Defense Trade: Clarification and More Comprehensive Oversight of
Export Exemptions Certified by DOD Are Needed (19-SEP-07,
GAO-07-1103).
Defense (DOD) activities, U.S. defense companies may export
defense items. The Department of State (State) controls such
exports through its International Traffic in Arms Regulations
(ITAR), which provides for some exemptions from export licensing
requirements. For a limited number of these exemptions, DOD may
confirm--or certify--that the export activity qualifies for the
use of an ITAR exemption. As part of an initiative, DOD is to
make more effective use of ITAR exemptions, but little is known
about the extent to which this is done. This report (1) describes
DOD's approach for certifying exporters' exemption use in support
of defense activities, (2) summarizes the use of selected
DOD-certified exemptions, and (3) examines State and DOD's
oversight of exemption use. GAO's findings are based on its
review of export control law, regulation, and DOD guidelines;
interviews with State, DOD, and defense industry officials; and a
GAO-developed database of DOD certification letters.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-1103
ACCNO: A77453
TITLE: Defense Trade: Clarification and More Comprehensive
Oversight of Export Exemptions Certified by DOD Are Needed
DATE: 09/19/2007
SUBJECT: Data integrity
Defense industry
Department of Defense contractors
Export regulation
Exporting
Federal regulations
International relations
International trade
International trade regulation
International trade restriction
Records management
Reporting requirements
Restrictive trade practices
International Traffic in Arms
Regulations
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GAO-07-1103
* [1]Results in Brief
* [2]Background
* [3]Guidelines for DOD's Certification of Exemption Use Have Rai
* [4]Military Services' Approach for Certifying ITAR Export Exemp
* [5]State and DOD Disagree on the Use of Certain Exemptions by C
* [6]DOD Components Certified the Use of Exemptions for a Variety
* [7]State and DOD Lack Complete Data to Oversee Exemptions Certi
* [8]Conclusions
* [9]Recommendations for Executive Action
* [10]Agency Comments
* [11]GAO Contact
* [12]Acknowledgments
* [13]GAO's Mission
* [14]Obtaining Copies of GAO Reports and Testimony
* [15]Order by Mail or Phone
* [16]To Report Fraud, Waste, and Abuse in Federal Programs
* [17]Congressional Relations
* [18]Public Affairs
* [19]PDF6-Ordering Information.pdf
* [20]Order by Mail or Phone
Report to the Chairman, Committee on Foreign Affairs, House of
Representatives
United States Government Accountability Office
GAO
September 2007
DEFENSE TRADE
Clarification and More Comprehensive Oversight of Export Exemptions
Certified by DOD Are Needed
GAO-07-1103
Contents
Letter 1
Results in Brief 2
Background 4
Guidelines for DOD's Certification of Exemption Use Have Raised Some
Concerns by State 5
DOD Components Certified the Use of Exemptions for a Variety of Programs
and Foreign Recipients 10
State and DOD Lack Complete Data to Oversee Exemptions Certified by DOD 13
Conclusions 15
Recommendations for Executive Action 15
Agency Comments 16
Appendix I Scope and Methodology 18
Appendix II ITAR Sections Discussed in This Report 20
Appendix III Comments from the Department of Defense 24
Appendix IV Comments from the Department of State 27
Appendix V GAO Contact and Staff Acknowledgments 29
Related GAO Products 30
Tables
Table 1: ITAR Exemptions Identified in DTSA Guidelines for Military
Service Certification and ITAR Exemption Description 8
Table 2: GAO Analysis of DOD Exemption Certifications (2004 through 2006)
11
Table 3: ITAR Sections Cited in This Report 20
Figure
Figure 1: Sample Letter 6
Abbreviations
DDTC Directorate of Defense Trade Controls
DOD Department of Defense
DTSA Defense Technology Security Administration
ITAR International Traffic in Arms Regulations
NATO North Atlantic Treaty Organization
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United States Government Accountability Office
Washington, DC 20548
September 19, 2007
The Honorable Tom Lantos
Chairman
Committee on Foreign Affairs
House of Representatives
Dear Mr. Chairman:
As part of its efforts to promote cost sharing and increase
interoperability of defense assets, the Department of Defense (DOD) enters
into defense cooperative agreements with allies and friendly nations. In
support of these agreements and associated DOD activities, U.S. defense
companies may export defense items1 to foreign governments and defense
companies. The Department of State (State) controls the export of defense
items, requiring most to be licensed for export through its International
Traffic in Arms Regulations (ITAR).2 Under certain conditions, however,
the ITAR provides for exports to be exempt from license requirements and
establishes the criteria for such exemptions. For a limited number of
exemptions, DOD may confirm--or certify3--in writing that the export
activity qualifies for the use of an ITAR exemption in support of DOD
activities, such as sharing of technical data related to DOD acquisition
programs. The use of exemptions, including those certified by DOD, and
compliance with the ITAR are ultimately the responsibility of the
exporter.
