oversight

Nonproliferation: Agencies Could Improve Information Sharing and End-Use Monitoring on Unmanned Aerial Vehicle Exports

Published by the Government Accountability Office on 2012-07-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to the Ranking Member, Subcommittee
             on National Security, Homeland Defense, and
             Foreign Operations, Committee on Oversight
             and Government Reform, House of
             Representatives

July 2012
             NONPROLIFERATION

             Agencies Could
             Improve Information
             Sharing and End-Use
             Monitoring on
             Unmanned Aerial
             Vehicle Exports




GAO-12-536
                                             July 2012

                                             NONPROLIFERATION
                                             Agencies Could Improve Information Sharing and
                                             End-Use Monitoring on Unmanned Aerial Vehicle
                                             Exports
Highlights of GAO-12-536, a report to the
Ranking Member, Subcommittee on National
Security, Homeland Defense, and Foreign
Operations, Committee on Oversight and
Government Reform, House of
Representatives

Why GAO Did This Study                       What GAO Found
The global use of UAVs has increased         Since 2005, the number of countries that acquired an unmanned aerial vehicle
significantly over time, raising concerns    (UAV) system nearly doubled from about 40 to more than 75. In addition,
about their proliferation. MTCR and          countries of proliferation concern developed and fielded increasingly more
Wassenaar are the multilateral regimes       sophisticated systems. Recent trends in new UAV capabilities, including armed
that address UAV proliferation. MTCR         and miniature UAVs, increased the number of military applications for this
seeks to limit the proliferation of          technology. A number of new civilian and commercial applications, such as law
weapons of mass destruction delivery         enforcement and environmental monitoring, are available for UAVs, but these
systems, while Wassenaar seeks to            applications are limited by regulatory restrictions on civilian airspace.
limit the spread of certain conventional
weapons and sensitive technologies
                                             The United States likely faces increasing risks as countries of concern and
with both civilian and military uses.
This report is an unclassified version of
                                             terrorist organizations seek to acquire UAV technology. Foreign countries’ and
a classified report issued in February       terrorists’ acquisition of UAVs could provide them with increased abilities to
2012. GAO was asked to address (1)           gather intelligence on and conduct attacks against U.S. interests. For instance,
global trends in the use of UAV              some foreign countries likely have already used UAVs to gather information on
technology, (2) U.S. national security       U.S. military activities overseas. Alternatively, the U.S. government has
considerations concerning UAV                determined that selected transfers of UAV technology support its national
proliferation, (3) multilateral and          security interests by providing allies with key capabilities and by helping retain a
bilateral tools to control UAV               strong industrial base for UAV production. For instance, the United Kingdom and
proliferation, and (4) coordination of       Italy have used UAVs purchased from the United States to collect data on
U.S. efforts to limit the spread of UAV      Taliban activity in Afghanistan.
technology. To conduct this review,
GAO analyzed intelligence, licensing,        The United States has engaged in multilateral and bilateral diplomacy to address
and end-use monitoring data, and             UAV proliferation concerns. The United States principally engaged the Missile
interviewed U.S. and foreign officials.      Technology Control Regime (MTCR) to address multilateral UAV proliferation
What GAO Recommends                          concerns. Since 2005, the United States proposed certain significant changes to
                                             address how MTCR controls UAVs, but members could not reach a consensus
GAO recommends that State                    for these changes. Also, while the Wassenaar Arrangement (Wassenaar)
improve its export licensing database        controls the export of some key dual-use UAV components, it does not control
to better identify authorized UAV            other dual-use technologies that are commonly used in UAVs. The Department
exports, that relevant agencies              of State (State) has also used diplomatic cables to address the proliferation of
improve mechanisms for sharing               UAV-related technologies bilaterally. State provided to GAO about 70 cables that
information relevant to the export           it sent from January 2005 to September 2011 addressing UAV-related concerns
licensing process, and that State and        to about 20 governments and the MTCR. Over 75 percent of these cables
DOD harmonize their UAV end-use              focused on efforts by a small number of countries of concern to obtain UAV
monitoring approaches. The                   technology.
agencies generally agreed with the
recommendations.                             U.S. agencies coordinate in several ways to control the spread of UAV
                                             technology, but could improve their UAV-related information sharing. For
                                             instance, an interagency group reviews many license applications to export UAV
                                             technology. However, there is not a formal mechanism to ensure that licensing
                                             agencies have relevant and timely intelligence information when making licensing
                                             decisions. Also, State’s licensing database cannot provide aggregate data on
                                             military UAV exports State has authorized, which may impair the U.S.
                                             government’s ability to oversee the release of sensitive UAV technology. The
                                             Department of Defense (DOD) and State each conduct end-use monitoring of
View GAO-12-536. For more information,
contact Thomas Melito at (202) 512-9601 or
                                             some UAV exports, but differences in the agencies’ programs may result in
melitot@gao.gov.                             similar types of items being subject to different levels of oversight.

                                                                                      United States Government Accountability Office
Contents


Letter                                                                                  1
               Background                                                               3
               Trends Show Rapid Growth in Global Acquisition, Development,
                 and Military Application of UAVs                                       9
               UAV Proliferation Presents Risks for the United States, but
                 Selected Transfers Support Its Interests                             17
               The United States Has Used Diplomacy to Address UAV
                 Proliferation Concerns with Limited Results                          20
               U.S. Agencies Coordinate to Control the Spread of UAV
                 Technology, but Could Strengthen Their Approval, Monitoring,
                 and Enforcement Efforts                                              22
               Conclusions                                                            35
               Recommendations for Executive Action                                   36
               Agency Comments and Our Evaluation                                     36

Appendix I     Scope and Methodology                                                  39



Appendix II    List of MTCR and Wassenaar Members                                     45



Appendix III   Israel’s Export Control System Since 2006                              47



Appendix IV    Comments from the Department of Homeland Security                      50



Appendix V     GAO Contact and Staff Acknowledgments                                  52



Tables
               Table 1: Estimates of State and Commerce UAV-Related Licenses,
                        Fiscal Years 2005 through 2010                                27
               Table 2: List of MTCR and Wassenar Members                             45




               Page i                                          GAO-12-536 Nonproliferation
Figures
          Figure 1: Three Major Categories of UAVs                                  4
          Figure 2: Principal UAV Licensing, Transfer, End-Use Monitoring,
                   and Enforcement Agencies                                        8
          Figure 3: Map of Countries That Acquired UAVs by December 2011          10
          Figure 4: Heron TP-Strategic UAV Produced by an Israeli
                   Manufacturer                                                   12
          Figure 5: Northrop Grumman’s X-47B UCAV                                 15




          Page ii                                          GAO-12-536 Nonproliferation
Abbreviations

BIS               Bureau of Industry and Security
CBP               Customs and Border Protection
Commerce          Department of Commerce
CIA               Central Intelligence Agency
DCS               Direct Commercial Sales
DDTC              Department of State Directorate of Defense
                  Trade Controls
DECA              Defense Export Control Agency
DHS               Department of Homeland Security
DOD               Department of Defense
DOJ               Department of Justice
DSCA              Defense Security Cooperation Agency
DSS               Defense Security Service
ECCN              Export Control Classification Number
FAA               Federal Aviation Administration
FBI               Federal Bureau of Investigation
FMS               Foreign Military Sales
ICE               Immigration and Customs Enforcement
MTCR              Missile Technology Control Regime
MTEC              Missile Technology Export Control Group
NASA              National Aeronautics and Space Administration
NASIC             National Air and Space Intelligence Center
NEECN             National Export Enforcement Coordination
                  Network
State             Department of State
UCAV              unmanned combat aerial vehicle
Wassenaar         Wassenaar Arrangement
UAV               unmanned aerial vehicle




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Page iii                                                      GAO-12-536 Nonproliferation
United States Government Accountability Office
Washington, DC 20548




                                   July 30, 2012

                                   The Honorable John Tierney
                                   Ranking Member
                                   Subcommittee on National Security, Homeland Defense, and Foreign
                                   Operations
                                   Committee on Oversight and Government Reform
                                   House of Representatives

                                   Dear Mr. Tierney:

                                   The use of unmanned aerial vehicles (UAVs) has increased significantly
                                   in recent years. 1 UAVs have demonstrated their effectiveness in recent
                                   conflicts, such as the wars in Iraq, Afghanistan, and Libya, where they
                                   have been used for intelligence, surveillance, and reconnaissance
                                   missions, as well as attack functions. UAVs are also increasingly being
                                   used for civilian purposes such as border security, environmental
                                   monitoring, and disaster relief. For example, the United States used
                                   UAVs to help the Japanese government survey the damage to the
                                   Fukushima nuclear power plant resulting from the March 2011
                                   earthquake. The growing sophistication and availability of UAVs poses
                                   risks for U.S. interests. Consequently, the United States has sought to
                                   limit the spread of UAV technology through bilateral diplomacy and by
                                   working with like-minded supplier countries through multilateral regimes
                                   such as the Missile Technology Control Regime (MTCR) and the
                                   Wassenaar Arrangement (Wassenaar). 2 In addition, the United States
                                   and other countries control some UAV exports through national export
                                   control licensing and enforcement efforts.



                                   1
                                    While the term UAV has been in use for some time, the Department of Defense and the
                                   Federal Aviation Administration, among other U.S. and international organizations, now
                                   use the term unmanned aircraft systems, or UAS, when referring to these systems. For
                                   this report, we use the term UAV because it remains the official term used by both U.S.
                                   and multilateral export control bodies.
                                   2
                                    Multilateral export control regimes are voluntary, nonbinding arrangements among like-
                                   minded supplier countries that aim to restrict trade in sensitive technologies to peaceful
                                   purposes. Multilateral export control regimes are referred to as either regimes or
                                   arrangements, and countries invited to participate in them are variously referred to as
                                   members, participants, participating states, or partners. In this report, we use the term
                                   regimes and refer to participating countries as members.




                                   Page 1                                                         GAO-12-536 Nonproliferation
In response to your request, we have updated our 2004 report on cruise
missile and UAV proliferation, focusing solely on UAVs. 3 This report is a
public version of the prior classified report that we provided to you in
February 2012, which addressed since 2005, (1) trends in the
development, acquisition, and application of UAV technology worldwide;
(2) U.S. national security considerations associated with transfers of UAV
technology; (3) the extent to which the United States has engaged in
multilateral and bilateral diplomacy to address UAV proliferation
concerns; and (4) the extent to which the U.S. government has
coordinated its export control efforts to limit the spread of UAV
technology. The Departments of Defense (DOD), State (State), and
Homeland Security (DHS) deemed some of the information in the prior
report as classified, which must be protected from public disclosure, as
did the Federal Bureau of Investigation (FBI) and the Central Intelligence
Agency (CIA). Therefore, this report omits sensitive information about
efforts by countries of concern and terrorists to obtain and use sensitive
UAV technology, as well as details about the U.S. proposals that the
multilateral regimes did not adopt. This report also omits sensitive
information about U.S. uses of bilateral diplomacy to address UAV
proliferation concerns, U.S. efforts to coordinate and use certain sensitive
information as part of the licensing process, and U.S. government efforts
to coordinate the enforcement of export controls on UAVs. Furthermore,
this report omits the full text of two of the three recommendations
contained in the classified report, as well as State’s, DOD’s, and the
Department of Commerce’s (Commerce) written comments, as these
contained sensitive information. This report is part of a larger body of
work involving export controls. 4




3
 GAO, Nonproliferation: Improvements Needed to Better Control Technology Exports for
Cruise Missiles and Unmanned Aerial Vehicles, GAO-04-175 (Washington, D.C.: Jan. 23,
2004). In GAO-04-175, we found that cruise missiles and UAVs posed a growing threat to
U.S. national security interests; multilateral export control regimes and national export
controls were limited in their capacity to address cruise missile and UAV proliferation
concerns’ and the U.S. government had performed little end-use monitoring to verify that
exporters and foreign recipients complied with licensing conditions.
4
 For example, GAO, Persian Gulf: Implementation Gaps Limit the Effectiveness of End-
Use Monitoring and Human Rights Vetting for U.S. Military Equipment, GAO-12-89
(Washington, D.C.: Nov. 17, 2011), and GAO, Export Controls: Agency Actions and
Proposed Reform Initiatives May Address Previously Identified Weaknesses, but
Challenges Remain, GAO-11-135R (Washington, D.C.: Nov. 17, 2010).




