Export Controls: State and Commerce Department License Review
Times Are Similar (01-JUN-01, GAO-01-528).
The United States defense industry and some U.S. and allied
government officials have suggested in recent years that the U.S.
export control process be reformed. Much of the debate on
reforming the process has focused on the amount of time required
to process an export license application. As a result GAO
analyzed the time it takes to process export license
applications. GAO found that the average State Department license
application review took 46 days, while the average Commerce
Department review took 50 days. Several variables had an impact
on the time it took to review applications. The commodity being
exported most affected the time of application review in both
Departments.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-528
ACCNO: A01113
TITLE: Export Controls: State and Commerce Department License
Review Times Are Similar
DATE: 06/01/2001
SUBJECT: Exporting
Licenses
Dept. of Commerce Control List
Dept. of Commerce Export Control
Automated Support System
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GAO-01-528
Briefing Report to the Chairman and Ranking Member, Subcommittee on
Readiness and Management Support, Committee on Armed Services, U. S. Senate
United States General Accounting Office
GAO
June 2001 EXPORT CONTROLS State and Commerce Department License Review Times
Are Similar
GAO- 01- 528
Page i GAO- 01- 528 Export Controls Letter 1
Briefing Section I State Department Export Licensing Process and Timing 8
Briefing Section II Commerce Department Export Licensing Process and Timing
28
Appendix I Scope and Methodology 44
Appendix II Comments From the Department of State 46
Appendix III Comments From the Department of Commerce 48
Figures
Figure 1: State and Commerce Departments? License Processing Time, Fiscal
Year 2000 2 Figure 2: Final Action of State and Commerce Departments?
Licenses, Fiscal Year 2000 5 Contents
Page 1 GAO- 01- 528 Export Controls
June 1, 2001 The Honorable James M. Inhofe Chairman The Honorable Daniel
Akaka Ranking Member Subcommittee on Readiness
and Management Support, Committee on Armed Services United States Senate
The U. S. defense industry and some U. S. and allied government officials
have suggested in recent years that the U. S. export control process be
reformed. Much of the debate on reforming the process has focused on the
amount of time required to process an export license application. As a
result, you asked that we analyze the time it takes to process export
license applications. In March 2001, we briefed your staff on the results of
our work. As agreed with your staff, we are providing the briefing as a
report (see app. I for a discussion of our scope and methodology). As also
agreed with your staff, we plan further work to determine why some license
applications take significantly longer than the average time to process and
will be reporting on this issue in the future.
Under the authority of the Arms Export Control Act, 1 the State Department
controls the export and import of defense articles and services. The State
Department?s International Traffic in Arms Regulations provide licensing
procedures and define the defense articles and services that require a
license in the U. S. Munitions List. 2 The regulations, however, do not
mandate or recommend timelines for the review of license applications.
The Export Administration Act 3 and Executive Order 12981 grant the Commerce
Department authority to review and issue licenses for the export of dual-
use commodities (those having both commercial and military applications).
The Commerce Department?s Export Administration Regulations establish
procedures for licensing and define
1 22 U. S. C. secs. 2751 et seq. 2 22 C. F. R. secs. 120- 130. 3 50 U. S. C.
App. secs. 2401 et seq.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 528 Export Controls
items that require an export license in the Commerce Control List. 4 An
automated system tracks the time spent reviewing license applications both
within the Commerce Department and among other agencies. The executive order
mandates specific timelines for the review of dual- use license applications
and requires that the Commerce Department refer license applications to
other executive branch agencies for review. For example, the Department of
Defense reviews applications for national security concerns and the
Department of State reviews applications for foreign policy concerns.
In fiscal year 2000, the average State Department license application review
took 46 days while the average Commerce Department review took 50 days. 5 In
that fiscal year, the State Department completed over 46,000 license
application reviews and the Commerce Department completed over 11,000.
Figure 1 shows the time it took the State and Commerce Departments to
process licenses applications in 30- day increments.
Figure 1: State and Commerce Departments? License Processing Time, Fiscal
Year 2000
Source: GAO analysis of the State and Commerce Departments? data.
4 15 C. F. R. secs. 730- 774. 5 We measured review time as total elapsed
calendar time from receipt of a license application to the final action
taken. Average License
Application Processing Time for State and Commerce Is Similar
11 % 56 % 13 %
20 % 41 % 13 %
12 % 34 %
0 to 30 days 31 to 60 days 61 to 90 days 91 days and over State Department
46,048 Commerce Department 11,041
Page 3 GAO- 01- 528 Export Controls
The State Department had 23 licensing officers to review license
applications in fiscal year 2000. In addition to reviewing license
applications, these officers responded to inquiries from other agencies and
Congress. The State Department is currently hiring additional licensing
officers. The Commerce Department had 51 licensing officers to review
license applications in fiscal year 2000. Besides reviewing license
applications, these officers process several thousand commodity
classification requests and advisory opinions annually and, as at the State
Department, Commerce licensing officers are responsible for responding to
inquiries from other agencies and from the Congress.
We examined selected variables to determine their impact on the amount of
time needed to process license applications. These included the extent of
interagency review, the commodity being exported, the type of license
granted, and the country of destination of the planned export.
The interagency review process has a significant effect on the time needed
to process a license application at both the State and Commerce Departments.
