The U.S. Government -- often in collaboration
with its allies -- controls the export of certain technologies and commodities to
countries that for various reasons are judged to be inappropriate recipients. The
violation of these export controls is commonly referred to as illegal technology transfer
and is a serious security concern.
The Arms Export Control Act regulates the
export of defense articles and services. Such exports may be licensed only if their export
will strengthen U.S. national security, promote foreign policy goals, or foster world
peace. The Arms Export Control Act is administered by the Department of State, Center for
Defense Trade Controls, through the International Traffic in Arms Regulations (ITAR) and
the U.S. Munitions List. The Munitions List is a list of defense articles that require a
license prior to export.
The Export Administration Act regulates the
export of dual-use items, that is, items that have both military and civilian uses.
Dual-use items that would make a significant contribution to the military potential of
another country are on the Department of Commerce's Commodity Control List, and a license
is required for their export. The Commodity Control List includes items from the
Defense Department's Militarily Critical
Technologies List and technology that could support the proliferation of chemical,
biological, or nuclear weapons or missile technology.
A number of countries conduct major programs
to avoid U.S. export controls. The potential magnitude of such programs is illustrated by
the program conducted by the former Soviet Union. After the demise of the Soviet Union,
the Russian government made public annual reports from the Chief of the KGB (Soviet
Intelligence) to the Secretary General of the Communist Party, Michael Gorbachev, for the
years 1985, 1986, 1988 and 1989. These reports state that the KGB acquired 12,000 to
13,000 samples of equipment or products each year from the West. Principal customers
for these samples were the Ministry of Defense, Military-Industrial Commission, and the
State Committee for Science and Technology. Not all these samples were obtained from the
U.S., and not all of them were obtained illegally, but a majority probably were.1
In many cases of illegal technology transfer,
the intended end-user is a country whose policies are unfriendly to the United States, but
this is not always the case. Some friendly countries obtain U.S. technology illegally to
seek economic advantage. One study of illegal technology transfer operations during the
12-year period from 1981 to 1993 identified 56 different end-user countries.2 The same study found as follows:
- The types of goods being exported illegally
were: 38% dual-use equipment (e.g., high performance computers, laser mirrors,
oscilloscopes); 31% weapons components (e.g., radar tubes, aircraft parts); 15% entire
weapons (e.g., TOW missiles, fighter aircraft); 13% nonlethal military equipment (e.g.,
night-vision goggles); and 3% commercial commodities (e.g., commercial jet engines).
- Various schemes were used to get around the
requirement for an export license. In over half the cases, the goods were simply purchased
and shipped by another U.S. company (often a front company) without a license in hopes
they would get past Customs without incident. Fraudulent end-user certificates were used
in many cases. In other cases, military items were declared as civilian, high tech items
were declared as low tech, shipping documents were falsified, export licenses were forged,
or a partial license was used rather than a full license.
- By far the most common means of shipping the
goods out of the United States was to export them first to a friendly country, then
transship them to a proscribed end-user. Half the transshipments during the time period
covered by this study were via Europe, most commonly via Germany, Switzerland or the
United Kingdom. The next most common procedure was for goods to be ordered by a U.S.
individual or company which then mislabeled them and repackaged and reshipped them
illegally to the end-user. Less frequently, goods were concealed in personal luggage,
delivered directly to a foreign diplomatic mission in the U.S., or smuggled in a chartered
The initial buyer in illegal technology
transfer operations is often a front company in the U.S. set up to acquire technology
legally and then export it illegally to an unauthorized recipient.
The best security
countermeasure is for a business to know its customers. When a "new company"
enters the picture requesting sensitive or classified information or technology, prudent
risk management would suggest doing some checking of the company's history.
To help U.S. businesses recognize indicators
of possible intent to circumvent export regulations, the Department of Commerce's Bureau
of Export Administration developed the following check list: 3
- The customer or its address is similar to one
of the parties found on the Commerce Department's list of denied persons.
- The customer or purchasing agent is reluctant
to offer information about the end-use of the item.
- The product's capabilities do not fit the
buyer's line of business, such as an order for sophisticated computers for a small bakery.
- The item ordered is incompatible with the
technical level of the country to which it is being shipped, such as semiconductor
manufacturing equipment being shipped to a country that has no electronics industry.
- The customer is willing to pay cash for a very
expensive item when the terms of the sale would normally call for financing.
- The customer has little or no business
- The customer is unfamiliar with the product's
performance characteristics but still wants the product.
- Routine installation, training, or maintenance
services are declined by the customer.
- Delivery dates are vague, or deliveries are
planned for out of the way destinations.
- A freight forwarding firm is listed as the
product's final destination.
- The shipping route is abnormal for the product
- Packaging is inconsistent with the stated
method of shipment or destination.
- When questioned, the buyer is evasive and
especially unclear about whether the product being sought is for domestic use, for export,
or for reexport.
The Bureau of Export Administration hotline
for reporting suspected export violations is 1-800-424-2980.
Information on export controls is available
on the Internet in an up-to-date database at www.gpo.gov/bxa.
This website contains the entire Export Administration Regulations (EAR), including the
Commerce Control List, the Commerce Country Chart, and the Denied Persons List.
Related Topics: Export-Controlled Information, Illegal Export of Poison Gas.
1. Raymond L.Garthoff, The KGB Reports to Gorbachev, Intelligence
and National Security, Vol. 11, No. 2, April 1996.
2. Extract from controlled report, approved for public release.
3. Bureau of Export Administration web site,