Defense Trade: Arms Export Control Vulnerabilities and
Inefficiencies in the Post-9/11 Security Environment (07-APR-05,
GAO-05-468R).
In the aftermath of the September 11, 2001, attacks and the
subsequent global war on terror, the nature of threats facing
this country has changed, and as a result, policies and
structures from previous decades need to be rethought. One area
for reexamination in this changed security environment is the
arms export control system. The State Department oversees this
system to ensure that arms exports are consistent with U.S.
national security and foreign policy goals. As such, the State
Department is responsible for authorizing arms exports, which is
generally done through export licensing, and for monitoring
exporter compliance with governing laws and regulations. In so
doing, the department needs to balance complex and competing
interests. Specifically, the State Department must limit the
possibility that exports will erode the U.S. military's
technological advantage and prevent U.S. arms from falling into
the wrong hands. At the same time, the department needs to allow
legitimate defense trade with allies to occur. At a Congressional
request, we are providing highlights from our most recent report
on the arms export control system and observations regarding
weaknesses and inefficiencies in the system based on our larger
body of export control work.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-468R
ACCNO: A21038
TITLE: Defense Trade: Arms Export Control Vulnerabilities and
Inefficiencies in the Post-9/11 Security Environment
DATE: 04/07/2005
SUBJECT: Counterterrorism
Export regulation
Exporting
Foreign military arms sales
International trade regulation
Licenses
National defense operations
National preparedness
Performance measures
Regulatory agencies
Strategic planning
Terrorism
Arms control
Homeland security
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GAO-05-468R
United States Government Accountability Office Washington, DC 20548
April 7, 2005
The Honorable Henry J. Hyde
Chairman, Committee on International Relations
House of Representatives
Subject: Defense Trade: Arms Export Control Vulnerabilities and
Inefficiencies in the Post-9/11 Security Environment
Dear Mr. Chairman:
In the aftermath of the September 11, 2001, attacks and the subsequent
global war on terror, the nature of threats facing this country has
changed, and as a result, policies and structures from previous decades
need to be rethought. One area for reexamination in this changed security
environment is the arms export control system. The State Department
oversees this system to ensure that arms exports are consistent with U.S.
national security and foreign policy goals. As such, the State Department
is responsible for authorizing arms exports,1 which is generally done
through export licensing, and for monitoring exporter compliance with
governing laws and regulations. In so doing, the department needs to
balance complex and competing interests. Specifically, the State
Department must limit the possibility that exports will erode the U.S.
military's technological advantage and prevent U.S. arms from falling into
the wrong hands. At the same time, the department needs to allow
legitimate defense trade with allies to occur.
At your request, we are providing highlights from our most recent report
on the arms export control system2 and observations regarding weaknesses
and inefficiencies in the system based on our larger body of export
control work.3 Enclosure I contains summaries of our arms export-related
reports from fiscal year 1999 to date, along with information on the
status of implementation of our recommendations by the various departments
involved with arms exports. Enclosure II lists related products we have
issued over the last decade. These reports were prepared in accordance
with generally accepted government auditing standards. Because this report
and its enclosures are based on those prior reports, we did not request
agency comments.
Summary
The State Department has not made significant changes to the arms export
control system since the September 2001 terror attacks. State Department
officials maintain that such changes are not needed. However, their
position is not based on systematic evaluations of the effectiveness of
controls. Over the years, we have identified weaknesses in the arms export
control system and made corrective
1"Arms" refers to defense articles and services as specified in 22 U.S.C.
2778.
2GAO, Defense Trade: Arms Export Control System in the Post-9/11
Environment, GAO-05-234 (Washington, D.C.: Feb. 16, 2005).
3This information was initially prepared for a hearing that had been
scheduled for April 7, 2005.
recommendations, a number of which the departments involved have not yet
implemented. Weaknesses include disagreements and poor coordination over
whether certain items are controlled by the State Department, as well as
limitations in the government's ability to ensure that exports not needing
prior government approval comply with export laws and regulations. These
weaknesses are compounded by challenges facing the enforcement community,
including constrained budgets and limited resources. Taken together, these
weaknesses and challenges create vulnerabilities in the arms export
control system and undermine assurances that the system is protecting U.S.
interests.
To facilitate arms exports to allies, the State Department has sought over
the last several years to reduce processing times for license
applications. The department undertook efforts, such as reallocating staff
and implementing initiatives, to streamline and expedite the processing of
export license applications. However, the State Department's median
processing times4 for arms export cases5-after declining since fiscal year
1999-began increasing in fiscal year 2003. Further, the department's
streamlining initiatives have generally not met established goals and have
not been widely used by exporters.
Background
The U.S. export control system for defense-related items involves multiple
federal agencies and is divided between two regulatory bodies-one for arms
and another for dual-use items that have both military and commercial
applications (see table 1).