The State Department?s Office of Defense Trade Controls processes two-
thirds of the license applications it receives without an interagency
review. For fiscal year 2000, the State Department took an average of 23
days to reach a decision on these license applications. The other one- third
of license applications submitted to the State Department are referred to
other agencies through the interagency review process and, in fiscal year
2000, took an average of 91 days before State reached a final decision. For
fiscal year 2000, the Commerce Department sent 83 percent of its license
applications out for interagency review. 6 These reviews averaged 54 days to
reach a final decision, as opposed to an average of 28 days for the 17
percent not referred for interagency review.
The commodity being exported and the type of license being requested had a
significant effect on processing time at the State Department. For the State
Department, the license applications to export launch vehicles and missiles;
military and space electronics; fire control systems, guidance systems and
night vision equipment; and space systems and technology
6 Executive Order 12981 grants authority for the Departments of State,
Defense, and Energy to review any license applications submitted to the
Department of Commerce. The order allows these agencies to indicate that
they do not wish to review certain types of licenses. Several Variables
Affect Processing Time
Page 4 GAO- 01- 528 Export Controls
took the longest to process. License applications for agreements 7 and for
temporary export licenses were the license types that took the longest to
process. A State Department official said that agreements are generally the
most complex cases and temporary exports frequently require interagency
review because they are related to marketing efforts for defense articles to
a country that does not already have those articles.
For the Commerce Department, the commodity being exported also affected the
time taken to process the license application. The Commerce Department?s
Export Control Automated Support System does not differentiate the time it
takes to process different license types. Therefore, we were not able to
determine variations in time by license type for Commerce Department
applications. License applications to export commodities in the computer,
electronics, telecommunications/ information security, lasers, and
navigation/ avionics categories had the longest review times.
In general, the country of destination is not a major differentiating factor
when measuring State Department license application processing time, but can
be in the Commerce Department process. Seventy- seven percent of fiscal year
2000 license applications submitted to the State Department for North
Atlantic Treaty Organization (NATO) countries and 75 percent of license
applications for non- NATO countries were completed within 60 days. State
Department officials stated that the lack of variation in processing time
for applications to export to NATO versus non- NATO countries can be
explained by the fact that non- NATO countries to which we export munitions
list items are generally our allies, for example, Japan or Australia.
Therefore, as a group these countries have a relationship to the United
States that is similar to that of our NATO allies. On the other hand, the
Commerce Department?s restrictions for NATO countries are not as stringent
as for non- NATO countries. Furthermore, many of the license applications
received by the Commerce Department are for licenses to export to countries
that are not our allies and may in some cases be considered countries of
concern. For fiscal year 2000, nearly 90 percent of license applications for
exports to NATO countries were completed in
7 Agreements include manufacturing license agreements that allow a U. S.
person to grant a foreign person an authorization to manufacture defense
articles abroad; technical assistance agreements that permit the performance
of defense services or the disclosure of technical data; and distribution
agreements that allow the establishment of a warehouse or distribution point
abroad for defense articles exported from the United States for distribution
to entities in an approved sales territory.
Page 5 GAO- 01- 528 Export Controls
60 days; in contrast, only 73 percent of applications to export to nonNATO
countries were completed in 60 days.
The results of license application reviews are generally similar for State
and Commerce. Figure 2 shows the final actions associated with the State and
Commerce Departments? license application reviews for fiscal year 2000. Over
80 percent of license applications at both Departments were approved.
However, of the 86 percent of applications that were approved by State
Department for fiscal year 2000, about one- third were approved with
conditions that limited the use of the exported item. Nearly all of the
fiscal year 2000 Commerce Department license application were approved with
conditions.
Figure 2: Final Action of State and Commerce Departments? Licenses, Fiscal
Year 2000
Source: GAO analysis of the State and Commerce Departments? data.
In commenting on a draft of this report the State Department said that the
report demonstrates that the U. S. government munitions control system is
relatively efficient and responsive. State also commented that they have
supplemented their staff and their processing time has been reduced. The
data presented in this report provides information on the length of time
taken for license application reviews and some insight into reasons why some
reviews take longer than others. We do not believe the data is a sufficient
basis for conclusions on the efficiency of the munitions export license
control system. While the report shows that many licenses are Final
Dispositions of
License Applications by State and Commerce Are Similar
Agency Comments
State Department Licenses Commerce Department Licenses 1 % < 1 % 12 %
86 % 4 % 16 %
80 % Approved Returned without action Denied Other
Page 6 GAO- 01- 528 Export Controls
processed quickly, the report also shows that over 5,200 license
applications took over 90 days to review in fiscal year 2000. The causes for
long review times vary, and we have begun an assessment to determine why
these reviews take so long.
In commenting on a draft of the report, the Department of Commerce expressed
a strong belief that comparing the number of license applications the
Commerce and State Departments each process and the time each Department
takes to process license applications can invite readers to draw erroneous
conclusions about the two processes. We believe this report accurately
describes the Commerce and State Departments? processes for reviewing
license applications. While the report shows that overall processing time is
similar between the two systems, the report also describes additional
factors. For example, about two- thirds of State Department license
applications are reviewed internally while the Commerce Department sends
most applications out for interagency review as authorized by Executive
Order 12981.
Commerce also objected to our use of calendar days when calculating license
application processing time. The Commerce Department believes that we should
exclude federal holidays, weekends, and the time Commerce is permitted to
hold an application without action as prescribed in Executive Order 12981.
The Executive Order and the Export Administration Regulations both reference
calendar days and do not exclude weekends and federal holidays. We note in
our report that the results of our analysis may differ from Commerce?s
because we use calendar days.