Over the past decade, Congress has requested that we examine the U.S.
export control system, and we have reported on various problems in the
processes for this system.4 This report looks at how unlicensed exports in
support of DOD activities, such as defense cooperative programs, are
overseen. Specifically, in response to your request, this report (1)
describes DOD's approach for certifying the use of export exemptions by
exporters in support of defense activities, (2) summarizes the use of
DOD-certified exemptions that we identified and reviewed, and (3) examines
the extent to which State and DOD oversee the use of these exemptions.
1 For purposes of this report, "defense items" includes defense articles,
technical data, and services.
2 International Traffic in Arms Regulations, 22 C.F.R. SS 120.1-130.17
(2006).
3 DOD uses the term "certify" to confirm that an exemption is being used
pursuant to an official written request, directive, or approval from DOD.
4 A list of related GAO products is provided at the end of this report.
To conduct our work, we identified DOD's approach for certifying the use
of export exemptions by exporters in support of defense activities through
an examination of export control laws, regulations, DOD guidelines, and
practices. We also interviewed officials responsible for export controls
from State, DOD, and defense companies. To summarize the use of
DOD-certified exemptions, we created a database of DOD certification
letters issued between 2004 and 2006 that we were able to identify and
collect from DOD components. From these data, we extracted information
such as the most frequent type of export and top foreign recipients and
summarized the results. We coordinated with State and DOD officials to
identify a list of DOD components certifying the use of exemptions.
However, the universe of all DOD-certified exemptions is unknown, and
additional exemption letters might exist. To examine the extent to which
State and DOD oversee the use of DOD-certified exemptions, we reviewed
DOD's 2006 report to State on exemption certifications and discussed how
data were collected with cognizant officials. For more on our scope and
methodology, see appendix I. We performed our review from January through
July 2007 in accordance with generally accepted government auditing
standards.
Results in Brief
DOD components, including the military services, prepare letters
certifying the use of certain ITAR exemptions by exporters in support of
DOD activities. The letters typically state the exporter's name, the item
to be exported, and the applicable ITAR exemption. The military services'
approach for certifying the use of ITAR exemptions is set forth in
guidelines DOD issued in March 2004, which cover five specific exemptions.
These guidelines were issued to the military services because they are the
DOD components primarily responsible for managing and implementing
international defense cooperative programs. However, we found other
nonservice DOD components that are certifying the use of exemptions in
support of international activities but that are not subject to the DOD
guidelines. Some of these nonservice components had created or were
creating their own guidelines, which could lead to inconsistent
certification practices. Officials from State, which regulates and
controls defense exports, have raised several concerns to DOD about its
guidelines, including the use of one ITAR exemption by contractors.
According to DOD officials, this exemption is available to contractors
when they work in direct support of DOD activities. However, State
officials stated that the exemption is limited to use by U.S. government
personnel. State officials also have raised concerns to DOD about the
comprehensiveness of DOD's exemption certification guidelines, including
the scope and purpose. DOD is in process of revising its guidelines,
partially in response to State's concerns. Although senior-level export
control officials at both State and DOD have met and exchanged
correspondence, to date, State and DOD have not reached agreement on
fundamental issues.
The letters provided to us by DOD components showed that over 1,900
exemptions were certified for use by more than 270 exporters in calendar
years 2004 through 2006. Two ITAR sections were most commonly cited,
covering (1) the export of technical data, including classified
information, and (2) the temporary export of technical data or defense
services for official use by the U.S. government. The majority of the
certified exemptions related to missile defense and Air Force programs.