Table 1: Roles and Responsibilities in the Arms and Dual-Use Export
Control Systems
Principal regulatory
body Mission Statutory authority
Implementing regulations
State Department's Regulates export of arms by giving primacy to
Arms Export Control Acta International Traffic in Arms Regulations
Directorate of Defense Trade Controls
national security and foreign policy concerns Commerce Department's Regulates
export of dual-use items by weighing Export Administration
Export Administration Regulations
Actb
Bureau of Industry and Security
economic, national security, and foreign policy interests
Other federal agencies
Defense Department Provides input on which items should be controlled by
either the State Department or the Commerce Department and conducts
technical and national security reviews of export license applications
submitted by exporters to either the State Department or the Commerce
Department
Homeland Security Enforces arms and dual-use export control laws and
regulations through border inspections and
c
Department investigations
Justice Department Prosecutes suspected violators of arms and dual-use
laws
Source: Cited laws and regulations (data); GAO (analysis).
a
22 U.S.C. 2751 et. seq.
b 50 U.S.C. App. 2401 et. seq. Authority granted by the act terminated on
August 20, 2001. Executive Order 13222 continues the export control regime
established under the act and the implementing Export Administration
Regulations.
4The median processing time is the point at which 50 percent of the cases
took more time and 50 percent took less time. We are reporting the median
processing time because the average, or mean, processing time can be
significantly affected by a small number of cases that had much longer
review times than the majority of cases.
5Arms export cases include applications for the permanent export of arms,
the temporary export and import of arms, and agreements between U.S.
industry and foreign entities to provide technical assistance or
manufacturing capability, as well as requests for amendments to existing
licenses and jurisdiction determinations.
c The Homeland Security Department shares responsibility with the Commerce
Department for the enforcement of dual-use export control laws and
regulations.
Implementing regulations for both the Departments of State and Commerce
contain lists that identify which items each department controls and
establish requirements for exporting those items. Exporters are
responsible for determining which department controls the items they are
seeking to export and what the requirements for export are. The two
departments' controls differ in several key areas. In most cases, the
Commerce Department's controls over dual-use items are less restrictive
than the State Department's controls over arms. For example, many items
controlled by the Commerce Department do not require licenses for export
to most destinations, while State-controlled items generally require
licenses to most destinations. Also, Commerce-controlled items may be
exported to China while most arms exports to China are prohibited.
Arms Export Control System Fundamentally Unchanged Despite Vulnerabilities
After the September 2001 terror attacks, the State Department did not make
fundamental or significant changes to the arms export control system, its
objectives, or implementing regulations. State Department officials
maintain that such changes are not needed because they regard the system
as effective in keeping U.S. defense items out of enemy hands while
ensuring that allies can obtain needed arms. However, the department's
conclusions regarding the sufficiency of its controls both prior to
September 2001 and afterward appear to be without basis. For example, the
State Department has not provided evidence that it systematically assesses
the effectiveness of its controls or its streamlining initiatives, which
were introduced in 2000 and characterized as a major post-Cold War
adjustment to the system.
Although the State Department has not performed systematic assessments, we
have. Our current and prior reports have clearly documented weaknesses and
challenges in the arms export controls system that point to
vulnerabilities in the system and its ability to protect U.S. interests.
The weaknesses we have identified relate to the most basic aspects of the
arms export control system-which items should be controlled and when those
items should be subject to government review prior to export. Weaknesses
include a lack of clarity as to whether an item is State-controlled or
Commerce-controlled, thereby increasing the risk that defense items will
be improperly exported, and limitations in the government's ability to
ensure that exports exempt from licensing requirements comply with laws
and regulations. Exacerbating these weaknesses are various challenges to
enforcement agencies' ability to carry out their responsibilities.
A number of our recommendations to address these weaknesses and challenges
have not yet been implemented.
Weaknesses and Challenges in the Arms Export Control System
Fundamental to the U.S. export control system is the determination as to
which items are controlled by the State Department and which are
controlled by the Commerce Department. A lack of clear jurisdiction and
improper decisions regarding jurisdiction create the risk that
defense-related items will be exported without the proper level of
government review and control to protect national interests. By not
clearly establishing which department has jurisdiction over some items,
the government leaves the determination of jurisdiction to the exporter,
who by default can then determine which national policy interests are to
be considered and acted upon when defense-related items are exported. As
we have reported in the past, there are persistent disagreements between
the Departments of State and
Commerce regarding jurisdiction and problems with the processes for
deciding which department has jurisdiction. Jurisdictional disagreements
involve sensitive defense items, such as those related to missiles and
night vision. These jurisdictional disagreements and problems are rooted
in differing interpretations of the regulations by the departments and
minimal or inefficient coordination between the departments. In the end,
the departments are not held accountable for making clear and transparent
decisions about export control jurisdiction.
Once an item has been determined to be State-controlled, generally a
State-issued license is required before the item can be exported. However,
the State Department's regulations allow exemptions from licensing
requirements under certain conditions. For example, some arms exports to
Canada do not require licenses. When exemptions are used, the burden for
ensuring the exports' legitimacy shifts from the State Department to
exporters. To help ensure that exemptions are properly used and items are
safeguarded, exporters need sufficient guidance to minimize the
possibility of incorrect interpretations of the regulations and improper
exports. As we have reported, a lack of regulatory clarity has resulted in
exporters inconsistently implementing exemptions and related reporting
requirements. State Department officials have, at times, provided
conflicting information about the proper use of exemptions to exporters
and enforcement officials.