Commerce also commented that it is misleading to compare their calendar time
with the State Department?s because State does not hold applications so that
applicants can provide additional information when it is needed in the
review of an application. Commerce is not correct. State and Defense
Department officials told us that both State licensing officers and Defense
license reviewers hold munitions license applications while awaiting
additional information from the applicant. However, the State Department
does not have a process to track licenses when they are held without action,
and as a result, we were not able to compare the time licenses are held at
both the State and Commerce Departments.
The Commerce Department provided additional comments on factors that they
believe underlie the results of our analysis. We did not address these
because they were beyond the scope of our review.
Page 7 GAO- 01- 528 Export Controls
The State and Commerce Departments? comments in full are included in
Appendix II and III.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
its issuance. At that time, we will send copies to Senator Jesse Helms,
Chairman, Committee on Foreign Relations; Senator Joseph Biden, Ranking
Member, Committee on Foreign Relations; Senator Phil Gramm, Chairman,
Committee on Banking, Housing, and Urban Affairs; Senator Paul Sarbanes,
Ranking Member, Committee on Banking, Housing, and Urban Affairs;
Representative Henry Hyde, Chairman, Committee on International Relations;
Representative Tom Lantos, Ranking Minority Member, Committee on
International Relations; Representative Bob Stump, Chairman, Committee on
Armed Services; and Representative Ike Skelton, Ranking Minority Member,
Committee on Armed Services. We will also send copies to the Honorable Colin
L. Powell, Secretary of State; the Honorable Donald L. Evans, Secretary of
Commerce; the Honorable Donald H. Rumsfeld, Secretary of Defense; and the
Honorable Mitchell E. Daniels, Jr., Director, Office of Management and
Budget. This report will also be made available on GAO?s home page http://
www. gao. gov.
If you or your staff have questions concerning this report, please contact
me at (202) 512- 4841. Others making key contributions to this report were
Blake Ainsworth, Raymond H. Denmark, Thomas J. Denomme, Minette D.
Richardson, and John P. Ting.
Katherine V. Schinasi Director, Acquisition and Sourcing Management
Briefing Section I: State Department Export Licensing Process and Timing
Page 8 GAO- 01- 528 Export Controls
The State Department?s approval authority for export licenses is established
in the Arms Export Control Act. Specific licensing procedures are explained
in the International Traffic in Arms Regulation. Companies that manufacture
defense articles or provide defense services are required to register with
the State Department?s Office of Defense Trade Controls. An exporter may
file a license application with the Office of Defense Trade Controls either
electronically or in hard- copy. Applications are assigned a number and
logged into the Office?s database. Briefing Section I: State Department
Export
Licensing Process and Timing
State Department License Process
Exporter files license application
Licensing officer initial review
Sent to Congress Log in and
distribute to licensing officer
Interagency review (34 percent)*
Licensing officer final review
Final action
License screening
*During FY 2000, 66 percent of license applications reached final action
without interagency review.
Briefing Section I: State Department Export Licensing Process and Timing
Page 9 GAO- 01- 528 Export Controls
Logged- in applications are assigned to licensing officers for initial
review according to the munitions categories. For example, munitions
categories include firearms, aircraft, ammunition, and spacecraft systems.
During this initial review, licensing officers decide whether an application
needs to be reviewed by other agencies, such as the Defense Department or
other State Department bureaus. 1 The names of the parties involved in the
application are also screened against a watch list of parties about whom
concerns have been raised to determine if more intensive reviews are
necessary. If an application is not referred to another agency for review,
the licensing officer can decide on the disposition of the application.
When agencies complete their review, they send their recommendation to the
Office of Defense Trade Controls. The State Department process does not
contain timelines for other agency reviews. The Defense Department, however,
instituted an internal requirement in October 1999 to complete and return
the results of its reviews within 31 days. When the Office of Defense Trade
Controls has received a response from all the agencies asked to review the
application, the file is returned to the licensing officer for final review
and disposition.
The State Department must notify Congress prior to approving applications
that involve exports of defense articles and services valued over $50
million or exports of major defense equipment valued over $14 million.
Several offices within the State Department must review the congressional
notification paperwork prior to its? submission to Congress. Notifications
are only delivered when Congress is in session. After notifying Congress,
the State Department must wait 15 days if the country is a NATO ally or 30
days for other countries. If Congress has no objection within the waiting
period, the Office of Defense Trade Controls can approve the export license.
In fiscal year 2000, about 120 applications were sent to Congress. The
processing time for these applications ranged from 54 to 847 days.
1 Since the license reviews conducted by other State Department offices and
bureaus are external to the office of Defense Trade Controls, we categorized
these reviews by these offices and bureaus as part of the interagency review
process.
Briefing Section I: State Department Export Licensing Process and Timing
Page 10 GAO- 01- 528 Export Controls
State Department Cases, Average Review Times, FY 1997- 2000
0 10
20 30
40 50
60 1997 1998 1999 2000
Number of days
Source: GAO analysis of State Department data. 32 days
39 days 48 days 46 days
Fiscal year
Briefing Section I: State Department Export Licensing Process and Timing
Page 11 GAO- 01- 528 Export Controls
Average munitions license processing time increased from 32 days in fiscal
year 1997 to 48 days in fiscal year 1999; but it improved to 46 days in
fiscal year 2000. The median processing time, the point at which 50 percent
of the cases took more time and 50 percent less time, was 25 days for fiscal
year 2000. 1 State Department officials explained that several factors
contributed to the increased time including the Office of Defense Trade
Controls? loss of several experienced licensing officers, an increase in the
number of license agreement applications that generally require more review
time, and the transfer of licensing jurisdiction over commercial satellites
from the Commerce Department to the State Department in March 1999. The
improvement in fiscal year 2000 may be the result of the Defense
Department?s reform of its license review process. This reform took effect
in October 1999 and imposed an internal Defense Department deadline of 31
days to review and return license applications unless an extension is
granted.
