Potential Impact of Expanding Coverage of the 1982 Amendment to the Arms Export Control Act

Pursuant to a congressional request, GAO commented on a proposal to modify a Senate report. The modification would allow government arsenals to sell defense articles and services to contractors for further assembly and export, regardless of whether the contractors receive such items for incorporation into material delivered to the Department of Defense (DOD).

GAO believes that the most effective way to broaden contractors' authority to purchase government-furnished equipment (GFE) would be to amend the law rather than to modify the Senate report. A modification would not accomplish the desired objective because courts do not generally regard such reports as strongly indicative of congressional intent. Proponents of a change in the law believe that expanding contractors' authority to purchase GFE would: (1) stimulate the economy by providing more work for arsenals and private industry; (2) increase foreign sales and improve the balance of payments; (3) stimulate foreign military sales in countries that do not buy from the government because of the long lead times involved; (4) allow sale of excess components now held by arsenals; and (5) be a viable option to foreign production. Opponents are concerned that, if authority to purchase GFE is broadened, companies which are primarily brokers might be able to participate, rather than only companies which add something to the GFE before export. There is also concern that amending the law might force DOD to give contractors' orders higher priorities than those for the armed services, thereby adversely affecting U.S. military readiness.