Enforcement officials have raised serious concerns regarding their ability
to enforce the proper use of exemptions and identified other challenges.
Homeland Security Department officials explained that they generally
oppose licensing exemptions because items can be more easily diverted
without detection, which complicates potential investigations. Justice
Department officials also informed us that prosecuting export violations
under an exemption is difficult because of the challenges in acquiring
evidence of criminal intent, given the limited "paper trail" available to
prove violations. In addition to these difficulties, enforcement officials
cited other challenges in enforcing arms export control laws and
regulations that include budgetary constraints, limited staff resources,
and difficulties in hiring and retaining experienced staff.
Arms Export Control System Hampered by Inefficiencies and Ineffective
Initiatives
While many license applications appropriately take time to review because
of the need to consider different viewpoints, State Department
inefficiencies in the processing of applications have created unnecessary
delays. Over the last several years, the State Department has initiated
various efforts to reduce license application processing times in response
to exporter complaints. For example, the department enlarged its staff of
licensing officers, who review applications, and developed a new automated
system for processing applications.
However, after declining since fiscal year 1999, median processing times
for arms export cases began increasing in fiscal year 2003 (see figure 1).
Data provided on the State Department's Web site indicate that processing
times have continued to increase throughout fiscal year 2004 and the start
of fiscal year 2005.
Figure 1: Median Processing Time for Cases, Fiscal Years 1999 - April 2004
(in days)
Days
30
25
20
15
10
5
0
1999 2000 2001 2002 2003 2004
Fiscal year
Source: State Department (data); GAO (analysis).
Although the State Department increased the number of licensing officer
positions between fiscal years 2000 and 2003 to 37, it has since
transferred 5 of these positions to other activities. This raises
questions regarding the department's commitment to its stated goal of
reducing processing times. In addition, use of the State Department's new
automated system for processing applications is limited. While a senior
department official described the new system as the most significant
effort to improve efficiency, the State Department reported that only 6
percent of applications were processed using the new system one year after
it was introduced.
As part of its efforts to reduce processing times, the State Department
implemented a series of initiatives primarily designed to expedite the
processing of license applications that meet certain criteria. However, we
found that processing time goals for applications submitted under the
initiatives have generally not been met. For example, only 19 percent of
the applications submitted under the initiatives for Operations Enduring
Freedom and Iraqi Freedom were processed within the goals set by the
department.6 Additionally, several initiatives have not been widely used
by exporters. For example, over the last 5 years, the State Department has
received only three applications for comprehensive export authorizations
that were intended to streamline licensing by providing advance approval
for a range of exports associated with multinational defense efforts, such
as the Joint Strike Fighter.
The initiatives' lack of success is not surprising. When many of these
initiatives were announced in 2000, we determined that there was no
analysis of the problems that the initiatives were intended to remedy or
demonstration of how they would achieve identified goals. As a result,
there was little assurance that the initiatives would result in
improvements to the arms export control system.
6This covers license applications processed between October 1, 2001, and
April 30, 2004.
Conclusions
At a time of evolving threats and changing allied relationships, it is
appropriate to ask how Congress can
be assured that the arms export control system is achieving its intended
purposes-protecting national
security and promoting foreign policy interests. To accomplish such
purposes, an export control system
needs to clearly define what should be controlled and how, so that it is
understandable by exporters and
enforceable by the government. The system should also be able to readily
prioritize which export
applications can be approved quickly and which require greater scrutiny to
consider the various national
interests at stake. Our recent and past work casts doubts on the
effectiveness and efficiency of the
system. In our opinion, therefore, it is time to step back and rethink
whether the current system can
appropriately protect U.S. interests in the post-9/11 security
environment.
We will send copies of this report to interested congressional committees.
We will also provide copies to
the Secretaries of Commerce, Defense, Homeland Security, and State; the
Attorney General; the
Director, Office of Management and Budget; and the Assistant to the
President for National Security
Affairs. In addition, this report will be available at no charge on the
GAO Web site at http://www.gao.gov.
If you or your staff have questions concerning this report, please contact
me at (202) 512-4841. Key
contributors to this report were Anne-Marie Lasowski, Johana R. Ayers, E.
Brandon Booth, Masha
Pastuhov-Pastein, and Lily J. Chin.
Sincerely yours,
Katherine V. Schinasi
Managing Director
Acquisition and Sourcing Management
Enclosures
Enclosure I: Prior GAO Reports on Arms Exports
Over the last several years, we have issued numerous reports regarding
exports of U.S. arms, which can be sold either directly by companies or by
the U.S. government. Direct commercial sales of arms are regulated by the
State Department's export control system, while U.S. government sales
occur through the Foreign Military Sales (FMS) program.
For both methods of sale, we have identified weaknesses in two areas: (1)
the U.S. government's controls on arms to ensure that U.S. interests are
protected and (2) the mechanisms to ensure that these exports comply with
U.S. laws and regulations. We have also identified inefficiencies in the
administration and management of both the arms export control system and
the FMS program. To correct those weaknesses and inefficiencies, we have
made multiple recommendations. These recommendations have generally
focused on clarifying regulations and guidance, improving interagency
coordination, and obtaining sufficient information for decision making.