1 We are reporting the median processing time because the average processing
time can be significantly affected by a small number of license applications
that had much longer review times than the majority of applications.
Briefing Section I: State Department Export Licensing Process and Timing
Page 12 GAO- 01- 528 Export Controls
State Department Cases, Review Time, FY 2000
56 percent 0 to 30 days 20 percent 31 to 60 days 13 percent 61 to 90 days 11
percent 91 days and over
State Department Cases 46,048
Source: GAO analysis of State Department data.
State Department Cases, Review Time, FY 1997- 2000
0 to 30 days 31 to 60 days 61 to 90 days 91 plus days Total FY 1997 30, 538
6,552 3, 718 3,060 43, 868
FY 1998 27, 532 7,036 4, 443 4,563 43, 574 FY 1999 24, 427 7,909 5, 107
6,595 44, 038 FY 2000 25, 865 9,074 5, 864 5,245 46, 048
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 13 GAO- 01- 528 Export Controls
Applications that took over 60 days have increased from about 15 percent of
the total in fiscal year 1997 to about 24 percent of the total in fiscal
year 2000. The number of applications over 60 days increased by 4,331 from
6,778 applications in fiscal year 1997 to 11,109 applications in fiscal year
2000, while those under 60 days decreased.
Briefing Section I: State Department Export Licensing Process and Timing
Page 14 GAO- 01- 528 Export Controls
State Department Cases, Referred and Not Referred to Other Agencies, FY 2000
Referred Not referred
Referred
Days to reach a decision * 91 days average * 69 days median
34 Percent 15,512 cases
66 Percent 30,536 cases
Not referred
Days to reach a decision * 23 days average * 15 days median
Source: GAO analysis of State Department data.
State Department Cases, Referred and Not Referred to Other Agencies, Review
Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
Not referred (66 percent of total cases)
0- 30 days 31- 60 days 61- 90 days 91+ days
Referred (34 percent of total cases)
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 15 GAO- 01- 528 Export Controls
In fiscal year 2000, the State Department referred about one- third of the
license applications to other organizations such as the Defense Department
or other State Department bureaus for in- depth technical or policy reviews.
Licensing officers rely on a State Department country policy handbook, their
own experience, and certain ?rules of thumb? to help determine which
applications need an outside review. Under these
?rules of thumb,? applications for license agreements and applications
involving new weapon systems are always sent for review.
The processing time for applications not referred to other organizations
averages 23 days with a median time of 15 days. The processing time for
licenses referred to other organizations averages 91 days with a median time
of 69 days. Applications not referred to other organizations are generally
completed within 30 days. In contrast, only 4 percent of applications
referred to other organizations are completed within 30 days. In fiscal year
2000, 695 of 30,536 applications not referred to other organizations, or 2
percent, took over 90 days. In contrast, 4,550 of a total 15,512 application
sent to other organizations, or 29 percent, took over 90 days.
Briefing Section I: State Department Export Licensing Process and Timing
Page 16 GAO- 01- 528 Export Controls
State Department Cases, Review Time by Commodity, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
Percent of total cases Firearms
(10 percent) Ammunition
(5 percent) Launch
vehicles and missiles (4 percent)
Tanks and vehicles
(4 percent) Aircraft
spares and engines (16 percent)
Military and space electronics (15 percent)
Fire control guidance and
night vision (6 percent)
0- 30 days 31- 60 days 61- 90 days 91+ days
Space systems and
technology (4 percent)
Other commodities
(7 percent) Agreements
(10 percent) Not
categorized (19 percent)
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 17 GAO- 01- 528 Export Controls
The United States Munitions List has 19 categories of items. The eight
largest categories are listed in this chart and account for 64 percent of
applications. In addition, 10 percent of all license applications in fiscal
year 2000 were for license agreements and 19 percent of license applications
were not categorized. The other 11 categories, which represent 7 percent of
license applications, include artillery projectors; concealment and
deception equipment; classified articles, technical data, and defense
services; explosives and propellants; military training equipment;
miscellaneous articles; nuclear weapons design and test equipment;
protective personnel equipment; submersible vessels; toxicologist agents;
and vessels of war.
Seventy- seven percent of firearm applications, 69 percent of ammunition
applications, 82 percent of tank and vehicle applications, and 60 percent of
aircraft, spare parts and engine applications were completed within 30 days.
The categories that took the longest to review were launch vehicles and
missiles; military and space electronics; fire control systems, guidance
systems, and night vision equipment; and space systems and technology.
Briefing Section I: State Department Export Licensing Process and Timing
Page 18 GAO- 01- 528 Export Controls
State Department Cases by License Type, Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
Percent of total cases 1 Permanent
licenses (64 percent)
License amendment
(14 percent) Temporary
import license (3 percent)
Temporary export license (6 percent)
General correspondence
(2 percent)
0- 30 days 31- 60 days 61- 90 days 91+ days
Agreements (10 percent)
Other (2 percent)
Source: GAO analysis of State Department data. 1 Due to rounding, the total
number of cases does not equal 100 percent.
Briefing Section I: State Department Export Licensing Process and Timing
Page 19 GAO- 01- 528 Export Controls
The State Department issues a variety of license types. These include
permanent licenses for munitions items, temporary licenses for both
munitions imports and exports, and license agreements between U. S. industry
and foreign entities to provide technical assistance or manufacturing
capability.