Page 2                                                       GAO-12-536 Nonproliferation
             To address these objectives, we obtained fiscal years 2005 through 2010
             export control licensing and end-use monitoring data from Commerce and
             State. We also obtained DOD fiscal years 2005 through 2010 Foreign
             Military Sales (FMS) program and end-use monitoring data. Based on our
             analysis of the data and interviews with agency officials, we determined
             that the data were sufficiently reliable for our use. We reviewed
             Commerce, State, and DOD documents, as well as intelligence and open
             source private sector reports on the proliferation of UAV technology. In
             Washington, D.C., we met with officials from Commerce, State, and DOD
             involved in the licensing and transfer process, and those officials
             knowledgeable about U.S. activities within the two multilateral regimes
             that the United States principally uses to address UAV proliferation
             concerns. We also met with officials from agencies responsible for
             enforcing export control laws and regulations, including Commerce, DHS,
             and the Department of Justice (DOJ), as well as with U.S. government
             analysts knowledgeable about UAVs. In addition, we met with U.S.
             embassy and foreign government officials in three countries—Israel, Italy,
             and the United Kingdom. We selected these three countries based on
             analyses of DOD and State data and open source reporting showing that
             these countries either had extensive experience operating U.S.-made
             UAV systems or were a UAV producer. We also met with leading UAV
             manufacturers and industry associations in the United States, Israel, Italy,
             and the United Kingdom. In addition, we examined applicable laws and
             directives. Appendix I provides a more detailed description of our scope,
             and methodology.

             We conducted this performance audit from October 2010 to July 2012 in
             accordance with generally accepted government auditing standards.
             These standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             Used only sparingly in past military operations, UAVs are now making
Background   national headlines as they are used in ways normally reserved for
             manned aircraft. UAVs come in a variety of sizes and configurations,
             ranging from as small as an insect to as large as a small commercial
             airliner. In our work, we focused on mini, tactical, and strategic UAVs.
             According to available analysis, mini and tactical UAVs constituted the
             vast majority of the UAV systems in operation from 2005 to 2011, while
             strategic UAVs included some of the most versatile UAVs, typically


             Page 3                                              GAO-12-536 Nonproliferation
                                           capable of operating up to 30,000 to 45,000 feet in altitude with a
                                           maximum endurance of more than 20 hours. Figure 1 briefly describes
                                           these three types of UAVs.

Figure 1: Three Major Categories of UAVs




Multilateral Export                        The two principal multilateral regimes that address exports of UAVs are
Control Regimes That                       the MTCR and Wassenaar. MTCR, established in 1987, is a voluntary
Address UAVs                               association of 34 countries that share the goal of limiting the spread of
                                           ballistic and cruise missiles and UAVs capable of delivering weapons of
                                           mass destruction. Wassenaar, established in 1996, is a voluntary
                                           association of 41 countries that share the goal of limiting the spread of
                                           certain conventional weapons and sensitive dual-use items having both
                                           civilian and military applications. 5 Both are consensus-based, requiring
                                           that all members must agree to any proposed changes in regime
                                           documents or activities. In both instances, members agree to restrict
                                           exports of sensitive technologies by placing them on commonly agreed to
                                           lists and incorporating these lists into their national export control laws


                                           5
                                           Appendix II contains a list of the MTCR and Wassenaar members.




                                           Page 4                                                   GAO-12-536 Nonproliferation
and regulations. Members also conduct activities in support of the
regimes, such as sharing information about denied license applications
and conducting outreach to countries that are not members of the
regimes.

Wassenaar has two control lists: a munitions list and a dual-use list. The
MTCR members control a common list of items, which is contained in the
MTCR Annex. The Annex covers complete missile systems, including
rocket systems and UAVs, as well as a broad range of equipment,
software, and technology. 6 The MTCR Annex consists of two categories
of items: Category I and Category II. Under MTCR, complete UAV
systems can be controlled as either a Category I or a Category II system,
depending on their range and payload capacity.

•   Category I UAVs are considered the most sensitive, and include
    strategic UAVs capable of delivering a payload of at least 500
    kilograms (about 1,100 pounds) to a range of at least 300 kilometers
    (approximately 186 miles). MTCR member nations considering the
    export of these UAVs commit to apply a “strong presumption of
    denial” standard regardless of purpose, meaning that such transfers
    should occur only on rare occasions and only in instances that are
    well justified under the MTCR Guidelines.

•   Category II UAVs are considered less sensitive, consisting primarily of
    UAVs that do not meet Category I criteria, but are capable of flying at
    least 300 kilometers. While these items require review through
    national export control systems, these items are not subject to the
    MTCR “strong presumption of denial,” except for exports judged by
    the exporting country to be intended for use in delivering weapons of
    mass destruction.

•   MTCR members have agreed to a “no undercut” policy for all MTCR-
    controlled items, meaning that MTCR members have agreed to
    consult with each other before considering exporting an item on the
    list that has been notified as denied by another member pursuant to
    the MTCR Guidelines.



6
 The Annex is formally known as the Equipment, Software, and Technology Annex. The
MTCR’s documents include the MTCR Guidelines and Annex. The Guidelines define the
purpose of MTCR and provide the overall structure and rules to guide the member nations
and those adhering unilaterally to the Guidelines.




Page 5                                                      GAO-12-536 Nonproliferation
Laws Governing Arms         Several U.S. laws authorize the sale or transfer of export controlled
Exports and Sales of UAVs   technologies from U.S. companies or the U.S. government to foreign
                            countries, or in certain cases foreign entities. The Arms Export Control
                            Act of 1976, as amended, 7 provides the President the authority to control
                            the sale or transfer of defense articles and services. Under the Arms
                            Export Control Act, State’s Directorate of Defense Trade Controls
                            (DDTC) 8 licenses direct commercial sale (DCS) exports of defense
                            articles and services on the U.S. Munitions List, 9 while DOD’s Defense
                            Security Cooperation Agency (DSCA) administers the FMS program
                            under the supervision and general direction of State. 10 In addition, the
                            Arms Export Control Act, as amended, also requires end-use monitoring
                            for the sale or export of defense articles and services, and delegates
                            these responsibilities to the same agencies that administer the program.
                            DDTC administers the Blue Lantern program to conduct end-use
                            monitoring for defense articles exported under DCS, while DSCA
                            administers the Golden Sentry program to monitor the end-use of defense
                            articles transferred through FMS.

                            In addition, the Export Administration Act of 1979, as amended, 11
                            provides the President the authority to control the sale of dual-use
                            technologies on the Commerce Control List, including certain dual-use
                            components. Commerce’s Bureau of Industry and Security (BIS)
                            administers this license review process, with support from the Defense
                            Technology Security Administration and other agencies. 12 BIS also



                            7
                             Arms Export Control Act, as amended, 22 U.S.C. §§ 2751-2799aa-2.
                            8
                             DDTC relies on other agencies, principally DOD’s Defense Technology Security
                            Administration, for technical assistance in conducting license reviews.
                            9
                              The U.S. Munitions List provides a list of the defense articles and services that require a
                            license for export.
                            10
                              While DCS involves negotiations between a U.S. supplier and a foreign buyer, FMS
                            involves negotiations between the U.S. government and a foreign government or
                            organization.
                            11
                              50 U.S.C. App. §§ 2401-2420. The Export Administration Act of 1979, as amended, is
                            not permanent legislation. Since August 21, 2001, the Export Administration Act has been
                            in lapse. However, the President has continued the regulations in effect through Executive
                            Order 13222 of August 17, 2001 (3 C.F.R., 2001 Comp 783 (2002)), which most recently
                            was extended by Presidential Notice on August 12, 2011, under the authority provided by
                            section 202(d) of the National Emergencies Act (50 U.S.C. § 1622(d)).
                            12
                                Within BIS, Export Administration administers the license review process.




                            Page 6                                                           GAO-12-536 Nonproliferation
administers Commerce’s end-use monitoring program for technologies
covered by the Commerce Control List. 13

The U.S. export control enforcement system consists of multiple
agencies. Within DHS, Immigration and Customs Enforcement (ICE)
investigates suspected export control violations involving both U.S.
Munitions List and Commerce Control List items. In addition, DHS’
Customs and Border Protection (CBP) inspects selected exports to
determine whether proper licenses were obtained prior to shipment and
may interdict suspicious items being shipped. Within Commerce, BIS’
Office of Export Enforcement has authority to investigate violations
involving Commerce Control List items. Within DOJ, the FBI can take the
lead in certain export control investigations involving counterintelligence
and counterterrorism. DOJ prosecutes suspected export control
violations. Investigations can result in criminal prosecutions; fines; and
imprisonment or administrative penalties, such as export denial orders
barring a party from exporting any U.S. items for a specific period of time.
Figure 2 shows the principal agencies that have a role in the export
control process. 14




13
 Within BIS, Export Enforcement administers Commerce’s end-use monitoring program.
14
   As we discuss further in this report, there is no formal mechanism to ensure that
licensing agencies have relevant and timely intelligence information when making
licensing decisions. For this reason, the intelligence community is not represented in
figure 2.




Page 7                                                         GAO-12-536 Nonproliferation
Figure 2: Principal UAV Licensing, Transfer, End-Use Monitoring, and Enforcement Agencies




                                        Note: While DSCA does not actually issue licenses for military UAVs and related technology
                                        transferred through FMS, we include them since they manage the U.S. government’s process for
                                        reviewing and making recommendations to State on transfers of such items through FMS. For the
                                        purposes of this report, transfers include defense articles and services authorized for sale through
                                        direct commercial sales, as well as defense articles and services that the U.S. government sells to
                                        foreign governments and international organizations through FMS.


                                        There are also U.S. government agencies that gather and analyze
                                        information on the proliferation of UAV systems and related technologies
                                        and produce UAV-related threat assessments and other UAV-related
                                        information. The Director of National Intelligence serves as the head of
                                        the intelligence community, establishing objectives and priorities for
                                        collection, analysis, production, and dissemination of national intelligence.
                                        Moreover, the Defense Security Service (DSS) provides threat
                                        assessments in support of its mission to oversee the protection of U.S.
                                        classified information and data in the hands of cleared DOD contractors.


                                        Page 8                                                                 GAO-12-536 Nonproliferation
                          The executive branch is currently considering reforms to the U.S. export
                          control system in an Export Control Reform Initiative, including the
                          creation of a single control list and a single information technology
                          system. This initiative could affect export control licensing and
                          enforcement efforts involving UAVs and related technologies and
                          components.


                          There has been rapid growth globally in UAV acquisition, development,
Trends Show Rapid         and military applications. From 2005 to 2011, nations, including countries
Growth in Global          of proliferation concern and key allies, sought to improve their intelligence
                          gathering and military aviation capabilities by developing and fielding their
Acquisition,              own UAV systems. Furthermore, militaries across the globe sought to
Development, and          expand the uses for UAVs, particularly in the area of armed strike
Military Application      missions. UAVs are also increasingly used in a number of civil and
                          commercial applications, such as law enforcement, but national and
of UAVs                   international regulations place restrictions on most of these applications. 15


Countries with UAVs       Our analysis of open source information shows a significant increase in
Nearly Doubled in Seven   the number of countries that acquired a UAV system since 2005. In 2004,
Years                     we reported that approximately 41 countries had acquired a UAV. 16 Our
                          review of current U.S. export licensing data and open source materials
                          found that this number grew over the intervening period to at least 76
                          countries. Figure 3 provides a global picture of the countries that have
                          acquired UAVs.




                          15
                            For our report, we looked at the acquisition of UAVs in terms of which countries have
                          obtained complete UAV systems and who they had acquired those systems from. For
                          development, we looked at which countries were building UAV systems and what they
                          were building. The applications of UAVs addressed which tasks UAVs were performing
                          and things that limited the tasks they were allowed to perform.
                          16
                           GAO-04-175.




                          Page 9                                                        GAO-12-536 Nonproliferation
Figure 3: Map of Countries That Acquired UAVs by December 2011




                                      Note: Shaded countries have acquired UAV systems.




                                      Page 10                                             GAO-12-536 Nonproliferation
a
 Although the United States does not have diplomatic relations with Taiwan, we have listed it as a
separate country because whenever the laws of the United States refer or relate to foreign countries,
nations, states, governments, or similar entities, such terms shall include and shall apply to Taiwan.
For the purposes of this report, Taiwan is included as a country.