Based on follow ups with the various departments, we determined that a
number of these recommendations have not yet been implemented.1 Tables 2
and 3 summarize what we found, what we recommended, and what actions, if
any, the departments have taken to implement those recommendations.
Direct commercial sales: These sales are regulated through the arms export
control system, which is overseen by the State Department under the
authority of the Arms Export Control Act. The State Department maintains a
list of the items subject to its export controls. Prior to exporting
State-controlled items to either overseas companies or governments,
companies generally need to obtain State-issued licenses. The Defense
Department assists the State Department by providing input on which items
should be State-controlled and by conducting technical and national
security reviews of export license applications. The State Department's
controls on arms exports are separate from those maintained by the
Commerce Department on the export of dual-use items, which have both
military and commercial applications. The State and Commerce Departments'
controls differ in several key areas. For example, many items controlled
by the Commerce Department do not require licenses for export to most
destinations, and Commerce-controlled items may be exported to China while
most arms exports to China are prohibited.
1GAO's standard practice is to follow up with departments to periodically
determine the status of open recommendations.
Table 2: 1999-2004 GAO Reports on the Arms Export Control System
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed (Oct. 9, 2001, GAO-02-120)
Background: The United States has committed to work with other countries
through the Missile Technology Control Regime to control the export of
missile-related items. The regime is a voluntary agreement among member
countries to limit proliferation and consists of common export policy
guidelines and a list of items to be controlled. In 1990, Congress amended
existing export control statutes to strengthen missile-related export
controls consistent with U.S. commitments to the regime. Under the amended
statutes, the Commerce Department is required to place regime items that
are dualuse on its list of controlled items. All other regime items are to
appear on the State Department's list of controlled items.
Main issues: The Departments of State and Commerce have not clearly
determined which department has jurisdiction over almost 25 percent of the
items that the United States agreed to control as part of its regime
commitments. The lack of clarity as to which department has jurisdiction
over some regime items may lead an exporter to seek a Commerce Department
license for a militarily sensitive item controlled by the State
Department. Conversely, an exporter could seek a State Department license
for a Commerce-controlled item. Either way, exporters are left to decide
which department should review their exports of missile items and, by
default, which policy interests are to be considered in the license review
process GAO recommendations
Departments of Commerce and State
o jointly review the listing of items included on the Missile Technology
Control Regime list, determine the appropriate jurisdiction for those
items, and revise their respective export control lists to ensure that
proposed exports of regime items are subject to the appropriate review
process
Action taken
The Departments of Commerce and State have not implemented our
recommendations despite initially agreeing to do so.
Export Controls: Processes for Determining Proper Control of
Defense-Related Items Need Improvement (Sept. 20, 2002, GAO-02-996)
Background: Companies seeking to export defense-related items are
responsible for determining whether those items are regulated by the State
Department or by the Commerce Department and what the applicable export
requirements are. When in doubt about whether an item is State-or
Commerce-controlled or when requesting a change in jurisdiction, an
exporter may request a commodity jurisdiction determination from the State
Department. The State Department, which consults with the Commerce and
Defense Departments, is the only department authorized to change export
jurisdiction. If an exporter knows an item is Commerce-controlled but is
uncertain of export requirements, the exporter can request a commodity
classification from the Commerce Department. The Commerce Department can
refer classification requests to the State and Defense Departments to
confirm that an item is Commerce-controlled.
Main issues: The Commerce Department has improperly classified some
State-controlled items as Commerce-controlled because it rarely obtains
input from the Departments of State and Defense before making a commodity
classification. As a result, the U.S. government faces an increased risk
that defense items will be exported without the proper level of government
review and control to protect national interests. Also, the Commerce
Department has not adhered to regulatory time frames for processing
classification requests.
In its implementation of the commodity jurisdiction process, the State
Department has not adhered to established time frames, which may
discourage companies from requesting jurisdiction determinations. The
State Department has also been unable to issue determinations for some
items because of interagency disputes occurring outside the process.
GAO recommendations
Commerce Department
o promptly review existing guidance and develop criteria with concurrence
from the Departments of State and Defense for referring commodity
classification requests to those departments
o work with the Departments of State and Defense to develop procedures
for referring requests that are returned to companies because the items
are controlled by the State Department or because they require a commodity
jurisdiction review
Departments of Commerce, State, and Defense
o revise interagency guidance to incorporate any changes to the referral
process and time frames for making decisions
o assess the resources needed to make jurisdiction recommendations and
determinations within established time frames and reallocate them as
appropriate
Action taken
With a limited exception, our recommendations have not been implemented.
In responding to our report, the State Department indicated it partially
agreed with our recommendations, while the Departments of Commerce and
Defense agreed to implement our recommendations.
o The Departments of Commerce and Defense have added staff to assist with
their respective processes.