Fifty- eight percent of permanent license applications took less than 30
days, 84 percent of amendments to existing licenses took less than 30 days,
and 75 percent of temporary import licenses took less than 30 days. On the
other hand, only 29 percent of temporary export license applications and 23
percent of license agreements took less than 30 days. A State Department
official explained that license agreements are complex, require substantial
work by the licensing officers, and often require an interagency review. The
official also said that temporary exports require review because they are
related to marketing efforts for defense articles to a country that does not
already have these articles. The number of agreements has risen from 2,681
in fiscal year 1997, to 4,604 in fiscal year 2000. In fiscal year 2000,
agreements were 10 percent of all license applications and 57 percent of
agreement reviews took over 60 days.
General correspondence cases, which accounted for 2 percent of the fiscal
year 2000 license applications, mirrored the review times experienced with
agreements. State Department data shows that 52 percent of these cases took
over 60 days. State Department officials told us that general correspondence
submissions are difficult for the licensing staff, because correspondence
seeks clarification on licenses, advisory opinions prior to license
applications, or permission for an item transfer from one country to
another.
Briefing Section I: State Department Export Licensing Process and Timing
Page 20 GAO- 01- 528 Export Controls
State Department Cases, NATO/ Non- NATO Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
NATO (42 percent of total cases)
0- 30 days 31- 60 days 61- 90 days 91+ days
Non-NATO (58 percent of total cases)
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 21 GAO- 01- 528 Export Controls
The processing time for North Atlantic Treaty Organization (NATO) member
countries is similar to the time for non- NATO members. In discussing the
similarity of times for items exported to NATO versus nonNATO countries,
State Department officials explained that the lack of variation in
processing time for applications to export to NATO versus non- NATO
countries can be explained by the fact that non- NATO countries to which we
export munitions list items are generally our allies, for example, Japan or
Australia. Therefore, as a group these countries have a relationship to the
United States that is similar to that of our NATO allies. As a result, the
type of item or whether an agreement is involved has a more significant
effect on the time needed to process a license application than the country
of destination.
Briefing Section I: State Department Export Licensing Process and Timing
Page 22 GAO- 01- 528 Export Controls
State Department Cases, Recipient Countries with Over 1,000 License Cases,
Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100% Australia Canada France Germany Israel Italy Japan South
Korea Taiwan Turkey United
Kingdom 0- 30 days 31- 60 days 61- 90 days 91+ days
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 23 GAO- 01- 528 Export Controls
State received over 1,000 license applications for each of eleven countries.
These countries represented 58 percent of all applications processed in
fiscal year 2000.
Briefing Section I: State Department Export Licensing Process and Timing
Page 24 GAO- 01- 528 Export Controls
State Department Cases, Average Agency Review Time for FY 1997- 2000
0 10
20 30
40 50
60 70
80 90
100 1997 1998 1999 2000
DOD STATE
Number of Days
(other than the Office of Defense Trade Controls)
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 25 GAO- 01- 528 Export Controls
Referrals to other agencies account for significant additional time. The
length of interagency reviews has varied from fiscal years 1997 through
2000.
In fiscal year 2000, the Defense Department?s average review time was 32
days and the median was 29 days. Defense Department annual license reviews
for fiscal years 1997 through 2000 ranged from a low of 11,235 to a high of
14,295.
In fiscal year 2000, the State Department?s average review time was 36 days
and the median was 24 days. State Department bureaus and offices annual
license reviews for fiscal years 1997 through 2000 ranged from a low of
11,097 to a high of 13,628. This does not include reviews within the Office
of Defense Trade Controls since that Office is the licensing authority.
Beginning in fiscal year 2000, the Defense Department began tracking the
time needed to review license applications and has established deadlines for
completing their reviews. The Defense Department?s average processing time
dropped from 50 days in fiscal year 1999 to 32 days in fiscal year 2000.
Other agencies that review State Department license applications include the
Departments of Commerce and Energy, the National Aeronautics and Space
Administration, the Missile Technology Export Control Group, the National
Security Council, and the U. S. Customs Service.
Briefing Section I: State Department Export Licensing Process and Timing
Page 26 GAO- 01- 528 Export Controls
State Department Cases, Final Action, FY 2000
86 percent Approved 12 percent ReturnedWithout Action 1 percent Denied <1
percent Other
Source: GAO analysis of State Department data.
State Department Cases by Final Action, Review Time, FY 2000
0% 20%
40% 60%
80% 100%
Percent of total cases Approved
(55 percent) Approved with
conditions (31 percent)
Returned without action
(12 percent) Denied
(1 percent) Other
(<1 percent )
0- 30 days 31- 60 days 61- 90 days 91+ days
Source: GAO analysis of State Department data.
Briefing Section I: State Department Export Licensing Process and Timing
Page 27 GAO- 01- 528 Export Controls
In fiscal year 2000, the Office of Defense Trade Controls approved 86
percent of license applications. Fifty- five percent of the applications
were approved with no conditions; 31 percent were approved with conditions
that limit the use of the exported items; 12 percent were returned without
action; and 1 percent were denied. The remainder of these applications were
withdrawn, lost, or were requests to determine whether State or Commerce had
jurisdiction. Returning the application without action allows the applicant
to re- apply when certain conditions are met or when circumstances change.
Nearly three- quarters of approvals without conditions were completed within
30 days, and about half of the approvals with conditions took over 60 days.
