The State Department granted licenses for the commercial export of arms and munitions worth almost $15 billion last year but exercised such loose controls that the system could have been exploited to obtain weapons for terrorists or unfriendly governments, according to a study by the General Accounting Office.
The report by the GAO, the investigative arm of Congress, was requested by Sen. David H. Pryor (D-Ark.). It is to be made public today at a hearing by the Senate Governmental Affairs Committee on the operations of the State Department's Office of Munitions Control (OMC).
GAO investigators found that the OMC, because of insufficient funds and personnel, routinely grants thousands of export licenses for modern military equipment without checking the backgrounds of the license applicants -- failing even to determine whether they have criminal records or histories of questionable dealings.
In one case, the report said, the OMC issued 322 licenses worth $15 million during fiscal 1986 to a firm that had been turned down for export privileges by the Commerce Department, which maintains a list of companies barred from receiving licenses because of past practices. The report did not identify the company.
In addition, the report said, while OMC acted on 49,000 license applications during fiscal 1986, it called on U.S. embassies in only 50 cases to verify whether the items actually went to the recipients listed on license applications.
As a result, congressional sources said, unscrupulous arms dealers could have manipulated the system with relative ease to buy American-made weapons for countries barred from making such purchases directly because they have supported international terrorism or violated U.S. law.
Interest in whether arms dealers have been acting as intermediaries in such transactions has heightened as the result of the Iran-contra affair with its revelations of secret arms sales to Iran by the Reagan administration and the covert supply of weapons and equipment to the Nicaraguan contras.
At issue are the methods by which the United States transfers military items and services to other countries. Sales made directly by the U.S. government under the Foreign Military Sales Program, where Washington finances the sale with long-term loans, or the Military Assistance Program, where the United States provides equipment without charge, are administered by the Defense Department.
In the case of commercial arms sales by individuals or businesses, the exporter must have a U.S. government export license approved by OMC if the item is on OMC's munitions list, which covers equipment ranging from spare parts to major weapons systems. Export licenses for another category of "dual-use" items, such as helicopters that have both civilian and military applications, are issued by the Commerce Department.
According to the GAO report, the number of applications for commercial munitions exports increased from 26,000 for items valued at $3.3 billion in 1977 to 49,000 applications worth $14.9 billion in 1986. Yet, GAO investigators found, over the same period OMC's staff remained at about 30 persons, with only 10 authorized to approve licenses and three assigned to enforce the proper use of these licenses.
The report said that in allocating these limited resources, OMC has chosen to emphasize speedy processing of license applications, but has done so at the expense of careful license review and compliance with various governmental reporting requirements.
As a result, the GAO investigation said, OMC does not verify the accuracy of information provided by persons or firms registering for licenses and does not check applicants, freight forwarders or consignees against the lists of disqualified or questionable exporters maintained by Commerce, the Pentagon or the Customs Service. Unlike these agencies, OMC officials told the GAO they do not believe their office has the legal authority to maintain such "watch lists."
The report found that while OMC officials said they were aware of less than 30 questionable firms and individuals, Defense Department officials contended that there are hundreds fitting that description.
To correct the situation, the GAO report recommended that OMC make better use of the lists and information available from other agencies to identify applications that should be scrutinized more carefully, be stricter in requiring exporters to make legally required reports about their transactions, develop procedures for better "end-use" verification of where arms exports ended up and improve its computer system so that licensing officers will have detailed, up-to-the-minute information available when they review applications.