Defense Trade: Lessons to Be Learned from the Country Export Exemption
(March 29, 2002, GAO-02-63)
Background: The State Department's export regulations do not require
licenses for the export of many defense items to Canada. In 2000, the U.S.
government announced plans to extend similar licensing exemptions for
exports to other countries. The State Department has negotiated agreements
with the United Kingdom and Australia to provide a basis for license-free
exports to those countries.
Main issues: Because of unclear guidance, some exporters have implemented
the Canadian exemption inconsistently and have misinterpreted requirements
to report their export activities to the State Department. The State
Department has provided inconsistent answers to exporters and U.S. Customs
Servicea officials when questions were raised about the exemption's use in
specific situations.
The State Department encourages exporters to voluntarily disclose
violations but relies primarily on U.S. Customs to enforce export control
laws and regulations, including use of the Canadian exemption. U.S.
Customs' ability to enforce the proper use of exemptions is weakened by a
lack of information and resources, difficulties in investigating suspected
violations, and competing demands, such as terrorism prevention and drug
interdiction.
GAO recommendations
State Department
o review guidance and licensing officer training to improve clarity and
ensure consistent application of the exemption and provide the guidance to
U.S. Customs to ensure that consistent information is disseminated to
exporters
o work with the Justice Department and U.S. Customs to assess lessons
learned from the Canadian exemption and ensure the lessons are
incorporated in future agreements
U.S. Customs
o assess the threat of illegal defense exports along Canadian border and
evaluate whether reallocation of inspectors or other actions are warranted
to better enforce export regulations
o update, finalize, and provide guidance on inspection requirements to
all inspectors
Action taken
The State Department has not implemented our recommendations. In its
response to our report, the State Department said it would provide
training and guidance but did not indicate how it would ensure that the
guidance and training are clear and understood by those who need to use
them. The department also said it would work with law enforcement agencies
to assess lessons learned but did not identify how it would do so. The
agreements with the governments of the United Kingdom and Australia were
drafted before the department conducted a lessons learned assessment.
U.S. Customs has implemented our recommendations.
Export Controls: Reengineering Business Processes Can Improve Efficiency
of State Department License Reviews (Dec. 31, 2001, GAO-02-203)
Background: The U.S defense industry and some foreign government
purchasers have expressed concern that the arms export control process is
unnecessarily lengthy. While the export licensing process can be lengthy
because of foreign policy and national security considerations, other
factors may also affect processing times.
Main issues: The State Department lacks formal guidelines for determining
which agencies and offices should review arms export license applications
and does not have procedures to monitor the flow of applications through
the process. As a result, thousands of applications have been delayed
while no substantive review occurred and hundreds more have been lost.
GAO recommendations
State Department
o develop criteria for determining which applications should be referred
to which agencies and offices for further review, develop formal
guidelines and training for reviewing organizations so they clearly
understand their duties
o establish timeliness goals for each phase of the licensing process and
mechanisms to ensure that applications are not lost or delayed
o implement these recommendations before proceeding with a planned
upgrade to the department's electronic business processing system
Action taken
Our recommendations have been implemented.
o Use of the State Department's new electronic system for processing and
tracking applications has been limited.
Joint Strike Fighter Acquisition: Cooperative Program Needs Greater
Oversight to Ensure Goals Are Met (July 21, 2003, GAO-03-775)b
Background: The Joint Strike Fighter, a nextgeneration fighter aircraft,
is being developed and produced by the United States and eight partner
countries.
Main issues: International participation in the Joint Strike Fighter
program involves the management of numerous export authorizations to share
project information with partner governments, solicit bids from foreign
suppliers, and execute contracts. Authorizations for exports to critical
foreign suppliers need to be planned for, prepared, and acted on in a
timely manner to help avoid program schedule delays. Without proper
planning, there could be pressure to expedite approvals to support program
goals, which could lead to inadequate license reviews. The contractor has
not fulfilled a requirement to complete a long-term plan that could
anticipate the export authorizations necessary to execute the program's
use of foreign suppliers to design and manufacture key parts of the
aircraft.
GAO recommendations
Department of Defense
o ensure that contractor's international industrial plan:
o identifies contracts involving the transfer of sensitive data and
technology to partner suppliers
o evaluates the risks that unfavorable export decisions could pose for
the program
o develops alternatives, such as using U.S. suppliers, to mitigate the
risks of unfavorable decisions
Action taken
The Defense Department has tasked the contractor to develop a technology
transfer "road map" as an initial step in implementing the
recommendations.
o GAO is currently evaluating the extent to which this road map fulfills
the recommendations.
Export Controls: Better Interagency Coordination Needed on Satellite
Exports (Sept. 17, 1999, GAO/NSIAD-99-182)
Background: U.S. export controls over commercial communications satellites
are complicated and have changed frequently over the years. Starting in
1992, the Departments of Commerce and State shared licensing
responsibility for satelliterelated exports. However, in 1998, Congress
transferred licensing responsibility for satellite-related exports to the
State Department because of concerns that the Commerce Department had
weakened controls over satellite exports. The Defense Department also
plays a role by reviewing satellite-related export applications and
monitoring sensitive launch activities. To help protect sensitive
technologies during a satellite launch, the U.S. government entered into
formal agreements with the governments of China, Russia, Kazakhstan, and
Ukraine that give the United States the right to take steps to safeguard
U.S. technology. The Departments of Commerce and State have attached
conditions to export licenses to reflect these agreements.