Further, while denied, lost, withdrawn, and commodity jurisdiction
applications are 2 percent of total license applications, they represent 9
percent of the applications that took over 90 days.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 28 GAO- 01- 528 Export Controls
Briefing Section II: Commerce Department Export Licensing Process and Timing
Commerce Department License Process
Exporter files license application
Pre- screened
Upload to data system
Licensing officer review
Interagency review (83 percent)*
Return to licensing
officer
Final action
Enforcement review and screening
Dispute resolution
Timeline (days) 1 9 308590 *During FY 2000, 17 percent of license
applications reached final action without interagency review.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 29 GAO- 01- 528 Export Controls
The Commerce Department process for reviewing license applications to export
Commerce Control List commodities is governed by Executive Order 12981 dated
December 5, 1995. The Executive Order established clear process deadlines.
For example, agencies have 30 days to review license applications and the
entire license review process must be complete in 90 days. Exporters use the
Export Administration Regulations and the Commerce Control List to determine
whether a license application is needed, and if they are unsure, consult
with the Commerce Department. Exporters submit license applications either
in hard copy or in electronic form. About 60 percent of applications are
submitted electronically. Hardcopy submissions are manually screened for
completeness and scanned into the Export Control Automated Support System.
Supporting documentation is submitted and distributed in hardcopy. In most
cases, the system automatically assigns the application to a licensing
officer.
Once an application is entered into the data system, it is considered
?registered? and the timing mechanism mandated by the executive order is
activated. Within 9 days of the registration date, the licensing officer
determines a Commerce position. The application is either referred for
interagency review (83 percent) or sent for final Commerce Department
review. The 17 percent decided without referral to other agencies are
approved, denied, or returned to the applicant without action either for
additional information or because a license was not required.
The Commerce Department data system sends license applications
electronically to referral agencies. If agencies do not provide the Commerce
Department with a recommendation within 30 days, the Commerce Department
proceeds as if the agency agreed with the initial Commerce Department
position. Following the agencies? review, the licensing officer takes final
action on the application. However, a single agency disagreement with the
Commerce position will escalate the review to a higher level multi- agency
dispute committee for resolution.
Although the Executive Order requires that the entire process be completed
in 90 days, it allows the review ?clock? to be stopped at certain points.
For instance, the ?clock? can be stopped when the Commerce Department or
other agencies need additional information from the applicant. Our analysis
of Commerce Department data reflects calendar days, which includes the time
during which the Department stops the clock.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 30 GAO- 01- 528 Export Controls
Commerce Department Cases, Average Review Times, FY 1997- 2000
0 10
20 30
40 50
60 1997 1998 1999 2000
Number of days
Source: GAO analysis of Commerce Department data. 43 days 44 days
56 days 50 days
Fiscal year
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 31 GAO- 01- 528 Export Controls
The average Commerce Control List license application review time increased
from 43 days in fiscal year 1997 to 56 days in fiscal year 1999. The median
processing time for fiscal year 2000 was 36 days. Fiscal year 1999 was a
year that included embargoes against India and Pakistan as well as
controversy over satellite exports to China. According to Commerce
officials, these events delayed license reviews and explain, at least in
part, the increased average review time. Average review time improved to 50
days in fiscal year 2000.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 32 GAO- 01- 528 Export Controls
Commerce Department Cases, Review Time, FY 2000
41 percent 0 to 30 days 34 percent 31 to 60 days 12 percent 61 to 90 days 13
percent 91 days and over
Commerce Department Cases 11,041
Source: GAO analysis of Commerce Department data.
Commerce Department Cases, Review Time, FY 1997- 2000
0 t o 30 days 31t o 60 days 61 t o 90 days 91 pl us days Tot al FY 1997
4,421 4, 458 926 738 10, 543
FY 1998 4,550 4, 377 1,165 912 11, 004 FY 1999 4,364 4, 836 1,455 1, 913 12,
568 FY 2000 4,575 3, 754 1,312 1, 400 11, 041
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 33 GAO- 01- 528 Export Controls
License applications that took over 60 days to review have increased from
about 16 percent of the total in fiscal year 1997 to about 25 percent of the
total in fiscal year 2000. The number of applications over 60 days increased
by 1,048 from 1,664 applications in fiscal year 1997 to 2,712 applications
in fiscal year 2000.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 34 GAO- 01- 528 Export Controls
Commerce Department Cases, Referred and Not Referred to Other Agencies, FY
2000
Referred Not referred
Referred
Days to reach a decision * 54 days average * 40 days median
83 percent 9,210 cases
17 percent 1,831 cases
Not Referred
Days to reach a decision * 28 days average * 13 days median
Source: GAO analysis of Commerce Department data.
Commerce Department Cases, Referred and Not Referred to Other Agencies,
Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
Not referred (17 percent of total cases)
0- 30 days 31- 60 days 61- 90 days 91+ days
Referred (83 percent of total cases)
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 35 GAO- 01- 528 Export Controls
Executive Order 12981 grants authority for the Departments of State,
Defense, and Energy to review all license applications submitted to the
Department of Commerce. These agencies are concerned with applications
involving national security, missile technology, and nuclear, chemical and
biological weapons proliferation. The order, however, allows these agencies
to indicate to the Commerce Department that they do not wish to review
certain types of licenses. Eighty- three percent of license applications
were referred to other agencies in fiscal year 2000.
The review time for applications not referred to other agencies averaged 28
days with a median time of 13 days. Review time for license applications
referred to other agencies averaged 54 days with a median time of 40 days.
Seventy- six percent of Commerce Control List license applications that were
not referred to other agencies for review were completed within 30 days.