According to available analysis, the majority of foreign UAVs that
countries have acquired fall within the tactical category. Tactical UAVs
primarily conduct intelligence, surveillance, and reconnaissance missions
and typically have a limited operational range of at most 300 kilometers.
However, some more advanced varieties are capable of performing
intelligence collection, targeting, or attack missions. Mini UAVs were also
frequently acquired across the globe during this period.

Several countries acquired UAVs from the United States, which increased
its export of this technology from fiscal year 2005 to December 2011. U.S.
export licensing data show an upward trend in approved military and dual-
use UAV export licenses since 2005. Approved dual-use export licenses
totaled almost $4 million from fiscal year 2005 to fiscal year 2010. For
military DCS licenses over this same period, the total value of approved
UAV licenses was at least $240 million. 17 In addition, the United States
sold $144 million worth of UAV technology to other governments through
the FMS program from fiscal years 2005 to 2010. The United States
exported a variety of UAV systems, ranging from mini UAVs, such as the
Raven, to strategic systems, such as the Predator and Global Hawk. To
date, the United States has exported a limited number of Category I UAV
systems, sending Reapers and Predators to Italy, Reapers to the United
Kingdom, and Global Hawk airframes to Germany and NATO as part of
joint UAV development programs. Officials from two U.S. defense
manufacturers that produce strategic UAVs both stated that there is
additional demand internationally for Category I UAVs but that they are
unable to meet this demand due to export control restrictions placed on
these systems by the U.S. government.

Many countries acquired their UAVs from Israel, one of the predominant
global exporters of this technology, according to available analysis.
Several key allies, such as Germany, France, and the United Kingdom,
leased or purchased UAVs from Israel for use in Afghanistan. Countries
such as India, Russia, and Georgia also acquired UAVs from Israel.



17
  We were unable to calculate a more precise figure for the military DCS licenses because
of limitations in State’s licensing database, which are discussed later in this report.




Page 11                                                               GAO-12-536 Nonproliferation
According to Israeli UAV manufacturers, exports are critical to their UAV
programs as they account for the majority of revenue from the production
of a system. Israel exports both mini and tactical UAVs. In addition, Israel
has exported the Heron I, which is a strategic UAV. Company officials at
an Israeli manufacturer told us they are currently marketing the Heron TP,
a strategic UAV that would fall under Category I of the MTCR (see fig. 4).
Because Israel has made several changes to its export control regime
since 2006 and is one of the three countries that we visited, we provide
further details about the changes that Israel has made to its export control
regime since 2006 in appendix III.

Figure 4: Heron TP-Strategic UAV Produced by an Israeli Manufacturer




Page 12                                                GAO-12-536 Nonproliferation
                            Countries acquired UAVs from a limited number of other exporters,
                            including Austria, South Africa, and Italy, who used foreign sales to
                            support their developing UAV industries. An Austrian company produces
                            a tactical rotary UAV that has been exported to a range of countries such
                            as the United Arab Emirates and a South African company produces a
                            range of systems for export including both mini and tactical UAVs. In
                            addition, an Italian manufacturer has produced and exported the Falco
                            UAV system to Pakistan.


Countries of Concern and    Both countries of concern and U.S. allies sought to develop and field their
U.S. Allies Developed and   own UAVs from 2005 to the present. We were informed that the number
Fielded UAVs                of countries developing UAVs has increased dramatically from 2005 to
                            the present. Currently, there are over 50 countries developing more than
                            900 different UAV systems. This growth is attributed to countries seeing
                            the success of the United States with UAVs in Iraq and Afghanistan and
                            deciding to invest resources into UAV development to compete
                            economically and militarily in this emerging area. We were also told that
                            these programs benefited significantly from the availability of commercial
                            UAV technology. Countries such as China and Iran made advances in
                            UAV technology and successfully fielded a number of systems. China has
                            pursued UAV development to obtain capabilities equal to current Western
                            systems. Like many countries, China is developing mini and tactical UAV
                            systems, but is also one of a small number of countries developing larger
                            and more advanced systems, such as high-speed UAVs that are specially
                            designed for combat. 18 Iran has developed and fielded tactical UAVs that
                            are less sophisticated than Western designs, but still can perform
                            missions, such as intelligence, surveillance, and reconnaissance and
                            one-way strike missions.

                            Throughout this period, the United States and Israel were the world
                            leaders in UAV development. Both countries developed and successfully
                            fielded a wide range of mini and tactical UAVs and also produced MTCR
                            Category I systems. Israel and the United States invested in the
                            development of new varieties of systems, such as rotary-wing UAVs,
                            unmanned cargo aircraft, and advanced handheld micro UAVs.




                            18
                             These vehicles are commonly referred to as unmanned combat aerial vehicles.




                            Page 13                                                   GAO-12-536 Nonproliferation
                              Many other nations have initiated their own UAV development programs.
                              Countries such as South Africa, Singapore, Turkey, and nations in
                              Western Europe, each developed UAVs alone or in cooperation with
                              others. We were informed that many countries chose tactical UAVs for
                              their development program. Tactical UAVs were chosen because they
                              can easily incorporate available dual-use technology. Countries such as
                              Italy, Germany, and South Africa have fielded and subsequently exported
                              their UAV systems. In the last few years, countries such as Turkey,
                              Russia, South Africa, and European consortiums established plans to
                              develop their own strategic UAVs. According to available analysis,
                              interest in armed UAVs has increased and development of these systems
                              is expanding. However, in the near term, it is likely that only established
                              UAV developers will be able to produce these systems, given the
                              technical expertise required to successfully integrate weapons onto a
                              UAV.


UAV Military Applications     We were told that the variety of applications for UAVs and U.S. military
Increased, but Civilian and   use of them has grown since 2005, although the majority of UAVs have
Commercial Applications       been used for military intelligence, surveillance, and reconnaissance
                              missions. While U.S. UAVs primarily perform intelligence, surveillance,
Remain Limited                and reconnaissance missions, the United States has also armed many of
                              its strategic UAVs, such as the Predator and the Reaper, and is in the
                              process of arming tactical UAVs, such as the Shadow. DOD reports that
                              the U.S. military has increased its use of UAVs significantly, growing from
                              just over 10,000 UAV flight hours in 2005 to more than 550,000 in 2010.
                              In addition, the United States transferred armed Reapers to the United
                              Kingdom in 2006 for use as part of NATO efforts in Afghanistan. Other
                              countries are also seeking to expand the range of missions for their UAVs
                              by pursuing systems with armed capabilities, according to available
                              analysis.

                              Militaries now also seek new ways to use this technology. For example,
                              some military units use miniature handheld rotary UAVs, according to
                              available analysis. The United States and other nations are researching
                              specially designed high-speed unmanned combat aerial vehicles (UCAV)
                              that can include stealth technology that will allow them to evade radar
                              detection. The proposed design for the U.S. Navy UCAV currently in
                              development is provided in figure 5. Additionally, the U.S. military recently
                              began evaluating unmanned helicopter systems for use as cargo
                              transport vehicles to free up pilots needed for critical combat missions.




                              Page 14                                              GAO-12-536 Nonproliferation
Figure 5: Northrop Grumman’s X-47B UCAV




UAV industry groups, manufacturers, and market analysts stated that civil
and commercial UAV applications continue to grow, even though current
national and international airspace regulations place restrictions on most
of these activities. In 2008, we reported that there were potential civil
uses for UAVs, such as law enforcement and disaster monitoring, as well
as commercial applications, such as real estate photography and pipeline
surveying. 19 Since then, civilian government entities—such as CBP, the
National Aeronautics and Space Administration (NASA), the National
Oceanic and Atmospheric Administration, and local law enforcement
agencies—have acquired and used UAVs. NASA, for instance, used the
Global Hawk system to track climate patterns in the arctic. Countries such


19
  GAO, Unmanned Aircraft Systems: Federal Actions Needed to Ensure Safety and
Expand Their Potential Uses Within the National Airspace System, GAO-08-511
(Washington, D.C.: May 15, 2008).




Page 15                                                  GAO-12-536 Nonproliferation
as Australia, Brazil, and Japan used UAVs for purposes such as law
enforcement, border protection, crop dusting, and environmental
monitoring. These uses, however, are restricted by current national and
international airspace regulations. In the United States, the Federal
Aviation Administration (FAA) requires that a UAV operator obtain either a
Special Airworthiness Certification or a Certificate of Authorization to fly a
UAV. 20 From 2005 to 2011, FAA issued 88 Special Airworthiness
Certificates and as of March 2011 had 264 active Certificates of
Authorization. Other countries’ restrictions can be even more limiting,
according to FAA officials. Italian defense officials we spoke with stated
that their regulations require a certification for each UAV and allow flights
only in a specially designated off-shore corridor. In Israel, the military
controls the country’s airspace and does not permit the use of nonmilitary
UAVs, according to U.S. embassy and Israeli officials.

Governments recognize the interest in UAV civilian and commercial
applications and are addressing this issue. In the United States, FAA is
developing regulations to permit greater use of small UAVs inside some
U.S. airspace and plans to draft and publish these regulations by 2013.
Other countries also have taken steps to address this issue. For instance,
officials from the United Kingdom’s Civil Aviation Authority stated that
they had established special airspace corridors for UAVs, which allow for
testing and system development. Also, in October of 2011, Italian UAV
companies announced that they had performed joint test flights of their
systems within civilian airspace for the first time. The International Civil
Aviation Organization, an organization that governs international airspace
and assists with the establishment of common national airspace
regulations, has a task force working to address obstacles to integrating
UAVs in national and international airspace. Organizations such as the
International Civil Aviation Organization and FAA have identified several
issues, including establishing (1) signal frequencies and bandwidths for
UAVs to use without disrupting other transmissions; (2) standards for
“sense and avoid” technology to help UAVs avoid mid-air collisions; and
(3) airworthiness certification standards that establish the required
specifications for UAVs to be allowed to fly. Once these issues are



20
  A Special Airworthiness Certification is issued to a private entity to allow it to fly their
UAV for research, training, or testing purposes. A Certificate of Authorization is provided
to a federal, state, or local government entity to allow it to fly a UAV under specific
conditions as part of its duties.




Page 16                                                           GAO-12-536 Nonproliferation
                          addressed, UAV market analysts estimate that the civil and commercial
                          markets for these systems have a strong potential for growth.


                          The United States likely faces increasing risks as additional countries of
UAV Proliferation         concern and terrorist organizations acquire UAV technology. UAVs can
Presents Risks for the    provide countries and terrorists organizations with increased abilities to
                          gather intelligence on and conduct attacks against U.S. interests.
United States, but        Alternatively, selected transfers of U.S. UAV technology support U.S.
Selected Transfers        objectives by increasing allies’ capabilities and by strengthening the
Support Its Interests     industrial base for UAV production in the United States.


Foreign Countries’ UAV    Available analysis has determined that foreign countries’ acquisition of
Acquisition Puts U.S.     UAVs can pose a threat because it puts U.S. military assets at increased
Military Assets at Risk   risk of intelligence collection and attack. We were told that the significant
                          growth in the number of countries that have acquired UAVs, including key
                          countries of concern, has increased the threat to the United States.
                          Because some types of UAVs are relatively inexpensive and have short
                          development cycles, they offer even less wealthy countries a cost-
                          effective way of obtaining new or improved military capabilities that can
                          pose risks to the United States and its allies.

                          We were informed that currently, the potential threat to the United States
                          primarily involves tactical UAVs, rather than more sophisticated, strategic
                          systems. However, according to available analysis, countries of concern
                          are pursuing more advanced UAVs through acquisitions from foreign
                          suppliers and indigenous development. Such UAVs would be capable of
                          flying higher, longer, and further and would be capable of a wider range of
                          missions.

                          According to a publicly released DSS report, many countries of concern
                          seek to illegally obtain U.S. UAV technology as part of their strategy to
                          advance their UAV capabilities. DSS reported in 2009 that foreign
                          targeting of U.S. UAV technology through both overt and covert collection
                          efforts had increased dramatically in recent years. 21 According to DSS,
                          the United States’ acknowledged status as a global leader in UAV
                          development makes the U.S. defense industry a primary focus of foreign



                          21
                           See Defense Security Service, Targeting U.S. Technologies (2009).




                          Page 17                                                   GAO-12-536 Nonproliferation
                              collection attempts. The targeted technologies included engines, optics
                              sensors, communications gear, and guidance and navigation systems.