Exporters who were identified in DOD-certified exemption letters included
defense contractors, university laboratories, and federally funded
research and development centers. Four defense contractors represented
more than one-fourth of the exemption certifications during this 3-year
period. The United Kingdom, Australia, Canada, and the North Atlantic
Treaty Organization (NATO) 5 were the most frequently cited recipients for
exports under exemptions certified by DOD components.
State and DOD lack comprehensive data to oversee the use of DOD-certified
exemptions. While DOD's exemption guidelines provide for annual reporting
to State on certified exemptions, this report captures data from the
military services but not from other DOD components, such as the Missile
Defense Agency. For example, in July 2007, DOD's report to State indicated
that 161 certification letters were issued by the military services in
2006; for the same year, we collected 271 letters from nonservice
components. In addition, the data may not capture the magnitude of
transfers certified for exemption use. For example, one letter that we
reviewed certified the use of an exemption by more than 50 companies for
the purposes of sharing, with allied partners, technical data relating to
a quote or bid proposal. Only the certification letter--not the actual
transfers, which totaled 600 over a 3-year period--was captured in the
cognizant military service's record keeping on exemptions. However, the
details on these transfers were not included in DOD's 2006 report to State
on exemptions certified by DOD, limiting insight into the number of
transfers that occurred.
5 NATO is an alliance of 26 countries from North America and Europe
committed to fulfilling the goals of the North Atlantic Treaty.
We are recommending that State and DOD resolve disagreements on exemption
use and guidelines and increase insight and oversight of certified
exemptions. Specifically, we are recommending that State and DOD establish
a work group to resolve disagreements. If needed, State should revise the
ITAR to incorporate any necessary changes. Once agreement is reached, DOD
should revise its guidelines and make them applicable to all DOD
components. We are also recommending that DOD ensure that its report to
State is more complete by collecting data, analyzing trends and usage, and
reporting on certifications from all DOD components. In commenting on a
draft of this report, DOD and State agreed to establish a work group to
resolve disagreements on exemption use and for DOD to revise and
distribute its guidelines accordingly. However, DOD misunderstood the
intent of our recommendation on oversight, stating that there is no
existing mechanism whereby the U.S. government can collect data from
exporters to monitor exports of defense items made under exemptions and
that such a mechanism would exceed DOD's existing authority. As a result,
we clarified the language in this recommendation to indicate that DOD
should ensure that the revised guidelines provide the appropriate
oversight mechanisms for the exemption certification process, such as the
collection of data from all DOD components on exemptions they certified.
Background
Authority for controlling the export of defense items is provided through
the Arms Export Control Act,6 and these exports are regulated through the
ITAR by State Department's Directorate of Defense Trade Controls. While
most defense items require a license for export, the ITAR contains
numerous exemptions from licensing requirements that have defined
conditions and limitations. For exports that directly support DOD
activities, such as exports related to defense cooperative programs,
exporters may claim an exemption from licensing requirements pursuant to
the written request, directive, or approval of DOD. In doing so, DOD
certifies that the export appropriately qualifies for one or more of a
limited number of applicable ITAR license exemptions. As with all
exemptions, the exporter decides whether to export using an exemption and
bears ultimate responsibility for complying with requirements in the ITAR.
6 22 U.S.C. S 2751 et seq.
In May 2000, the Administration announced 17 proposals as part of its
Defense Trade Security Initiative--an effort to facilitate cross-border
defense cooperation and streamline U.S. export controls. One proposal was
that DOD make more effective use of ITAR exemptions to facilitate exports
that further U.S. government interests in defense cooperation with allies
and friendly nations. To clarify exemption use, DOD's Defense Technology
Security Administration (DTSA)--which is responsible for developing and
implementing DOD security policies on international transfers of
defense-related goods, services, and technologies--issued guidelines in
March 2004 for certifying U.S. exporters' use of certain ITAR exemptions.
7 These guidelines were provided to the military services, given that they
are primarily responsible for managing and implementing international
defense cooperative programs.
Guidelines for DOD's Certification of Exemption Use Have Raised Some Concerns by
State
In support of defense activities, DOD components prepare letters
certifying the use of certain exemptions by exporters under State's export
control regulations. The approach used by the military services for
certifying the use of ITAR exemptions is set forth in DOD guidelines.