However, nearly half of those licenses were returned to the applicant
without action. During the nine days in which the Commerce Department
licensing officer initially reviews the application, the officer may request
additional information from the exporter. According to Commerce Department
officials, exporters have up to 20 days to provide the additional
information. If the exporter does not respond within the 20- day timeframe,
the licensing officer returns the license to the exporter without action.
Commerce Department officials told us that most returned applications were
sent back because exporters failed to provide additional information. In
addition, officials told us that applications may also be returned to
exporters without action because licensing officers discover during their
initial analysis that an export license is not required.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 36 GAO- 01- 528 Export Controls
Commerce Department Cases, Review Time by Commodity, FY 2000
0% 20%
40% 60%
80% 100%
Percent of total cases Miscellaneous,
facilities, equipment and nuclear (19 percent)
Chemicals and toxins
(15 percent) Materials
(4 percent)
0- 30 days 31- 60 days 61- 90 days 91+ days
Electronics (9 percent)
Computers (5 percent)
Telecom- munications
(13 percent) Lasers and
sensors (4 percent)
Navigation and avionics
(2 percent) Marine
(<1 percent) Propulsion
and space vehicles (5 percent)
Other (23 percent)
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 37 GAO- 01- 528 Export Controls
The Export Administration Regulations classify Commerce Control List
commodities according to 10 categories. In addition, there is a generic
commodity classification for items that do not fall under one of the 10
categories but are subject to Export Administration Regulations controls for
other reasons. Those items with the generic classification are identified in
the chart as ?other.? 1
Eighty- three percent of nuclear materials, facilities, equipment and
miscellaneous; 68 percent of materials, chemicals microorganisms and toxins;
60 percent of propulsion systems, space vehicles, and related equipment; and
41 percent of marine applications were completed within 30 days. The
categories that took the longest to review were materials processing;
computers; electronics; telecommunications/ information security; lasers;
navigation/ avionics; and ?other.?
1 License applications may include multiple, usually related, commodities.
Applications with disparate commodities may be referred for review to more
than one Commerce Department commodity control office.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 38 GAO- 01- 528 Export Controls
Commerce Department Cases, NATO/ Non- NATO Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100%
NATO (17 percent of total cases)
0- 30 days 31- 60 days 61- 90 days 91+ days
Non-NATO (83 percent of total cases)
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 39 GAO- 01- 528 Export Controls
License applications for exports to NATO countries tend to be reviewed
faster than applications for exports to non- NATO countries. Sixty- one
percent of applications for exports to NATO countries were completed within
30 days and nearly 90 percent were completed within 60 days. Thirty- eight
percent of applications for exports to non- NATO countries were completed in
30 days and 73 percent were completed within 60 days.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 40 GAO- 01- 528 Export Controls
Commerce Department Cases, Recipient Countries With Over 300 license Cases,
Review Time, FY 2000
0% 10%
20% 30%
40% 50%
60% 70%
80% 90%
100% Canada China Cuba India Israel Japan Mexico Russia Taiwan
0- 30 days 31- 60 days 61- 90 days 91+ days
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 41 GAO- 01- 528 Export Controls
Commerce received over 300 license applications for each of nine countries.
These countries represented 52 percent of all applications processed in
fiscal year 2000. License applications for exports to Canada had the
shortest review times. About 98 percent of all license applications for
exports to Canada were reviewed and completed within 30 days.
India and China accounted for nearly half of the Commerce Control List
export licenses that took more than 90 days to review. India was sanctioned
during fiscal year 1999 for its nuclear weapons activities. As a result, the
Commerce Department adopted a policy of denying exports and reexports of
items controlled for nuclear and missile technology reasons to India. Those
sanctions continued through fiscal year 2000 and may have contributed to the
lengthy review times for exports to India.
On the other hand, the majority of licenses for exports to Cuba are reviewed
within 60 days. Cuba is an embargoed destination as defined by Export
Administration Regulations. This means that all items on the Commerce
Control List require a license for export to Cuba. In addition, most other
items subject to the Export Administration Regulations but not on the
Commerce Control List also require a license for export to Cuba. During
fiscal year 2000, 95 percent of commodities licensed for export to Cuba were
items that were not on the Commerce Control List but were subject to the
Export Administration Regulations. A great many of those items were medical
supplies. During fiscal year 2000, the Commerce Department reviewed 340
license applications for exports to Cuba. Commerce completed 87 percent of
these reviews in less than 60 days.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 42 GAO- 01- 528 Export Controls
Commerce Department Cases, Final Action, FY 2000
80 pe rce nt Approved 16 percent Returned Without Action 4 percent Denied
Source: GAO analysis of Commerce Department data.
Commerce Department Cases, Review Time by Final Action, Review Time, FY 2000
0% 20%
40% 60%
80% 100%
Approved (80 percent of total cases)
0- 30 days 31- 60 days 61- 90 days 91+ days
Returned Without Action (16 percent of total cases) Denied
(4 percent of total cases)
Source: GAO analysis of Commerce Department data.
Briefing Section II: Commerce Department Export Licensing Process and Timing
Page 43 GAO- 01- 528 Export Controls
The majority of Commerce Control List license applications are approved. As
the chart shows, 80 percent of licenses were approved during fiscal year
2000. Of the licenses that were approved, all but three carried conditions
to be met for approval. The Commerce Department system has 48 standard
conditions that may be applied to each license as warranted and has a
provision for additional conditions that licensing officers may apply. For
example, 1 of these 48 standard conditions states that resale, transfer, or
reexport of items listed on a license is not authorized without prior
authorization by the U. S. government. Another standard condition requires
that items be made available for periodic on- site inspection.