                              We were informed that by acquiring UAVs, countries can enhance their
                              capability to gather intelligence, surveillance, and reconnaissance
                              information on U.S. forces and other assets. UAVs can allow countries to
                              collect potentially harmful data on the location, strength, and movement of
                              U.S. troops that can be used to more effectively plan or conduct attacks
                              against U.S. interests. Available analysis also suggests that the use of
                              UAVs by foreign parties to gather information on U.S. military activities
                              has already taken place. We were informed that as more countries
                              acquire UAVs, such intelligence, surveillance, and reconnaissance
                              collection efforts are likely to increase.

                              Hostile countries could also use UAVs to attack U.S. interests. While only
                              a limited number of countries have fielded lethal or weaponized UAVs,
                              this threat is anticipated to grow, given the number of countries pursuing
                              the acquisition or development of such systems, including countries of
                              concern. 22 According to others’ analysis, as the number of countries with
                              such capabilities increases, it will likely alter the nature of future conflicts
                              because countries will be able to field a larger number of strike assets
                              without risking their manned aircraft.


Terrorist Organizations       Available analysis has also shown that terrorist organizations’ acquisition
Could Use UAVs to Harm        of UAVs to harm U.S. interests poses a risk for the United States. Certain
U.S. Interests, but Factors   terrorist organizations have acquired or are developing some form of UAV
                              technology. For the most part, these organizations are currently limited to
May Limit the Near-Term       using smaller, more rudimentary UAVs, such as radio-controlled aircraft
Risk                          that are available worldwide from hobby shops or through the Internet.
                              Hezbollah is one terrorist organization that has acquired and used UAV
                              technology to date.

                              Although no terrorist organization has successfully carried out an attack
                              with a UAV to date, available analysis has found that there are likely
                              some terrorist organizations interested in using UAVs to deliver both
                              conventional and unconventional weapons. For example, in September


                              22
                                Lethal UAVs are designed to conduct one-way attacks with the vehicle being destroyed
                              upon detonation. Weaponized UAVs are two-way attack vehicles that fly to a target, fire
                              their munitions, and then return.




                              Page 18                                                     GAO-12-536 Nonproliferation
                              2011, the FBI arrested an individual in the United States on charges that
                              he planned to crash radio-controlled unmanned airplanes loaded with
                              explosives into the U.S. Capitol and the Pentagon.

                              Available analysis has noted that there are likely advantages to using
                              UAVs in terrorist attacks, but also factors that may limit the near-term risk.
                              For instance, in certain situations, small UAVs could potentially be more
                              precise in conducting terrorist attacks than using other items, such as
                              mortars or rockets. The impact of such attacks might be lessened though,
                              given the inability of small UAVs to carry large explosives. However, if
                              terrorists were able to equip UAVs with even a small quantity of chemical
                              or biological weapons an attack could potentially produce lethal results.
                              Certain challenges were cited in acquiring the technology and expertise
                              necessary to field a UAV sophisticated enough to carry out more
                              destructive attacks with conventional weapons. Larger, more
                              sophisticated systems would potentially also be harder to operate without
                              detection.


Transfers of U.S. UAV         Although UAV proliferation poses risks, the U.S. government has
Technology Increase Allies’   determined that selected transfers of UAV technology can further national
Capabilities and              security objectives. The transfer of U.S. UAV systems to allies provides
                              these countries with increased capabilities to contribute to U.S. efforts
Strengthen the Industrial     globally. It also helps ensure that allies’ military equipment is
Base for UAV Production       interoperable with that of U.S. forces. Allies have used UAVs acquired
                              from the United States to support a variety of U.S. objectives. For
                              instance, coalition partners have successfully deployed U.S. UAVs to
                              assist in the wars in Afghanistan and Iraq. The U.S. Air Force reported
                              that Italy effectively used Predators purchased from the United States to
                              locate roadside bombs and weapons caches in Iraq, supporting coalition
                              efforts to stabilize the country in advance of national elections. Italy and
                              the United Kingdom also successfully deployed U.S. UAVs in Afghanistan
                              to collect intelligence, surveillance, and reconnaissance data on Taliban
                              activity. State officials said that allowing such sales improved Italy’s and
                              the United Kingdom’s abilities to function with the United States in an
                              interoperable manner and provided U.S. and NATO commanders with
                              additional assets. Allies also used UAVs purchased from the United
                              States in support of such U.S. security objectives as counternarcotics and
                              counterterrorism operations.

                              Additionally, DOD has noted the importance of allowing selected transfers
                              of UAV technology in order to strengthen the U.S. industrial base for UAV
                              production. According to some U.S. government officials, the ability to sell


                              Page 19                                              GAO-12-536 Nonproliferation
                           American UAVs to foreign purchasers helps defray the U.S. government’s
                           acquisition costs. U.S. government officials also noted that opening larger
                           potential markets to American UAV producers provides additional
                           incentives for producers to invest resources in the research and
                           development of UAV systems, and helps the United States retain a
                           technological lead over foreign UAV producers. According to private
                           sector representatives, UAVs are one of the most important growth
                           sectors in the defense industry and provide significant opportunities for
                           economic benefits if U.S. companies can remain competitive in the global
                           UAV market.


                           The United States has used multilateral and bilateral diplomacy to
The United States Has      address UAV technology advances and proliferation concerns. For
Used Diplomacy to          instance, to address advances in UAV technology, the United States
                           proposed several changes to the MTCR; however, MTCR members
Address UAV                agreed to only one change. Moreover, nonmembers continue to acquire,
Proliferation              develop, and export UAV technology. In addition to multilateral diplomacy,
Concerns with              the United States used bilateral diplomacy in the form of demarches to
                           foreign governments to address specific UAV proliferation concerns with
Limited Results            countries. 23


The United States Made     The United States proposed changes to address how the MTCR applies
Proposals to Address the   to UAVs, but MTCR members only reached a consensus to accept one of
Proliferation of UAVs      the changes. The United States principally focused these efforts through
                           the MTCR because it addresses the potential use of UAVs to deliver
through the MTCR but       weapons of mass destruction, according to State. According to
Members Did Not Agree to   documents provided by State and State officials, the United States
Most of the Changes        proposed six UAV-related changes to the MTCR Annex and members
                           accepted one.

                           The five U.S.-sponsored UAV-related proposals that were not adopted
                           were closely related. They were significant since they would have
                           resulted in moving some UAVs currently categorized under MTCR
                           Category I to Category II, according to State documents and State and
                           DOD officials. However, MTCR members could not achieve a consensus
                           to adopt the proposals. As we reported in 2004, both MTCR and



                           23
                            A demarche is a formal diplomatic protest or representation.




                           Page 20                                                         GAO-12-536 Nonproliferation
                            Wassenaar use a consensus process that makes decision making
                            difficult. MTCR last discussed these U.S. proposals in 2008 and removed
                            them from its agenda the following year, pursuant to MTCR rules.

                            MTCR members have adopted a total of 22 UAV-related technical
                            changes during the 2005 to 2011 period, according to State. For instance,
                            MTCR members adopted controls on turboprop systems used in
                            Category I UAVs and inertial navigation systems in Category II UAVs,
                            according to State officials. However, according to available analysis, only
                            7 percent of UAV systems are subject to MTCR’s strictest controls.


The United States Made      The United States proposed three major changes to the Wassenaar
Proposals to Address the    control list, which members adopted. The first, adopted in 2005, added to
Proliferation of UAV-       the control list equipment and components specially designed to convert
                            manned aircraft to UAVs, as well as equipment specially designed to
Related Dual-Use            control UAVs and guidance and control systems for integration into UAVs,
Technologies, but           among other things. The second, adopted in 2007, added to the control
Wassenaar Does Not          list, engines designed or modified to power a UAV above 50,000 feet. The
Control Some Key            third, adopted in 2008, refined the control policy on navigation, altitude,
Technologies                and guidance and control systems for UAVs.

                            While Wassenaar applies to the export of some military and dual-use
                            systems used on UAVs, it does not apply to other dual-use enabling
                            technologies, according to available analysis. Some of these dual-use
                            technologies are critical to the development of UAV programs in certain
                            countries of concern; however, they are difficult to control because they
                            have other commercial applications.


Some Countries of UAV       Regime members agree to provide greater scrutiny to trade in
Proliferation Concern Are   technologies identified as sensitive by the regimes through their national
Not MTCR or Wassenaar       laws and regulations. Regime members also share license application
                            denial and other information. Our most recent work shows that some
Members                     countries that produce and export UAVs do not belong to MTCR or
                            Wassenaar. This fact raises concerns about the potential for
                            nonmembers to undermine the regimes’ ability to limit UAV proliferation.




                            Page 21                                             GAO-12-536 Nonproliferation
The United States Has Also   In addition to employing multilateral diplomacy to address UAV
Used Bilateral Demarches     proliferation concerns, the United States employed bilateral diplomacy,
to Address UAV               chiefly in the form of demarches, to address specific concerns with
                             foreign governments. State provided to us approximately 70 cables
Proliferation Concerns       containing UAV-related demarches issued to 20 foreign governments and
                             a multilateral regime during the period from January 2005 to September
                             2011. Over 75 percent of the cables provided responded to efforts by a
                             small number of countries of concern to obtain controlled and
                             uncontrolled technologies for use in their UAV programs. 24 While the
                             regimes do not control the proliferation of all enabling technologies used
                             by countries of concern to develop UAVs, the United States has issued
                             demarches to foreign governments even for exports of certain
                             uncontrolled technologies when these were clearly to be used for a
                             military purpose. In addition, State cables show that several countries
                             took actions in response to U.S. demarches.


                             U.S. agencies coordinate in a variety of ways to control the spread of
U.S. Agencies                UAV technology, but could strengthen their processes for approving,
Coordinate to Control        monitoring, and enforcing export control requirements on UAVs. First,
                             U.S. agencies have established procedures for coordinating the review
the Spread of UAV            and approval of UAV transfers, but limitations in information sharing
Technology, but Could        hamper these efforts. Second, DOD, State, and Commerce each conduct
Strengthen Their             end-use monitoring of some UAV technology, but differences in the
                             agencies’ programs may result in similar items being subject to different
Approval, Monitoring,        levels of oversight. Third, U.S. agencies have coordinated UAV-related
and Enforcement              prosecutions and other enforcement actions, but the nature of UAV
                             technology and general issues with export control investigations present
Efforts                      enforcement challenges.




                             24
                               To conduct our analysis of the extent to which the United States used bilateral
                             diplomacy to address UAV proliferation concerns, State provided to us copies of UAV-
                             related demarches. We did not conduct an independent assessment to determine whether
                             our sample contained all the UAV-related demarches that State presented to foreign
                             governments from January 2005 to September 2011. Appendix I provides a broad
                             discussion of how we determined which demarches were UAV-related.




                             Page 22                                                  GAO-12-536 Nonproliferation
Agencies Use an              Various U.S. government agencies, including Commerce, State, and
Interagency Process to       DOD, play a role in the process to review and approve transfers of U.S.
Review and Approve UAV       UAV technology to foreign purchasers. These agencies’ decisions are
                             guided by regulatory controls that have been established to govern the
Transfers, but Limitations   transfer of both military and dual-use UAV technology. Controls on
in Information Sharing       military UAV systems and related technology are outlined in the U.S.
Hamper This Process          Munitions List, while controls on dual-use UAV systems and related
                             technology are listed in the Commerce Control List. The Commerce
                             Control List contains three Export Control Classification Numbers
                             (ECCNs) exclusively dealing with UAV systems and related items: 9A012,
                             9A120, and 9B010. 25 Additionally, we identified at least 29 other ECCNs
                             that include controls on components or materials that can be used in
                             UAVs. Unlike the Commerce Control List, the U.S. Munitions List does
                             not include sections that outline controls for UAVs specifically. 26 Rather,
                             controls for military UAV technology fall under several more general U.S.
                             Munitions List categories. For instance, applicable controls for complete
                             UAV systems are contained in Category VIII of the U.S. Munitions List,
                             which deals with aircraft and associated equipment more broadly.
                             According to State and Commerce officials, U.S. controls on UAVs are
                             primarily based upon the MTCR and Wassenaar control lists. In addition,
                             U.S. law establishes unilateral controls that limit the transfer of various
                             items, including UAV technology, to particular countries. For instance,
                             State noted that the U.S. trade embargos on countries such as Iran, North
                             Korea, and Syria cover UAV technology, along with a wide array of other
                             items. Additionally, the U.S. government has enacted laws that suspend
                             the approval of any transfers of items on the U.S. Munitions List, including
                             military UAV technology, to China.