Main issues: Most of the licensed satellite launch campaigns by China,
Russia, and Ukraine from 1989 to1999 included license conditions to
protect sensitive U.S. technology. However, the Commerce Department
approved eight launch campaigns that omitted most license safeguard
conditions, and neither the State Department nor the Defense Department
requested the conditions be included. Documents from the Departments of
State and Defense show that monitoring problems, unauthorized transfers of
technology, and other violations of export control regulations possibly
occurred in 14 launch campaigns in China, Russia, and Ukraine, including
some of the campaigns where license conditions were omitted. Recent
legislative changes address some causes of past export licensing problems
but do not fully resolve the implementation problems by the Departments of
Commerce, State, and Defense.
GAO recommendations
State Department
o consult with Departments of Commerce and Defense to establish clear
roles and responsibilities for all agencies and overseas posts in
implementing the government-togovernment technical safeguards agreements
and ensuring U.S. exporter compliance with U.S. satellite export
regulations
Action taken
Our recommendations have been implemented.
Defense Trade: Analysis of Support for Recent Initiatives (Aug. 31, 2000,
GAO/NSIAD-00-191)
Background: In 1999, the Defense Department compiled a list of 81 defense
cooperation initiatives intended to enhance cross-border defense trade and
investment. Several initiatives were part of an ongoing effort to reinvent
the FMS program, while other initiatives were to help streamline processes
and/or change policies considered important for defense cooperation, such
as export controls. Building on the 81 initiatives, the Departments of
State and Defense announced 17 measures, collectively known as the Defense
Trade Security Initiative (DTSI), to adjust the export control system.
Main issues: The Defense Department developed its initiatives on the basis
of incomplete data and inadequate analysis to determine underlying causes
for problems it identified. It is unclear whether the department's
initiatives will achieve the desired outcomes of improving U.S. and
foreign forces' ability to operate together in coalition warfare
scenarios, reducing a gap in military capabilities between the United
State and its allies, and ensuring that U.S. companies successfully
compete in overseas markets. Further, there was no demonstration of how
DTSI measures would achieve identified goals and no analysis of existing
problems. As a result, there is little assurance that any underlying
problems with the U.S. export control system have been sufficiently
analyzed to determine whether DTSI will remedy any existing problems.
GAO recommendations Action taken
No recommendations Not applicable
Export Controls: State and Commerce Department License Review Times are
Similar June 1, 2001, GAO-01-528)
Background: The U.S. defense industry and some U.S. and allied government
officials have expressed concerns about the amount of time required to
process export license applications.
Main issues: In fiscal year 2000, the State Department took an average of
46 days to reach a decision on license applications, while the Commerce
Department took 50 days. Both departments approved more than 80 percent of
license applications.
GAO recommendations Action taken
No recommendations Not applicable
Source: GAO analysis of prior work.
a The U.S. Customs Service is now part of the Homeland Security
Department's Customs and Border Protection and Immigration and Customs
Enforcement.
b This report addresses international program management issues in
addition to arms export controls.
FMS program: Eligible foreign governments may purchase arms from the U.S.
government through the FMS program. While the FMS program is overseen by
the State Department, which must approve all sales, the Defense
Department's Defense Security Cooperation Agency is responsible for
overall administration of the program, and the military departments
execute the individual sales agreements that are signed with foreign
governments. The program is governed by the Arms Export Control Act.
Table 3: 1999-2004 GAO Reports on the Foreign Military Sales Program
Foreign Military Sales: Actions Needed to Provide Better Controls over
Exported Defense Articles (June 5, 2003, GAO-03-599) FOR OFFICIAL USE ONLY
Main Issues: GAO identified a number of GAO recommendations Action taken
weaknesses related to the government's Departments of Defense, While the
departments
ability to ensure that items exported
through the FMS program are authorized, Homeland Security, and State have
taken some action
received by the appropriate foreign o multiple recommendations to to
implement the
government, or properly monitored. Citing improve the security of FMS
recommendations, most
the sensitivity of the information contained exports and enhance end-use
have not yet been
in the report, the Homeland Security monitoring efforts implemented.
Department directed that the report not be
made publicly available.
Nonproliferation: Further Improvements Needed in U.S. Efforts to Counter
Threats from Man-Portable Air Defense Systems (May 13, 2004, GAO-04-519)a
Background: The proliferation of manportable air defense systems
(MANPADS), shoulder-launched surfaceto-air missile systems, has been of
growing concern to the United States and its allies. The U.S. government
has sold MANPADS-the Stinger-through the FMS program since 1982. To
prevent proliferation, U.S. law requires the Defense Department to conduct
annual inspections to ensure that Stinger systems are being used and
stored as required under the FMS program. Countries that purchase Stingers
are legally bound to cooperate with these inspections.
Main issues: The disposition of Stingers sold overseas is unknown because
the Defense Department's Stinger inventory inspection process is flawed.
