipment
Photosensitive components            2           3,550         2           3,550
Presses and specialized              1         266,666         1         266,666
 controls/accessories
Electron tubes and                   1          33,200         1          33,200
 specially designed
 components
Vacuum/controlled                    1         381,320         0               0
 environment furnaces
================================================================================
NRL items subtotal                  31       8,845,930        26       6,792,734
================================================================================
Non-NRL items subtotal               0               0         0               0
================================================================================
Total                               31      $8,845,930        26      $6,792,734
--------------------------------------------------------------------------------
Sources:  Department of Commerce, Department of Energy. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix V:1

Sharon Chamberlain, Assistant Director
Charles T.  Bolton, Evaluator-in-Charge
Todd Appel, Evaluator
Daniel Tikvart, Evaluator
Jai Lee, Computer Specialist
Thomas W.  Gosling, Editor


   EUROPEAN OFFICE
--------------------------------------------------------- Appendix V:2

Paul Aussendorf, Site Senior
Pamela J.  Timmerman, Evaluator


   FAR EAST OFFICE
--------------------------------------------------------- Appendix V:3

David Trimble, Site Senior
Michael Zola, Evaluator