                             While State and Commerce are responsible for reviewing and approving
                             export licenses for military and dual-use UAV technology respectively, the
                             U.S. government has established several mechanisms to coordinate




                             25
                                The Commerce Control List is divided into 10 broad categories (categories 0 through 9),
                             with each category containing ECCNs that describe the specific controls on a particular
                             item or type of item.
                             26
                               The U.S. Munitions List is divided into 21 broad categories, with each category further
                             divided into subcategories.




                             Page 23                                                        GAO-12-536 Nonproliferation
these decisions with other relevant agencies. 27 For instance, State and
Commerce, as the lead licensing agencies, “staff” out license applications
to other relevant agencies, including DOD’s Defense Technology Security
Administration, for their review. State and Commerce officials noted that it
is particularly important to provide licenses to DOD for review since DOD
officials often have the technical expertise regarding particular items.
Additionally, many UAV-related license applications are reviewed by the
Missile Technology Export Control Group (MTEC). The MTEC is an
interagency body that is chaired by State’s Bureau of International
Security and Nonproliferation. It includes representatives from State’s
DDTC, DOD, Commerce, NASA, and the Department of Energy. During
the weekly MTEC meetings, participants can make recommendations to
approve or deny licenses or propose conditions to be placed on these
licenses. According to State, the MTEC assesses whether license
applications are consistent with U.S. laws and regulations,
nonproliferation policy, and international commitments. For instance, in
one case, the MTEC and the Missile Annex Review Committee 28 worked
with a U.S. UAV producer to determine what modifications the company
needed to make to one of its existing UAV systems to ensure that it was
not inherently capable of delivering at least a 500 kilogram payload to a
range of at least 300 kilometers. The resulting design ensured that the
UAV was classified as an MTCR Category II system and thus not subject
to the “strong presumption of denial,” if the company sought to export the
system.

State and DOD also coordinate decisions regarding the transfer of military
UAV technology through the FMS program. For instance, DOD
procedures in its Security Assistance Management Manual specify that
DSCA or State may initiate coordination to approve or disapprove a
transfer within 5 days of receiving the information copy of the Letter of
Request, which is a formal request from a country to purchase an item


27
  The majority of UAV-related dual-use and military items exported commercially require
an export license from Commerce and State, respectively. Approval to transfer military
UAV items through the FMS program is granted by the U.S. government through a Letter
of Offer and Acceptance. DOD’s DSCA manages this process, but State has final
authority regarding the approval of FMS transfers.
28
  The Missile Annex Review Committee is an interagency working group led by State’s
Bureau of International Security and Nonproliferation. It is tasked with addressing
technical issues related to the MTCR Annex. For instance, it reviews proposals for
amending the Annex. At the request of groups such as the MTEC, it can also make
determinations as to whether particular items are controlled by MTCR.




Page 24                                                     GAO-12-536 Nonproliferation
                                  through FMS. DSCA consults with State on these requests in order to
                                  determine if there are any immediate objections to the proposed sale
                                  within the U.S. government. Further, State must approve any arms
                                  transfer through FMS.

Limitations in License Database   The U.S. government has authorized the export of a range of UAV
                                  technology, but database limitations impair its ability to oversee the
                                  release of such technology. The U.S. government approved the export or
                                  transfer of a range of complete military and dual-use UAV systems, as
                                  well as key UAV components, from fiscal years 2005 through 2010, but it
                                  has no comprehensive view of the volume of UAV technology it
                                  authorized for export. Specifically, State’s licensing database was not
                                  designed to produce complete data on the number, types, and value of
                                  UAV technology that State has licensed for export. Since State’s
                                  database organizes items by U.S. Munitions List category and
                                  subcategory, and the list has no dedicated category or subcategory for
                                  UAV technology, State lacks an effective means of querying the database
                                  to identify UAV-related licenses. In July 2009, State issued a request that
                                  exporters list in the “purpose” field of their export license application if an
                                  item was a “UAV-related license,” covered under certain subcategories
                                  within Category VIII of the U.S. Munitions List. State issued this request to
                                  assist it in routing license applications to the appropriate internal unit for
                                  review, rather than to facilitate monitoring of the volume of UAV
                                  technology authorized for export, according to State officials. 29 Although
                                  State has issued the request to exporters, it does not have procedures to
                                  ensure that exporters comply with this request and the request does not
                                  apply to UAV-related licenses involving items not covered by Category
                                  VIII. In announcing the request, State noted its intention to automate this
                                  process, but had not done so as of February 2012.

                                  In contrast, Commerce’s database does allow for identification of UAV-
                                  related items falling under the Commerce Control List’s three UAV-
                                  specific ECCNs. However, it has limitations in determining the extent to
                                  which certain UAV components have been authorized for export. The
                                  Commerce Control List contains at least 29 other ECCNs that control
                                  items that are used in UAVs, but can also be used for other purposes. For


                                  29
                                    According to State officials, Category VIII licenses are automatically assigned to DDTC’s
                                  Aircraft Division; however, the DDTC’s Space and Missile Technology Division is
                                  responsible for reviewing UAV-related licenses. Thus, the new procedure was designed to
                                  ensure UAV licenses were routed correctly.




                                  Page 25                                                       GAO-12-536 Nonproliferation
items controlled under these 29 ECCNs, Commerce’s database does not
provide a means for easily determining which items authorized for export
are to be used in UAVs and which are to be used for other purposes,
such as in manned aircraft. DOD’s system for recording FMS cases is
better able to provide a complete picture of UAV technology that has
been transferred overseas via FMS.

These limitations in the U.S. government’s licensing data impair the ability
of U.S. agencies and Congress to oversee the release of sensitive UAV
technology. As a result, U.S. agencies may face additional challenges in
working to effectively counter UAV proliferation. For instance, U.S.
officials may lack complete information on relevant, past licensing
decisions, when determining whether or not to grant an export license for
a particular UAV item. Additionally, these data issues reduce U.S.
agencies’ ability to conduct analysis of denied UAV-related license
applications to determine if there are particular trends in questionable
parties’ attempts to acquire UAV technology, according to U.S.
government officials.

Despite these limitations, we analyzed State and Commerce licensing
data, as well as FMS data, to estimate the extent to which the U.S.
government authorized the export of UAV technology in fiscal years 2005
through 2010. 30 In total, the U.S. government approved FMS transfers of
complete UAV systems in 15 cases over the period. 31 Additionally, we
identified 1,278 UAV-related licenses that State processed over the
period. Of these, State approved 90 percent, denied 3 percent, and
returned to the applicant without action 7 percent. 32 We could not


30
   For Commerce’s licensing data, we reported only those licenses for commodities
controlled under the three UAV-specific ECCNs: 9A012, 9A120, and 9B010. Although we
identified another 29 ECCNs that control commodities that could be used in UAVs, we did
not report on licenses involving these commodities because they are not exclusively used
in UAVs. For State’s licensing data, State provided us all licenses that had gone before
the MTEC over the period from fiscal years 2005 through 2010. While the majority of UAV
licenses go before the MTEC, certain UAV-related licenses may not be captured within the
data State provided. See appendix I for additional information about the limitations of the
data and the steps we took to refine the data.
31
  In several of these cases, countries also purchased various components, parts, and
accessories in addition to the systems themselves.
32
  If a license applicant fails to provide the necessary information for State to make a
determination whether to approve or deny the license, State may return the application
without action to the applicant.




Page 26                                                       GAO-12-536 Nonproliferation
                             accurately determine the number of approved licenses that were for
                             complete UAV systems, given limitations in State’s database, but the data
                             indicate that State authorized the export of several complete UAV
                             systems including the Desert Hawk, the ScanEagle, and the Raven. From
                             fiscal years 2005 through 2010, we identified 134 licenses to export dual-
                             use UAV technology that Commerce processed. It approved 74 percent
                             of these applications, denied 2 percent and returned without action
                             24 percent. Of the 99 licenses that Commerce approved, we identified at
                             least 55 that appeared to involve complete dual-use UAV systems based
                             upon the descriptions in Commerce’s data. In addition to complete UAV
                             systems, the U.S. government authorized the export of an array of UAV
                             components and subsystems. Table 1 shows a breakdown of the
                             estimated number of UAV-related licenses for fiscal years 2005 through
                             2010.

                             Table 1: Estimates of State and Commerce UAV-Related Licenses, Fiscal Years
                             2005 through 2010

                                                                                                                 Licenses
                                                                  License             Licenses   Licenses        returned
                              Agency                    applications total            approved     denied   without action
                              State                                       1,278          1,150        36                 92
                              Commerce                                          134         99         3                 32
                             Source: GAO analysis of State and Commerce data.



                             The U.S. government authorized the transfer of UAV systems to a variety
                             of countries over fiscal years 2005 through 2010. For instance, it
                             authorized the transfer of military UAVs to NATO allies such as Denmark,
                             Italy, Lithuania, and the United Kingdom, as well as other countries such
                             as Australia, Colombia, Israel, and Singapore.

Limitations in Information   In addition to the U.S. government’s limited ability to determine the
Sharing                      volume of authorized UAV exports, U.S. licensing agencies have limited
                             information sharing mechanisms with the intelligence community. Both
                             State and Commerce officials stated that the intelligence community does
                             not have a formal process in place to directly provide them timely and
                             relevant intelligence to assist in the licensing process. For instance,
                             intelligence agencies may be consulted by the MTEC on occasion, but
                             they are not routinely represented at weekly meetings. Some intelligence
                             agencies participate in the interagency Missile Trade Analysis Group,




                             Page 27                                                             GAO-12-536 Nonproliferation
which is a State-chaired interagency working group responsible for
stopping specific shipments of missile and UAV proliferation concern
worldwide. 33 Although the group is not directly involved in licensing
issues, State officials noted that representatives from State’s DDTC and
Commerce’s BIS attend the group’s meetings to help ensure a strong
working relationship with licensing agencies. Moreover, State officials
stated that because both the MTEC and the Missile Trade Analysis Group
are chaired by State’s Bureau of International Security and
Nonproliferation it helps ensure coordination and information-sharing on
issues affecting both groups.

According to State and Commerce officials, certain intelligence agencies
previously had a more formalized role in the licensing process, but chose
to remove themselves from it in 2008. For instance, State officials stated
that certain intelligence agencies had previously participated in the MTEC
and helped validate the bona fides of foreign parties in license
transactions. Additionally, Commerce officials reported one intelligence
agency had previously hired contactors to screen foreign parties in
Commerce export license applications against intelligence reporting.
According to Commerce officials, this agency decided to end its
formalized support for the licensing process due to budget cuts and other
priorities. State officials said that, since 2008, State has struggled to get
timely and relevant intelligence information to assist in licensing
decisions. Additionally, Commerce officials stated that they did not
believe they were getting access to all pertinent intelligence information
as part of their license review process. Some DOD officials also
expressed concern with the lack of official mechanisms for the
intelligence and licensing agencies to coordinate and noted that some
derogatory information available to them on parties listed on license
applications may not be getting factored into licensing decisions.

According to U.S. government officials, the administration is currently
discussing how the intelligence community can provide better support to
the licensing agencies. Additionally, Commerce noted that it has received
funding to establish its own intelligence center, known as the Strategic
Intelligence Liaison Center, within BIS, to fill the gaps caused when the


33
 The Missile Trade Analysis Group is led by State’s Bureau of International Security and
Nonproliferation and includes representatives from State’s Bureau of Intelligence and
Research and DDTC, as well as Commerce, DOD, the Department of Energy, DHS, the
FBI, the National Security Agency, and the CIA.




Page 28                                                      GAO-12-536 Nonproliferation
                              intelligence community stopped reviewing Commerce export licenses.
                              The center will, among other things, check the names of parties in license
                              applications against intelligence systems, as was previously done by the
                              intelligence community. While the focus of the center will be on
                              Commerce export licenses, Commerce officials stated that they are
                              working with other relevant agencies to ensure that the information the
                              center generates is available to them, as appropriate. Commerce stated
                              that the center was established as of the end of 2011.