Nonservice DOD components also certify the use of exemptions but are not
subject to the guidelines, which were not issued departmentwide. Some of
these nonservice components had created or were creating their own
guidelines, which could lead to confusion regarding certain certification
practices. State, as the regulator of defense exports, has raised concerns
about the guidelines not clearly explaining the purpose and scope of the
exemptions available to DOD, and State and DOD disagree on contractors'
use of one exemption that has been certified by DOD components.
Military Services' Approach for Certifying ITAR Export Exemptions Is Set Forth
in DOD Guidelines, but These Guidelines Were Not Issued DOD-wide
Some ITAR exemptions apply to exports that directly benefit DOD
activities, ranging from support of defense cooperative programs, such as
the Joint Strike Fighter, to providing equipment and technical services
necessary to support U.S. forces in foreign locations. For such
exemptions, DOD confirms whether the export activity appropriately
qualifies for the use of an exemption and typically documents this
confirmation in a written letter directly to the exporter or sometimes to
the cognizant DOD program office that the exemption will benefit.
Typically, the letters identify the ITAR sections that pertain to the
exemption, the type and purpose of the export, the destination country,
and a time frame for the export to occur (see fig. 1).
7 According to DOD officials, this certification was intended to meet the
ITAR requirement for DOD's "written direction or approval."
Figure 1: Sample Letter
In March 2004, DOD issued guidelines to the military services that were
intended to provide a level of oversight for the exemption certification
process, such as establishing elements of authority and record-keeping
requirements.8 The guidelines included the following procedures for
certifying exporters' use of ITAR exemptions in support of DOD's
activities:
o Established authorized exemption officials within each service
to certify the use of ITAR exemptions. These designated general
officers or senior executive service personnel in the military
services are responsible for overall management and oversight of
the exemption certification process.
o Provided elements for the certification, to include (1) a
tracking number for the certification; (2) ITAR exemption citation
number; (3) name of the exporter for whom use of the exemption is
certified; (4) the reason/purpose for certifying use of the
exemption and benefit to the U.S. government; (5) description of
the specific defense article, service, or technical data exempted;
(6) conditions and limitations as necessary to establish a clearly
defined scope for defense articles, services, and technical data
authorized for export and any handling, control, or accountability
measures deemed necessary; (7) the foreign end users; and (8) the
expiration date--not more than 1 year from date of issue.
o Required the military services to enter data on exemptions into
a centralized DOD database.
o Stated that DTSA would annually report on the services'
exemption certification data to State.
o Restated requirements in the ITAR that exemptions may only be
certified for use by eligible U.S. persons registered with the
Department of State, Director of Defense Trade Controls; and that
U.S. persons must comply with ITAR requirements for use of
exemptions, including applicable criteria and limitations. DOD
certifications do not supersede other ITAR requirements for use of
exemptions.
o Listed five exemptions that relate to exports of defense
items--such as technical data pursuant to a written DOD request,
shipments of defense items by or for U.S. government agencies, or
plant visits (classified or unclassified) (see table 1).
8 According to DOD, this approach was part of a set of initiatives to
facilitate defense trade.
Table 1: ITAR Exemptions Identified in DTSA Guidelines for Military
Service Certification and ITAR Exemption Description
ITAR exemption Description from ITARa
125.4(b)(1) Technical Data Pursuant to Written Request
"Technical data, including classified information, to be
disclosed pursuant to an official written request or
directive from the U.S. Department of Defense."
125.4(c) Responding to a Quote or Bid Proposal
"Defense services and related unclassified technical
data ... to nationals of NATO countries, Australia,
Japan, and Sweden, for the purposes of responding to a
written request from the Department of Defense for a
quote or bid proposal. Such exports must be pursuant to
an official written request or directive from an
authorized official of the U.S. Department of Defense."
125.5 (a),(b),(c) Exemptions for Plant Visits
(a) "A license is not required for the oral and visual
disclosure of unclassified technical data during the
course of a classified plant visit by a foreign person,
provided (1) the classified visit has itself been
authorized pursuant to a license issued by the
Directorate of Defense Trade Controls; or (2) the
classified visit was approved in connection with an
actual or potential government-to-government program or
project by a U.S. Government agency...." (b) ...
Directorate of Defense Trade Controls approval is not
required for disclosure of oral and visual classified
information during the course of a plant visit approved
by the appropriate U.S. Government agency if certain
requirements are met, such as the classified information
is directly related to that which was approved by the
U.S. Government agency.... (c) "...a license is not
required for the disclosure to a foreign person of
unclassified technical data during the course of a plant
visit (either classified or unclassified) approved by
the Office of Defense Trade Controls or a cognizant U.S.