The department does not require inspecting organizations to maintain
records on the number and destinations of Stingers. Records are neither
complete nor reliable. Also, the Defense Department lacks procedures for
conducting inspections, which has resulted in inconsistent inspection
processes. As a result, the department lacks the ability to periodically
account for Stingers sold through the FMS program, compare the results
against credible control records, and examine exceptions to what was
authorized.
GAO recommendations
Defense Department
o establish standardized record-keeping requirements for all U.S.
organizations responsible for maintaining records on Stinger systems sold
overseas
o issue standardized inventory and physical security inspection
procedures for officials responsible for conducting inspections
Action taken
The Defense Department has begun implementing our recommendations.
Foreign Military Sales: Changes Needed to Correct Weaknesses in End-Use
Monitoring Program (Aug. 24, 2000, GAO/NSIAD-00-208)
Background: Since 1996, the Arms Export Control Act has required an enduse
monitoring program for items sold through the FMS program. To the extent
practicable, the end-use monitoring program is to provide reasonable
assurance that the recipient of defense articles and services is complying
with U.S. government requirements to safeguard these defense articles. The
act also requires the Defense Department to report annually to Congress on
the implementation of the end-use monitoring program.
Main issues: The Defense Department has not effectively implemented the
requirement that it observe and report on foreign governments' use of U.S.
defense articles and services sold through the FMS program. Field
personnel have not received the guidance needed to conduct end-use checks.
Also, the department relied on host country records to maintain
accountability for certain weapons systems, such as Stinger missiles, but
these records have discrepancies. As a result, the end-use monitoring
program cannot provide assurances that foreign governments are adhering to
conditions placed on U.S. arms sales.
The Defense Department has not complied with the act's reporting
requirements to track cost and personnel information used in the end-use
monitoring program. As a result, Congress may be limited in its ability to
evaluate the end-use monitoring program or to determine if additional
resources are needed.
GAO recommendations
Defense Department
o issue specific guidance to field personnel on what activities need to
be performed for the routine observation of U.S. defense equipment and
additional guidance for the monitoring of specific weapon systems
o reconcile discrepancies in foreign governments' Stinger missile
inventories
o comply with the 1996 enduse monitoring amendment of the Arms Export
Control Act by reporting required information to Congress
Action taken
The Defense Department has implemented our recommendations regarding
guidance and reporting requirements. It has recently begun implementing
our recommendation regarding Stinger missiles.
Foreign Military Sales: Review Process for Controlled Missile Technology
Needs Improvement (Sept. 29, 1999, GAO/NSIAD-99-231)
Background: The U.S. government relies on a complex process with many
participants to determine what items may be transferred through the FMS
program.
Main issues: The U.S. government has not established a process for
ensuring that certain controlled items are fully and systematically
identified when reviewing or approving foreign military sales agreements.
As a result, items controlled as part of the Missile Technology Control
Regime have been sold under the program without proper review and
approval.
GAO recommendations
Departments of State and Defense
o establish a process to identify all items on proposed FMS sales
agreements controlled under the Missile Technology Control Regime or other
nonproliferation agreements and to refer the information to the State
Department so it can review proposed sales to ensure compliance with
nonproliferation agreements.
Action taken
Our recommendations have been implemented.
Foreign Military Sales: Efforts to Improve Administration Hampered by
Insufficient Information (Nov. 22, 1999, GAO/NSIAD-00-37)
Background: The Arms Export Control Act requires the Defense Department to
recover the full estimated cost of administering foreign military sales
from foreign customers. Because of budget pressures and customer
complaints about program inefficiencies, the Defense Department has begun
reinvention efforts to improve the management and implementation of the
FMS program.
Main issues: The Defense Department does not have sufficient information
to determine the administrative costs for the FMS program. It is,
therefore, unable to use actual costs as a basis to determine what charges
should be applied to sales and does not know if the percentage charged to
customers on the dollar value of individual sales is appropriately
recovering program costs. As a result, the department estimates future
sales and uses the administrative account balance to plan future budgets
and adjust administrative charges, but these projections are subjective.
Reinvention efforts could help better identify costs, but the initiatives
lack a common approach and are unlikely to provide complete and consistent
information about the costs of administering sales.
GAO recommendations
Defense Department
o use a comprehensive and consistent definition of administrative tasks
to collect cost information and issue guidance to the military services on
the consistent application of program management charges
o assess the amount of administrative funds needed to complete existing
sales and use excess funds, if any, on other program costs
Action taken
Our recommendations have been implemented.
Source: GAO analysis of prior work.
a
This report also addresses international efforts to limit MANPADS
proliferation and efforts to develop countermeasures to minimize the
MANPADS threat to aircraft.
Enclosure II: Related GAO Products
Defense Trade: Arms Export Control System in the Post-9/11 Environment.
GAO-05-234. Washington, D.C.: February 16, 2005.
Nonproliferation: Further Improvements Needed in U.S. Efforts to Counter
Threats from Man-Portable Air Defense Systems. GAO-04-519. Washington,
D.C.: May 13, 2004.