Three Agencies Conduct        State, Commerce, and DOD each conducts end-use monitoring on some
End-Use Monitoring of         UAV-related exports and transfers. Since our previous report on UAV
UAVs, but Procedures Are      proliferation, all three agencies have taken some steps to increase their
                              end-use monitoring of UAVs and related items.
Different for Similar Items
                              In 2004, the director of the Office of Enforcement Analysis within
                              Commerce’s BIS issued a memo to his staff that highlighted the need to
                              focus greater attention on conducting end-use monitoring of UAV exports.
                              The memo identified certain types of items that should have priority for
                              end-use monitoring, given their utility in developing UAVs. Unlike
                              Commerce, State issued no specific guidance on how to target its end-
                              use monitoring of military UAV technology. Although State has not issued
                              UAV-specific end-use monitoring guidance, State has identified UAVs as
                              an example of a sensitive commodity that might trigger a Blue Lantern
                              check, given the negative impact on national security if the item were to
                              be diverted or illicitly retransferred. 34 State officials said that they consider
                              a variety of factors when making a determination as to whether end-use
                              checks on sensitive items, including UAV technology, are warranted. For
                              instance, State may be more likely to do a Blue Lantern check if the end-
                              user has no established history with controlled items, if the number of
                              items ordered by the end-user is more than would reasonably be needed,
                              if the shipment involves an illogical routing, or if the purchaser is paying in
                              cash or at above market rates.

                              Shortly after our 2004 report, DOD took steps to strengthen its end-use
                              monitoring of UAV technology transferred via FMS. In March 2004, DOD
                              announced that MTCR Category I UAVs would be among those items



                              34
                               State’s DDTC administers the Blue Lantern program to monitor arms exported through
                              DCS.




                              Page 29                                                   GAO-12-536 Nonproliferation
subject to enhanced end-use monitoring under the Golden Sentry
program. 35 For those items subject to enhanced end-use monitoring,
DOD officials stationed in the host country are required to conduct
inventories of transferred items following delivery and at regular intervals
thereafter to verify that the items are accounted for and being used in
accordance with the terms and conditions of the transfer. DOD can also
require enhanced end-use monitoring on non-Category I UAVs, if the
transfer is deemed to be of significant risk to warrant such a step. DOD
officials reported that, as of February 2012, there had only been one
instance where DOD required enhanced end-use monitoring for a non-
Category I UAV. 36 Items not requiring enhanced end-use monitoring are
subject to routine end-use monitoring under the Golden Sentry program.
Routine end-use monitoring is conducted in conjunction with other
required security-related duties. For example, U.S. officials might observe
how a host country’s military is using U.S. equipment when visiting a
military installation on other business. Given the large volume of defense
articles transferred through FMS, DSCA officials have instructed DOD
personnel to concentrate routine end-use monitoring efforts on a “watch
list” of specific categories of items. DOD has included UAVs among the
items on the watch list. However, some DOD officials that we interviewed,
as well as officials interviewed by other GAO teams in 2011, noted that
there was not clear guidance on the activities that constitute routine end-
use monitoring and how to document these efforts. 37

The majority of end-use monitoring done for UAV-related items has had
favorable results, but agencies found problems in some cases. From
fiscal years 2005 through 2010, State identified 45 UAV-related Blue
Lantern checks that it conducted and Commerce identified 201 UAV-
related end-use checks that it conducted. 38 Of the checks State identified
as being UAV-related, 66 percent resulted in favorable findings,
16 percent in unfavorable findings, and another 18 percent were



35
  DOD’s DSCA administers the Golden Sentry program to monitor arms transferred
through FMS.
36
 Details of this transfer are designated for official use only and are not reported here.
37
 GAO-12-89.
38
  To obtain this data on UAV-related end-use checks, State and Commerce queried their
respective databases and provided us data on those end-use checks they deemed to be
UAV-related over the period from fiscal years 2005 through 2010.




Page 30                                                         GAO-12-536 Nonproliferation
                                inconclusive. 39 Of the checks Commerce identified as being UAV-related,
                                58 percent were favorable, 6 percent were unfavorable, and the
                                remaining 36 percent had limited or inconclusive results. 40 Of the checks
                                that were unfavorable, some identified significant concerns related to
                                unauthorized end-users or end-uses. For instance, State conducted a
                                Blue Lantern check as part of a request to amend a license application to
                                allow for the provision of additional services to one country in support of a
                                U.S. UAV it had already purchased. State found that the country was
                                basing and operating the UAV in a manner that violated the U.S.
                                government’s prohibition against using U.S. Munitions List items in
                                internationally disputed territory. Thus, the check was deemed
                                unfavorable.

Differences in Agencies’ End-   All three agencies have conducted end-use monitoring on UAV
Use Monitoring Programs May     technology, but differences in their respective end-use monitoring
Result in Different Levels of   programs may result in similar types of items being subject to different
Oversight for Similar Items     levels of oversight. Further details of these differences in U.S. agencies’
                                end-use monitoring programs for UAVs are addressed in the classified
                                version of the report.

                                U.S. agencies may also have differing levels of access to facilities and
                                equipment when conducting end-use monitoring, contributing to
                                differences in the level of oversight of exported items. Although DOD
                                requires that countries agree to permit inventories and physical
                                inspections as a condition of FMS transfers, State sometimes lacks this
                                type of agreement from countries for items exported through DCS. In fact,
                                U.S. government officials noted that some bilateral agreements prohibit
                                U.S. officials from directly conducting end-use monitoring on State-
                                licensed items. Even when State does have such authority, it


                                39
                                  According to State, if the critical questions have been answered satisfactorily, the
                                transaction appears legitimate, and the bona fides of the end-users or other parties are
                                confirmed, the case will likely be closed “favorable.” If the transaction’s legitimacy cannot
                                be confirmed, the consignees or end-user appear untrustworthy, or if there are other
                                troubling discrepancies, the case will likely be closed “unfavorable.”
                                40
                                  According to Commerce, a check may result in a limited or inconclusive finding under a
                                number of conditions. For instance, a check may be deemed limited if the official
                                conducting the check cannot view the commodity in question on-site, but only the
                                documents related to the sale, because the item was legally resold to another party. An
                                inconclusive check may occur when the official conducting the check is unable to
                                conclusively determine the end-use of an item because there is potentially conflicting or
                                missing information, but there is not enough evidence to deem the check unfavorable.




                                Page 31                                                          GAO-12-536 Nonproliferation
                           inconsistently visits end-users to verify compliance with license
                           conditions, in at least some countries. For instance, we reported in
                           November 2011 that State infrequently visited end-users in Persian Gulf
                           countries when conducting Blue Lantern post-shipment checks on night
                           vision devices. 41


Agencies Coordinated       U.S. agencies coordinated their UAV enforcement actions through
Efforts to Enforce UAV     several mechanisms, including the National Export Enforcement
Export Controls, but the   Coordination Network, and the Exodus Command Center, but officials
                           acknowledged limitations with each. We have previously reported on
Nature of UAV Technology   challenges in enforcing export control laws and regulations more
Creates Enforcement        generally. Among other things, we found enforcement agencies have had
Challenges                 difficulty coordinating cases and agreeing on how to proceed on
                           investigations. 42

                           The National Export Enforcement Coordination Network (NEECN) was
                           designed to be a hub for coordination on export control investigations.
                           Among other things, NEECN assisted law enforcement agencies in
                           apprising each other of investigative leads, disseminating investigative
                           leads to law enforcement field offices, providing support to ongoing
                           investigations, and identifying proliferation trends. As of November 2011,
                           NEECN was replaced by the new Export Enforcement Coordination
                           Center, as part of the administration’s export control reform initiative. To
                           help ensure greater coordination, the administration has required key
                           agencies to partner in this effort in contrast with NEECN, which was a
                           voluntary effort and at times suffered from a lack of agency participation,
                           according to some law enforcement officials. 43

                           Another key coordination mechanism is the ICE-led Exodus Command
                           Center. Enforcement agencies, including ICE and CBP, submit license
                           determination requests through the center to confirm with State or
                           Commerce whether a particular item requires a license, and if so, whether
                           the required license has been obtained. During fiscal years 2005 through


                           41
                            See GAO-12-89.
                           42
                            See GAO-11-135R.
                           43
                             The Export Enforcement Coordination Center includes the Departments of Commerce,
                           Defense, Energy, Homeland Security, Justice, State, and Treasury, as well as the Office
                           of the Director of National Intelligence.




                           Page 32                                                      GAO-12-536 Nonproliferation
2010, law enforcement officials used the Exodus Command Center for
license determination requests involving UAV-related technology;
however, details of these requests are designated as sensitive but
unclassified and are not reported here. Law enforcement officials noted
that while the Exodus Command Center is a key tool, license
determination requests can take a significant amount of time, thus
impacting their ability to move forward on investigations or other
enforcement actions. In March 2012, we issued a report that explores in
more detail the challenges that law enforcement agencies face in
investigating illicit transshipments, including license determination
delays. 44

U.S. agencies have worked together to take certain enforcement actions
against violators of export control laws and regulations on UAV
technology. Based on our analysis of DOJ reporting on export control
enforcement prosecutions from October 2006 through June 2011, we
identified at least seven prosecutions involving attempts to illegally export
UAV-related technology. For instance, in 2009, a District of Columbia
couple pleaded guilty to making false statements regarding the export of
autopilots for mini UAVs to China.

According to U.S. enforcement officials, they encountered certain
difficulties enforcing export laws and regulations on UAVs that are
common across all export control investigations. For instance, of the
34 closed investigations that ICE identified for us as being UAV-related in
fiscal years 2005 through 2010, none of the cases resulted in a criminal
prosecution. In the majority of the 34 cases, the investigations were
closed as a result of investigators losing touch with the suspects outside
of the country. We previously reported that many suspects in export
control violation cases are located outside of the country and foreign
governments may not always choose to cooperate with U.S. law
enforcement officials. 45




44
  See GAO, Export Controls: Proposed Reforms Create Opportunities to Address
Enforcement Challenges, GAO-12-246 (Washington, D.C.: Mar. 27, 2012).
45
 See GAO, Export Controls: Challenges Exist in Enforcement of an Inherently Complex
System, GAO-07-265 (Washington, D.C.: Dec. 20, 2006).




Page 33                                                   GAO-12-536 Nonproliferation
Law enforcement officials also identified two issues that make UAV cases
particularly difficult to pursue. DOJ officials noted that it can be difficult to
prosecute a case involving an export control violation, particularly those
involving dual-use technologies, because proving the violation took place
typically involves showing that the commodity in question was specifically
designed for use in a technology or application requiring an export control
license. For instance, in the 2009 case discussed previously, DOJ
ultimately prosecuted the District of Columbia couple for making false
statements and not for illegally exporting the autopilots to China. DOJ did
this because prosecutors could not prove that the autopilots were
specially designed for use in military UAVs, despite evidence that this
was their intended use, according to DOJ officials. As part of the
administration’s efforts to move items on the U.S. Munitions List to the
Commerce Control List, Commerce issued a proposed rule in the Federal
Register in July 2011 defining what is meant by specially designed and
requesting public comment on the proposed definition. 46 The comment
period for this proposed rule closed on September 13, 2011. After
reviewing the comments submitted and further review of the issue,
Commerce issued another proposed rule further revising the definition of
“specially designed” in the Federal Register in June 2012. 47 The comment
period for this proposed rule will close on August 3, 2012. In addition,
ICE, CBP, and Commerce officials noted that it is often difficult for law
enforcement officials to determine whether violations are occurring
because many law enforcement officials lack the technical skills to
differentiate controlled UAV components from similar components used in
model aircraft or ultralights, which are not subject to export control
restrictions. Commerce officials also noted that the rapidly evolving nature
of the technologies for use in UAVs could make it more difficult for law
enforcement to readily identify these technologies in the future. According
to ICE officials, to provide law enforcement officials with the technical
skills to identify UAV-related technologies, ICE has provided UAV training
to its agents in multiple locations throughout the country. 48 Commerce
has also provided technical training to law enforcement officials; however,



46
  76 Fed. Reg. 41,958, Proposed Revisions to the Export Administration Regulations
(EAR): Control of Items the President Determines No Longer Warrant Control Under the
United States Munitions List (July 15, 2011).
47
 77 Fed. Reg. 36,409, “Specially Designed” Definition (June 19, 2012).
48
  This information was provided after the publication of our classified report in February
2012.




Page 34                                                         GAO-12-536 Nonproliferation
              this training did not specifically focus on UAV technologies, according to
              Commerce officials.