Government agency... provided the technical data does
not contain information in excess of that approved for
disclosure."
126.4(a) Shipments by or for United States Government Agencies
"A license is not required for the temporary import, or
temporary export, of any defense article, including
technical data or the performance of a defense service,
by or for any agency of the U.S. Government for official
use by such an agency, or for carrying out any foreign
assistance, cooperative project or sales program
authorized by law and subject to control by the
President by other means."
126.4(c) End-Use by U.S. Government Agency in a Foreign Country
"A license is not required for the temporary import, or
temporary or permanent export, of any classified or
unclassified defense articles, including technical data
or the performance of a defense service, for end-use by
a U.S. Government Agency in a foreign country...."
Source: DOD Guidelines for Certifying Use of International Traffic in Arms
Regulation Exemptions, (March 2004) and reissued December 2006;
International Traffic in Arms Regulations, 22 C.F.R. Parts 125 and 126
(2006).
aFor complete citations, see appendix II.
DTSA officials stated that DOD has not determined the need for a
departmentwide directive or instruction on certifying the use of ITAR
exemptions. Because all nonservice DOD components currently are not
subject to existing DOD guidelines, officials at some nonservice
components that we spoke with had created or were in the process of
creating their own exemption guidelines. 9 A lack of common guidelines
could lead to inconsistent certification practices. In addition, some
confusion exists regarding certain certification practices. For example,
an official from one of the four nonservice components questioned whether
the component could provide certifications for exporters with which it had
contracts or whether the cognizant military service that maintained the
overall contract would need to provide the certification. This official
continues to certify exemptions for such exporters with which it
contracts.
9 Some nonservice components incorporated elements of the DOD exemption
guidelines into their approach for certifying ITAR exemptions.
State and DOD Disagree on the Use of Certain Exemptions by Contractors and the
Comprehensiveness of DOD's Exemption Guidelines
State officials, who regulate and control the export of defense items,
have raised concerns about DOD's exemption certification guidelines.
Specifically, DTSA provided State with proposed revisions to its
guidelines in April 2006, and in response, State provided DTSA with
written comments raising concerns with the guidelines. According to
senior-level export control officials at both State and DOD, they met to
discuss areas of disagreement but were unable to reach resolution. To
date, State and DOD have not resolved fundamental areas of concern.
o First, State disagreed with DOD's certification of exporters'
use of the exemption under ITAR section 126.4(a). According to
State officials, language in this section indicates that the
exemption is only designed for use by U.S. government personnel
for U.S. government end-use and is not designed to be used by
contractors. DTSA disagreed on this point and stated that the
section's phrase "by or for any agency of the U.S. government"
indicates that the exemption can be used by contractors when their
work is directed by DOD for its own benefit. In the most recent
draft iteration of the guidelines, DTSA now plans to further
define responsibility for certifying this ITAR exemption, removing
some certification responsibility from the military services in an
attempt to provide greater control over its use. However, DTSA
officials stated that DOD plans to continue to certify the use of
this exemption.
o Second, State indicated that the guidelines to the military
services are not clear on the purpose and scope of the exemptions
available to DOD. State suggested that DOD revise its guidelines
to include (1) ITAR sections 126.6(a) and 126.6(c) on foreign
military sales to provide further context, citing that their
inclusion would inform the military services that other ITAR
exemptions are provided for the exclusive use of DOD in the
conduct of its official business, and (2) ITAR section
125.4(b)(3)--the provision of technical data in furtherance of a
contract between the exporter and the U.S. government if the
contract provides for the export of data--which State identified
as one that may be certified by DOD for use by exporters when
conducting DOD's mission. State also noted that the use of each
exemption is pursuant to the conditions and terms specified in the
ITAR and that the exporter should be directed to the relevant ITAR
sections. DTSA officials stated that its guidelines only include
those ITAR sections that specifically provide for exemption use
for exports at the direction or approval of DOD. DTSA officials
further stated that the foreign military sales process is defined
separately in the ITAR and that DOD has its own system and process
for reporting to State on foreign military sales. (The complete
text of cited ITAR sections under discussion can be found in app.