Defense Acquisitions: DOD Needs to Better Support Program Managers'
Implementation of Anti-Tamper Protection. GAO-04-302. Washington, D.C.:
March 31, 2004.
Nonproliferation: Improvements Needed to Better Control Technology Exports
for Cruise Missiles and Unmanned Aerial Vehicles. GAO-04-175. Washington,
D.C.: January 23, 2004.
Export Controls: Post-Shipment Verification Provides Limited Assurance
That Dual-Use Items Are Being Properly Used. GAO-04-357. Washington, D.C.:
January 12, 2004.
Joint Strike Fighter Acquisition: Cooperative Program Needs Greater
Oversight to Ensure Goals Are Met. GAO-03-775. Washington, D.C.: July 21,
2003.
Defense Trade: Better Information Needed to Support Decisions Affecting
Proposed Weapons Transfers. GAO-03-694. Washington, D.C.: July 11, 2003.
Nonproliferation: Strategy Needed to Strengthen Multilateral Export
Control Regimes. GAO-03-43. Washington, D.C.: October 25, 2002.
Export Controls: Processes for Determining Proper Control of
Defense-Related Items Need Improvement. GAO-02-996. Washington, D.C.:
September 20, 2002.
Export Controls: Department of Commerce Controls over Transfers of
Technology to Foreign Nationals Need Improvement. GAO-02-972. Washington,
D.C.: September 6, 2002.
Export Controls: More Thorough Analysis Needed to Justify Changes in High
Performance Computer Controls. GAO-02-892. Washington, D.C.: August 2,
2002.
Export Controls: Rapid Advances in China's Semiconductor Industry
Underscore Need for Fundamental U.S. Policy Review. GAO-02-620.
Washington, D.C.: April 19, 2002.
Defense Trade: Lessons to Be Learned from the Country Export Exemption.
GAO-02-63. Washington, D.C.: March 29, 2002.
Export Controls: Issues to Consider in Authorizing a New Export
Administration Act. GAO-02-468T. Washington, D.C.: February 28, 2002.
Export Controls: Reengineering Business Processes Can Improve Efficiency
of State Department License Reviews. GAO-02-203. Washington, D.C.:
December 31, 2001.
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed. GAO02-120. Washington, D.C.: October 9, 2001.
Defense Trade: Information on U.S. Weapons Deliveries to the Middle East.
GAO-01-1078. Washington, D.C.: September 21, 2001.
Information Security: Weaknesses Place Commerce Data and Operations at
Serious Risk. GAO-01-751. Washington, D.C.: August 13, 2001.
Export Controls: State and Commerce Department License Review Times are
Similar. GAO-01-528. Washington, D.C.: June 1, 2001.
Export Controls: Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements. GAO-01-530. Washington, D.C.: May 31,
2001.
Export Controls: System for Controlling Exports of High Performance
Computing Is Ineffective. GAO-01-10. Washington, D.C.: December 18, 2000.
Defense Trade: Analysis of Support for Recent Initiatives.
GAO/NSIAD-00-191. Washington, D.C.: August 31, 2000.
Foreign Military Sales: Changes Needed to Correct Weaknesses in End-Use
Monitoring Program. GAO/NSIAD-00-208. Washington, D.C.: August 24, 2000.
Defense Trade: Status of the Department of Defense's Initiatives on
Defense Cooperation. GAO/NSIAD-00-190R. Washington, D.C.: July 19, 2000.
Foreign Military Sales: Efforts to Improve Administration Hampered by
Insufficient Information. GAO/NSIAD-00-37. Washington, D.C.: November 22,
1999.
Foreign Military Sales: Review Process for Controlled Missile Technology
Needs Improvement. GAO/NSIAD-99-231. Washington, D.C.: September 29, 1999.
Export Controls: Better Interagency Coordination Needed on Satellite
Exports. GAO/NSIAD-99-182. Washington, D.C.: September 17, 1999.
Export Controls: National Security Issues and Foreign Availability for
High Performance Computer Exports. GAO/NSIAD-98-200. Washington, D.C.:
September 16, 1998.
China: Military Imports From the United States and the European Union
Since the 1989 Embargoes. GAO/NSIAD-98-176. Washington, D.C.: June 16,
1998.
Export Controls: Change in Export Licensing Jurisdiction for Two Sensitive
Dual-Use Items. GAO/NSIAD-97-24. Washington, D.C.: January 14, 1997.
Export Controls: Sensitive Machine Tool Exports to China. GAO/NSIAD-97-4.
Washington, D.C.: November 19, 1996.
Export Controls: Sale of Telecommunications Equipment to China.
GAO/NSIAD-97-5. Washington, D.C.: November 13, 1996.
Export Controls: Concerns Over Stealth-Related Exports. GAO/NSIAD-95-140.
Washington, D.C.: May 10, 1995.
Export Controls: Some Controls Over Missile-Related Technology Exports To
China Are Weak. GAO/NSIAD-95-82. Washington, D.C.: April 17, 1995.
Export Controls: License Screening and Compliance Procedures Need
Strengthening. GAO/NSIAD-94-178. Washington, D.C.: June 14, 1994.
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