              Multiple factors highlight past and likely persistent limitations of U.S.
Conclusions   efforts to control the proliferation of UAV technology through the export
              control process. First, the key trends in the acquisition, development, and
              applications of UAV technology globally show enormous growth in
              demand for military uses of UAVs, including for lethal applications, and an
              increasing ability of countries to acquire or develop their own systems.
              While only a few countries will have a near-term ability to develop and
              field the most sophisticated systems, many are expected to have
              sufficiently useful UAVs. These could threaten U.S. forces and interests.
              Second, the U.S. government recognizes the risks related to the
              proliferation of UAV technology, but faces difficulties setting controls on
              systems and components that countries of concern are interested in
              obtaining. Third, the U.S. government used multilateral and bilateral
              mechanisms to restrict the proliferation of UAV technology to a great
              extent, but as we reported in 2004, the nonbinding and consensual nature
              of multilateral export control regimes can challenge the U.S.
              government’s ability to achieve its objectives in these forums.

              While technological advances and the consensual nature of the
              multilateral export control regimes complicate the task of avoiding
              widespread proliferation to U.S. adversaries, the U.S. government can
              take steps to better coordinate its efforts to address national security
              considerations through its controls on the transfer and export of UAV
              technology. For instance, some agencies have routine and formal roles in
              reviewing licenses, but others have no formal mechanism to share
              significant information with each other. In fact, the role of some agencies
              with potentially important information to provide has diminished in recent
              years. Furthermore, U.S. government efforts to provide reasonable
              assurance that UAV exports and transfers are used as intended are
              marked by differing levels of protection through State and DOD end-use
              monitoring activities. As we previously reported on a similar situation
              involving night vision devices for Persian Gulf countries, major differences
              in the two agencies’ monitoring programs need to be harmonized. Finally,
              certain information that would be useful to executive branch and
              congressional decision-making is unavailable because State’s licensing
              database cannot readily identify all licenses authorizing military UAV
              exports. Thus the U.S. government cannot readily identify the full range of
              UAVs it has authorized for export to foreign countries.




              Page 35                                             GAO-12-536 Nonproliferation
                      We are making three recommendations: 49
Recommendations for
Executive Action      •    As part of the Administration’s export control reform initiative, we
                           recommend that the Secretary of State establish a mechanism in the
                           licensing database to better enable the identification of licenses
                           authorizing the export of UAVs and related components and
                           technologies.

                      •    We recommend that all U.S. agencies with information relevant to the
                           export licensing process should seek to improve mechanisms for
                           information sharing.

                      •    To close gaps in the implementation of UAV end-use monitoring
                           programs that may limit the ability of DOD and State to adequately
                           safeguard defense articles upon their arrival and basing, we
                           recommend that the Secretaries of State and Defense take steps to
                           harmonize their approaches to end-use monitoring. Such steps might
                           include developing a plan for how and when each agency’s end-use
                           monitoring approaches would be harmonized.


                      We provided a draft of our February 2012 classified report to State, DOD,
Agency Comments       Commerce, DHS, DOJ, and the CIA for their review and comment. State,
and Our Evaluation    DOD, Commerce, and DHS provided written comments. We have
                      reprinted DHS’ written comments in appendix IV. State’s, DOD’s, and
                      Commerce’s comments discussed classified information and cannot be
                      publicly released; however, we have included an unclassified summary of
                      their comments, as well as those of DHS. State, Commerce, and DOD
                      also provided technical comments, as did the CIA, which we incorporated
                      in the report as appropriate.

                      State agreed with our recommendation to establish a mechanism in the
                      licensing database to better identify licenses authorizing the export of
                      UAVs and related components and technologies. According to State, the
                      U.S. Munitions List is being rewritten to redefine its controls on UAVs and
                      better differentiate them from controls on other military aircraft. State
                      noted that these changes to the U.S. Munitions List, along with the



                      49
                        The full texts of the second and third recommendations were deemed to contain
                      sensitive information and are not included here. They are included in our February 2012
                      report.




                      Page 36                                                      GAO-12-536 Nonproliferation
introduction of USXports as the U.S. government’s export control
licensing case management system, will provide an opportunity to
improve database collection and facilitate the identification of UAV
licenses.

State, DOD, and Commerce agreed with our recommendation to take
additional steps to establish better interagency information sharing.
According to State, the administration is currently trying to address such
concerns as part of its export control reform initiative. Both DOD and
Commerce noted that as part of the administration’s export control reform
initiative, a new unit, known as the Information Triage Unit, is being
established to facilitate information sharing among various U.S. agencies.
To begin implementing the functions of the Information Triage Unit,
Commerce noted that it has established a Strategic Intelligence Liaison
Center. DHS and Commerce noted the role of the Export Enforcement
Coordination Center with respect to the exchange of export control-
related information among certain U.S. agencies.

State and DOD also agreed with our recommendation to harmonize their
approaches to the end-use monitoring of UAVs. State said that it has and
will continue to make improvements in its end-use monitoring program.
State also said that the report lacks some critical perspective on the
number and scope of transfers involving the most sophisticated UAVs.
We acknowledge that the United States has to date transferred only a
limited number of more sophisticated UAVs, but this does not lessen the
importance of ensuring that UAVs the United States transfers to foreign
recipients are well protected. Additionally, we note U.S. government
officials we met with anticipate that the number of such UAVs transferred
will increase in the future. Thus, the importance of effective U.S. end-use
monitoring of UAVs will likely continue to increase over time. DOD stated
that it welcomes the opportunity to work with State on the end-use
monitoring issues raised in our recommendation.


As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to interested congressional
committees, the secretaries and agency heads of the departments
addressed in this report, and other interested parties. In addition, the
report will be available at no charge on the GAO website at
http://www.gao.gov.




Page 37                                             GAO-12-536 Nonproliferation
If you or your staff have questions about this report, please contact me at
(202) 512-9601 or at melitot@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made key contributions to this report are
listed in appendix V.




Thomas Melito
Director, International Affairs and Trade




Page 38                                            GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             To assess the global trends in the development, acquisition, and
             application of unmanned aerial vehicle (UAV) technology worldwide since
             2005, we obtained, analyzed, and corroborated private sector open
             source and U.S. government reporting on U.S. and foreign UAV activities
             from various sources and spoke to representatives of U.S. private sector
             associations representing companies that manufacture UAVs. For this
             report, we defined the term “acquisition” to mean those countries that
             have obtained complete UAV systems, as well as the countries from
             which they acquired these UAVs. We defined the term “development” to
             mean those countries producing and supplying UAVs and the systems
             they are building. The term “applications” addressed the tasks that UAVs
             perform and the limitations in their capacity to achieve these tasks.
             Private sector associations we met with included the Association for
             Unmanned Vehicle Systems International and the Aerospace Industries
             Association. We also interviewed representatives of UAV manufacturers
             in the United States, as well as various analysts within the U.S.
             government who track UAV issues. We also obtained copies of their
             briefs as well as some of their reports. In addition, to get a better
             understanding of the regulatory and technological limitations that affect
             UAV development, we met with officials from the Federal Aviation
             Administration. As our trend assessment dealt with global trends, we also
             met with industry, trade association, and foreign government officials in
             three countries—Israel, Italy, and the United Kingdom—and obtained
             reports on their UAV programs. We selected these countries based on
             analyses of open source reporting and Department of Defense (DOD)
             and Department of State (State) data showing that these countries either
             have extensive experience operating U.S.-made UAV systems or are
             important producers of UAVs and related components. We traveled to
             Patuxent Naval Air Station in Patuxent, Maryland, to gain a firsthand
             understanding of the current state of UAV technology, observing the U.S.
             Navy’s Broad Area Maritime Surveillance-Demonstrator system and the
             Shadow 200. The Broad Area Maritime Surveillance-Demonstrator UAV
             is based on the Global Hawk platform—a strategic UAV—while the
             Shadow 200 is a tactical UAV in use by the U.S. Army that is currently
             undergoing modification for use by the U.S. Marine Corps.

             To assess the national security considerations associated with the
             proliferation of UAV technology, we met with private sector and U.S.
             government analysts knowledgeable about UAVs. We also obtained and
             analyzed a range of private sector and unclassified and classified reports
             and briefings by the intelligence community discussing the threats
             associated with the spread of UAV technology to countries of concern
             and terrorist organizations. Additionally, we interviewed officials from


             Page 39                                            GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology




State, the Department of Commerce (Commerce), and DOD to gather
information on the key risks and benefits associated with the spread of
UAV technology. To better understand the security considerations
associated with transfers of U.S. UAV technology to U.S. allies, we met
with foreign government and U.S. embassy officials in Italy to document
the Italian Ministry of Defense’s experience purchasing and operating
U.S.-made systems. While in London, we were unable to meet with
United Kingdom military officials knowledgeable about their experience
purchasing and operating U.S. systems, but we obtained written
responses to questions from the United Kingdom’s Ministry of Defense
and met with U.S. embassy officials familiar with the United Kingdom’s
experience.

To assess the extent to which the U.S. government used the multilateral
regimes and bilateral demarches to foreign countries to address UAV
technology proliferation, we obtained and analyzed classified State
reporting cables documenting the results of the 2005 through 2009
Missile Technology Control Regime (MTCR) plenaries and other
meetings. We also reviewed various MTCR and Wassenaar Arrangement
(Wassenaar) documents, including the two regime’s control lists and the
various U.S. proposals submitted to the MTCR and Wassenaar.
Additionally, we interviewed State, Commerce, and DOD officials to
gather information on the steps that the U.S. government has taken
through the regimes to work with other participants to control UAV
proliferation. We also met with officials of the Wassenaar Arrangement
Secretariat. We attempted to meet with MTCR officials, but were not able
to due to scheduling limitations. To better understand the limitations of the
multilateral regimes, we met with officials from State, Commerce, DOD,
and other agencies. To assess the extent to which the United States used
bilateral diplomacy to address UAV proliferation concerns, we obtained
and analyzed approximately 70 demarches presented to foreign countries
during the January 2005 to September 2011 timeframe that State
provided to us. 1 We also interviewed State officials knowledgeable about
the demarches. We did not conduct an independent assessment to
determine whether our sample contained all the UAV-related demarches
that State presented to foreign countries during this timeframe.




1
A demarche is a formal diplomatic protest or representation.




Page 40                                                        GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology




To assess the extent to which the U.S. government has coordinated its
export control efforts to limit the spread of UAV technology, we obtained
and analyzed fiscal years 2005 through 2010 export licensing and end-
use monitoring data from Commerce and State. We also obtained DOD
fiscal years 2005 through 2010 Foreign Military Sales program and end-
use monitoring data. To assess the reliability of these various data sets,
we conducted interviews with relevant agency officials, reviewed agency
documentation, reviewed past GAO assessments of the databases used
to produce this data, and conducted our own reviews of the data provided
by the agencies. We determined that the data were sufficiently reliable for
our use; however, we identified certain limitations, including with State’s
licensing database in particular, which are discussed further below. We
also reviewed Commerce, State, and DOD documents and reports and
met with officials in Washington, D.C., involved in licensing, transfer, and
end-use monitoring activities from these three agencies. We also met with
agency officials from Commerce, Immigration and Customs Enforcement,
Customs and Border Protection, the Federal Bureau of Investigation, and
the Department of Justice responsible for enforcing export control laws
and regulations.

To analyze Commerce’s UAV-related export control licensing data, we
identified the 3 principal export control classification numbers (ECCNs)
that exclusively control UAV systems and technology, as well as 29
additional ECCNs that include technology that could be used in UAVs, but
can also be used for other purposes. To identify these ECCNs, we first
conducted a search of the Commerce Control List to determine which
ECCNs contained the terms: “unmanned aerial vehicle,” “UAV,”
“unmanned aerial system,” and “UAS.” We also reviewed Commerce
documentation discussing UAV-related ECCNs. Finally, we validated the
choice of these ECCNs with officials from Commerce and the Defense
Technology Security Administration and made modifications to our list
based upon their input. We validated our list of ECCNs with Commerce
and the Defense Technology Security Administration because Commerce
manages the database used to track dual-use license applications and
the Defense Technology Security Administration is the main agency that
Commerce uses for technical assistance in conducting license reviews.
We then analyzed Commerce export licensing data and quantified the
number of license applications associated with each of these ECCNs
during fiscal years 2005 through 2010. However, in the final report, we
chose to limit our discussion to only those licenses involving the three
ECCNS that are UAV-specific. We chose to do so because, through our
own analysis and interviews with Commerce and Defense Technology
Security Administration officials, we determined there was not a reliable


Page 41                                             GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology




way of identifying which of the more than 7,000 license applications
involving the other 29 ECCNs included items that were to be used in
UAVs, versus those licenses that included items to be used for other
purposes, such as in manned aircraft. Because our final analysis does not
include any license applications involving these 29 ECCNs, our results
may not have captured some UAV-related licenses; however, we believe
the results are sufficiently reliable to provide a reasonable estimate of the
number of UAV-related licenses submitted to Commerce in fiscal years
2005 through 2010.