While most approvals and returns without action were completed in 60 days or
less, two- thirds of denials, about 4 percent of all Commerce Control List
license applications, took over 90 days to complete. Only five applications
that had not been referred to other agencies were denied and two of them
took over 90 days to complete.
Appendix I: Scope and Methodology Page 44 GAO- 01- 528 Export Controls
To determine how long it takes to process State and Commerce Department
licenses, we obtained and analyzed the State and Commerce Department?s
license data for fiscal years 1997 through 2000. The data was extracted
based on the date of final action on each license. We analyzed the data to
determine what types and categories of licenses took the longest to review.
For Commerce Department processing, Executive Order 12981 allows for certain
actions not to be counted in calculating time; however, our analyses
included the actual elapsed time. We calculated time for both the State and
Commerce Departments license reviews based on the receipt date and final
action date of license applications. Further, our analysis of both databases
is dependent on the reliability of the data provided by the State and
Commerce Departments.
The State Department does not have a data dictionary that explains its data.
As a substitute, we discussed key elements of the database with a State
Department representative to ensure that we accurately interpreted the data.
In a recent review of the Office of the Defense Trade Controls, the State
Department Inspector General sampled selected elements of the database and
found data entry errors. While conducting our analysis, we also found data
entry inaccuracies. We worked with a State Department representative to
correct some of these inaccuracies. However, some data fields did not have
entries resulting in incomplete data. Because of the lack of a data
dictionary and the inaccurate and incomplete data, we are not certain of the
reliability of the State Department?s data.
The Commerce Department has a data dictionary and built- in data edit
protocols for identifying and correcting major discrepancies. Since cases
are transmitted to reviewing offices and agencies via the data system, most
of the data is recorded automatically. The licensing officer records all
other data. During our analysis, we found some minor inaccuracies that did
not adversely impact the overall reliability of the data. The Commerce
Department Inspector General has reported that this data is sufficiently
reliable. However, there is separate ongoing GAO work concerning the
Commerce Department?s Information Security Management program that may
comment on the reliability of the Department?s Export Control Automated
Support System. As a result, we are not commenting on the reliability of the
data at this time.
In both cases, however, our analysis is based on the best available data. To
understand the State and Commerce Department?s process, we reviewed
regulations and discussed the processes with State, Commerce, and Defense
Department officials. We also held discussions with Appendix I: Scope and
Methodology
Appendix I: Scope and Methodology Page 45 GAO- 01- 528 Export Controls
representatives from seven companies and industry representatives to obtain
their views on the State and Commerce Department processes.
We conducted our work from June 2000 through May 2001 in accordance with
generally accepted government auditing standards.
Appendix II: Comments From the Department of State Page 46 GAO- 01- 528
Export Controls
Appendix II: Comments From the Department of State
Appendix II: Comments From the Department of State Page 47 GAO- 01- 528
Export Controls
Appendix III: Comments From the Department of Commerce
Page 48 GAO- 01- 528 Export Controls
Appendix III: Comments From the Department of Commerce
Note: GAO comments supplementing those in the report text appear at the end
of this appendix.
Appendix III: Comments From the Department of Commerce
Page 49 GAO- 01- 528 Export Controls
See comment 1.
Appendix III: Comments From the Department of Commerce
Page 50 GAO- 01- 528 Export Controls
Appendix III: Comments From the Department of Commerce
Page 51 GAO- 01- 528 Export Controls
See comment 1. Now on p. 3.
Now on pp. 3 and 4. See comment 3.
Now on p. 3. See comment 2.
Appendix III: Comments From the Department of Commerce
Page 52 GAO- 01- 528 Export Controls
See comment 3. Now on p. 29.
See comment 4. Now on p. 28. Now on p. 4.
Appendix III: Comments From the Department of Commerce
Page 53 GAO- 01- 528 Export Controls
See comment 6. See comment 5.
See comment 3.
Appendix III: Comments From the Department of Commerce
Page 54 GAO- 01- 528 Export Controls
See comment 7. Now on p. 33. Now on p. 31.
Appendix III: Comments From the Department of Commerce
Page 55 GAO- 01- 528 Export Controls
Now on p. 35.
Appendix III: Comments From the Department of Commerce
Page 56 GAO- 01- 528 Export Controls
See comment 3. Now on p. 41. Now on p. 39.
See comment 8. Now on p. 37.
Appendix III: Comments From the Department of Commerce
Page 57 GAO- 01- 528 Export Controls
See comment 3. Now on p. 43.
Appendix III: Comments From the Department of Commerce
Page 58 GAO- 01- 528 Export Controls
The following are GAO?s comments on the Department of Commerce?s letter
dated May 17, 2001.
1. Defense Department officials told us that their engineers perform similar
technical analysis on both State and Commerce license applications.
2. This information is already included in the report. 3. Text revised. 4. A
footnote was added for clarification. 5. Obtaining intelligence information
is an important part of the licensing
process and adds time. 6. Commerce is not correct. State and Defense
Department officials told
us that both State licensing officers and Defense license reviewers hold
munitions license applications while awaiting additional information from
the applicant.
7. The Executive Order and Export Administration Regulations state that
agencies that fail to make a recommendation within the required 30- day
period are ?? deemed to have no objection to the?? Commerce Department?s
final decision regarding the license application in question. Additional
time occurs when agencies disagree on the final disposition for a license
application and not when they fail to make a recommendation.
8. We defined ?EAR99? items as ?other? because readers of this report may
not be familiar with the Export Control Classification Number or Commerce
Control List classification systems. GAO Comments
(707516)
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