State’s licensing database is organized according to U.S. Munitions List
category and subcategory and there is no specific category or
subcategory for UAVs and related technology. Thus, to analyze State’s
UAV-related licensing data, we obtained data for more than 7,000 license
applications that State had submitted to the Missile Technology Export
Control Group (MTEC) during fiscal years 2005 through 2010. While the
majority of UAV licenses go before the MTEC, certain UAV-related
licenses may not be captured within the data State provided, according to
State officials. For instance, certain sensors or other types of payloads
used in UAVs, but also used in other types of aircraft, might not be
reviewed by the MTEC because they are not considered missile
technology controlled by the MTCR, according to State officials.
Additionally, the data provided by State included a significant number of
licenses that were not UAV-related and instead pertained to other types
of missile technology. To better identify the UAV-related licenses, we
identified 34 key terms to use in filtering the data. These terms included
both general terms that are commonly used to describe UAVs, such as
“unmanned aerial system” and “UAS,” and also specific terms that are the
names of key UAV systems that are produced in the United States and
abroad, such as “Predator” and “ScanEagle.” We validated these terms
with State and the Defense Technology Security Administration. We
validated the choice of these terms with State and the Defense
Technology Security Administration because State manages the
database used to track U.S. Munitions List-related license applications
and the Defense Technology Security Administration is the main agency
that State uses for technical assistance in conducting license reviews. We
used these terms to assist in separating out those licenses that were
UAV-related from those that were not. Nonetheless, we found that Direct
Commercial Sales (DCS) data could not identify with certainty all licenses
authorizing UAVs and related components without a manual review of
tens of thousands of licenses. As a consequence, we could not accurately
report the magnitude of DCS arms transfer authorizations for UAVs;
however, we believe the results are sufficiently reliable to provide a


Page 42                                              GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology




general estimate of the number of UAV-related licenses submitted to
State in fiscal years 2005 through 2010.

To analyze State and Commerce end-use monitoring of UAV-related
exports, we obtained end-use monitoring data from both agencies
identifying the number, location, and type of UAV-related end-use
monitoring checks conducted in fiscal years 2005 through 2010. Both
State’s and Commerce’s end-use data have limitations because the
agencies’ databases are not designed to provide a means of
automatically identifying end-use checks that are UAV-related. As a
result, both agencies developed queries using terms such as “UAV” and
“unmanned aerial vehicle.” Based upon our discussions with agency
officials, we believe that these queries identified the majority of relevant
end-use check records, but some UAV-related checks may not have been
captured in the queries. However, we determined that the agencies’ end-
use monitoring data is sufficiently reliable to provide a reasonable
estimate of the number and types of checks performed by the two
agencies.

To analyze DOD’s transfers of UAV technology via the Foreign Military
Sales (FMS) program, we obtained from the Defense Security
Cooperation Agency (DSCA) a breakdown of the number, country, and
type of UAV technology transferred during fiscal years 2005 through
2010. To produce this data, DSCA developed a query of its 1200 system
to identify relevant FMS transfers involving UAV technology. We also
obtained Golden Sentry UAV-related end-use monitoring data from DSCA
for the same period.

To ensure the accuracy of the information contained in appendix III, we
provided a copy of this appendix to Israeli government officials, who
provided technical comments. We have incorporated their comments as
appropriate.

DOD, State, the Department of Homeland Security, the Federal Bureau of
Investigation, and the Central Intelligence Agency deemed some of the
information in our February 2012 report as classified, which must be
protected from public disclosure. Therefore, this report omits sensitive
information about efforts by countries of concern and terrorists to obtain
and use sensitive UAV technology, as well as details about the U.S.
proposals that the multilateral regimes did not adopt. This report also
omits sensitive information about U.S. uses of bilateral diplomacy to
address UAV proliferation concerns, U.S. efforts to coordinate and use
certain sensitive information as part of the licensing process, and U.S.


Page 43                                             GAO-12-536 Nonproliferation
Appendix I: Scope and Methodology




government efforts to coordinate the enforcement of export controls on
UAVs.

We conducted this performance audit from October 2010 to July 2012 in
accordance with generally accepted auditing standards. These standards
require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on
our audit objectives.




Page 44                                             GAO-12-536 Nonproliferation
Appendix II: List of MTCR and Wassenaar
              Appendix II: List of MTCR and Wassenaar
              Members



Members

              Table 2: List of MTCR and Wassenaar Members

              MTCR                                          Wassenaar
              Argentina                                     Argentina
              Australia                                     Australia
              Austria                                       Austria
              Belgium                                       Belgium
                       a
              Brazil                                        Bulgaria
              Bulgaria                                      Canada
                                                                        b
              Canada                                        Croatia
              Czech Republic                                Czech Republic
              Denmark                                       Denmark
                                                                        b
              Finland                                       Estonia
              France                                        Finland
              Germany                                       France
              Greece                                        Germany
              Hungary                                       Greece
              Iceland                                       Hungary
              Ireland                                       Ireland
              Italy                                         Italy
              Japan                                         Japan
                                                                    b
              Luxembourg                                    Latvia
                                                                            b
              Netherlands                                   Lithuania
              New Zealand                                   Luxembourg
              Norway                                        Malta
                                                                        b
              Poland                                        Mexico
              Portugal                                      Netherlands
              Republic of Korea                             New Zealand
              Russia                                        Norway
              South Africa                                  Poland
              Spain                                         Portugal
              Sweden                                        Republic of Korea
                                                                            b
              Switzerland                                   Romania
              Turkey                                        Russia
                                                                            b
              Ukraine                                       Slovakia
                                                                            b
              United Kingdom                                Slovenia
              United States                                 South Africa
                                                            Spain




              Page 45                                                   GAO-12-536 Nonproliferation
Appendix II: List of MTCR and Wassenaar
Members




    MTCR                                                   Wassenaar
                                                           Sweden
                                                           Switzerland
                                                           Turkey
                                                           Ukraine
                                                           United Kingdom
                                                           United States
Source: MTCR and Wassenaar.
a
Brazil is a member of MTCR, but not Wassenaar.
b
Croatia, Estonia, Latvia, Lithuania, Mexico, Romania, Slovakia, and Slovenia are members of
Wassenaar, but not MTCR.




Page 46                                                             GAO-12-536 Nonproliferation
Appendix III: Israel’s Export Control System
               Appendix III: Israel’s Export Control System
               Since 2006



Since 2006

               According to Israeli officials we spoke with, the changes that have
               occurred in Israel’s export control system since 2006 were significant
               because they elevated the importance of export controls. For this reason,
               this appendix provides additional information about these changes.
               According to Israeli officials we spoke with, in general, the changes are
               designed to encourage more interagency coordination and to facilitate
               enhanced enforcement of export control laws.

               In July 2006, Israel established a single export control agency within the
               Ministry of Defense, named the Defense Export Control Agency (DECA).
               DECA is responsible for reviewing and consequently approving or
               denying applications for licenses that involve items, technologies, know-
               how, and services which are considered under the definition of defense
               exports.

               According to Israeli officials and documents, in cases where a license
               application involves purely military items or dual-use items that are
               destined for a military end-user, DECA bears full responsibility, although it
               is required to consult with the Ministry of Foreign Affairs. In these
               instances, the licensing process is a two-stage process with a marketing
               license preceding the export license. In cases of applications involving
               dual-use items destined for a civilian end-user, the Israeli Ministry of
               Industry, Trade, and Labor bears the responsibility, while consulting with
               DECA. In these cases, the licensing mechanism is a one-stage process,
               as it includes the issuance and granting of the export license alone.

               According to Israeli officials and documents, for license applications in
               which DECA bears full responsibility, a mechanism was established
               within the Ministry of Defense to coordinate the review of these licenses.
               This includes the establishment of advisory committees. In addition, a
               technical committee called the “MTCR Committee” reviews license
               applications involving possible technologies controlled by MTCR. That
               committee’s task is to determine whether an item is contained within an
               MTCR control list and if so, what category.

               According to Israeli officials and documents, by law, DECA is solely
               responsible for enforcing export control directives and regulations. Within
               the framework of that responsibility, DECA is often assisted by Israeli
               Customs, which in practice, enforces most of the directives and
               regulations. In addition, DECA is responsible for conducting outreach to
               companies that export military and dual-use items, technologies, know-
               how, or services.



               Page 47                                              GAO-12-536 Nonproliferation
Appendix III: Israel’s Export Control System
Since 2006




According to Israeli officials that we spoke with, Israel also adopted export
control legislation to control the export of both military and dual-use items,
technologies, know-how, and services. According to Israeli documents, in
July 2007, the Israeli Parliament enacted a new Defense Export Control
Law, which entered into force in December of that year. This law elevated
the importance of export controls in several ways, according to Israeli
officials. For instance, Israeli officials stated that the law established a
requirement for Israeli exporters to register before applying for any export
control license and to create a new position within the company—director
of export control. According to Israeli officials, the law also established
periodic reporting, record-keeping, and inspection requirements; provided
for new administrative penalties such as fines, suspensions, and
revocations of licenses; and strengthened criminal penalties for those
found violating the law. Moreover, according to Israeli documents, the
Defense Export Control Law led the Ministry of Defense to establish
separate lists of controlled technologies—one based on the MTCR
Annex, two based on the Wassenaar munitions and dual-use lists, and a
third dual-use list for transfers to the Palestinian Authority.

The lists of controlled technologies are updated annually in two ways,
according to Israeli officials. First, DECA meets with MTCR and
Wassenaar Arrangement officials in outreach sessions conducted by the
two regimes. The outreach sessions are designed in part to inform key
countries that are not MTCR or Wassenaar Arrangement members about
control list changes agreed to by member countries, according to
Wassenaar Arrangement officials. In addition, DECA meets with export
control counterparts from the United States, United Kingdom, Germany,
and other countries, according to Israeli officials.

With respect to license application approvals, the Israeli government
typically imposes certain conditions, according to Israeli government and
industry officials. For instance, DECA requires manufacturers to obtain re-
export approval for all controlled components not made in Israel from the
country of origin as a pre-condition for considering a license application.
In addition, DECA typically imposes certain license conditions, for
instance, requiring end-users to sign an end-use or end-user certificate.
According to Israeli government officials, approved licenses often state
that technology cannot be transferred to a third party without authorization
from DECA.

According to Israeli government officials and documents, with respect to
license applications involving UAV technology, the Israeli government
typically imposes additional licensing conditions as well. For instance,


Page 48                                              GAO-12-536 Nonproliferation
Appendix III: Israel’s Export Control System
Since 2006




license applications must specify under which MTCR category the UAV
falls, if any. According to Israeli government and industry officials, for
MTCR Category I UAVs such as the Heron TP, the Israeli government
has adopted a “presumption of denial” standard. In instances where
authorization is eventually given to export a Category I UAV, it is limited
to MTCR member countries only. In cases where authorization is granted
to export an MTCR Category II UAV, these may be marketed or sold to
MTCR nonmember countries only as long as they provide a declaration
that they fully adhere to MTCR controls.




Page 49                                             GAO-12-536 Nonproliferation
Appendix IV: Comments from the
             Appendix IV: Comments from the Department
             of Homeland Security



Department of Homeland Security




             Page 50                                     GAO-12-536   Nonproliferation
Appendix IV: Comments from the Department
of Homeland Security




Page 51                                     GAO-12-536   Nonproliferation
Appendix V: GAO Contact and Staff
                   Appendix V: GAO Contact and Staff
                   Acknowledgments



Acknowledgments

                   Thomas Melito, (202) 512-9601 or melitot@gao.gov
GAO Contact
                   In addition to the contact named above, the following staff made key
Staff              contributions to this the report: Joseph A. Christoff, Director (ret.);
Acknowledgements   Jeff Phillips, Assistant Director; Lynn Cothern; Martin De Alteriis;
                   Elias Lewine; Grace Lui; José M. Peña; and Ryan Vaughan.
                   Mitch Karpman provided technical assistance in statistics and data
                   analysis, Jena Sinkfield provided graphics support, and Sarah McGrath
                   provided editorial assistance. Burns Chamberlain, Gifford Howland,
                   Mason Calhoun, Drew Lindsey, Rachel Dunsmoor, Judith Williams, and
                   Juan P. Avila provided additional technical assistance.




(320895)
                   Page 52                                          GAO-12-536   Nonproliferation
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