II.)
o Finally, State suggested that DTSA be the certifying entity for
all other DOD components outside of the military services and that
all certifying organizations be trained in the evaluation of
certification requests and the application of DOD guidelines. DTSA
officials plan to include in the revised guidelines a provision
that nonservice DOD components seek guidance from their respective
general counsel, as is the current practice.
DOD is in the process of revising its guidelines, which are set to expire
in December 2007. These revisions are partially in response to State's
concerns, and DOD is planning to submit them to State for its review.
However, to date, State and DOD officials have not reached agreement on
these issues, and the lack of common understanding of regulatory exemption
use could result in inconsistent application of the regulations.
DOD Components Certified the Use of Exemptions for a Variety of Programs and
Foreign Recipients
On the basis of over 1,100 certification letters that DOD components
provided to us and our review of them, DOD components certified the use of
over 1,900 exemptions10 for multiple companies and various programs from
2004 through 2006. Most of the exemptions were for exports of technical
data or services for Air Force or missile defense programs and for exports
to long-standing allies.
We identified a number of DOD components that certified the use of ITAR
exemptions by exporters. These components varied widely in the number of
certifications they issued--ranging from 24 to more than 1,040. Table 2
summarizes highlights of our analysis of export exemptions certified by
various DOD components.
10 DOD components provided us over 1,100 certification letters, some of
which covered multiple exporters. We counted an exemption for each company
or organization separately, therefore reaching over 1,900 exemptions.
Table 2: GAO Analysis of DOD Exemption Certifications (2004 through 2006)
Area of analysis Results
Number of certifications, by o Missile Defense Agency--1,040
DOD component o Air Force--595
o Navy--112
o National Security Agency--112
o Army--53
o National Geospatial-Intelligence
Agency--24
o Acquisition, Technology, and
Logistics--24
Most frequently cited ITAR o 125.4(b)(1)--"Technical data,
exemptions including classified information, to be
disclosed pursuant to an official
written request or directive from the
U.S. Department of Defense."
o 126.4(a)--"Temporary import or export
of a defense article or service by or
for any agency of the U.S. government
for official use by such an agency, or
for carrying out any foreign assistance,
cooperative project or sales
program...."
Most frequent type of export o Knowledge transfer (technical data and
defense services)
Most frequently cited foreign o United Kingdom
destinations o NATO
o Australia
o Canada
o Norway
o Japan
Programs/activities most often o Command, Control, Battle Management,
cited and Communications (C2BMC)
o Joint Strike Fighter (JSF)
o Upgraded Early Warning Radar (UEWR)
o Space Based Infrared System (SBIRS)
o Joint Project Optic Windmill (JPOW)
Companies/organizations most o Northrop Grumman
often identified for exemption o Lockheed Martin
use o Raytheon
o SPARTA
o MITRE
o Boeing
Source: GAO analysis of DOD component exemption certification letters from
calendar years 2004 through 2006.
Of the components we identified, the Missile Defense Agency and the Air
Force provided us about 80 percent of the exemption certification letters
that we reviewed. Almost all of the certifications were for the export of
technical data or for the temporary export of defense items "by or for any
agency of the U.S. government for official use by such an agency." About
half of the certifications were for the use of ITAR section 125.4(b)(1)
for the export of technical data, including classified information,
typically related to a particular program, such as Joint Strike Fighter or
Upgraded Early Warning Radar, with allies during discussions at scheduled
meetings or participation in technical conferences in foreign locations.
In addition, almost 30 percent of the certifications were for ITAR section
126.4(a), such as exports of technical data, defense services, or hardware
in support of joint military exercises. ITAR section 126.4(a) is the one
that State and DOD disagree on its use by contractors. An additional 19
percent of the certifications cited both of these ITAR sections. Less than
3 percent of the ITAR exemptions identified were for transfers of software
and hardware--primarily for use by U.S. forces outside of the United
States, sometimes in support of operations in Iraq. Twenty-one of the
certifications issued by two nonservice components cited ITAR section
125.4(b)(3)--technical data in furtherance of a contract between the
exporter and the U.S. government if the contract provides for the export
of data.
More than 270 exporters, including prime contractors and subcontractors,
were identified in exemption certification letters we reviewed. The most
frequently identified exporters were defense contractors, but university
laboratories and federally funded research and development centers were
also identified. Four major defense contractors represented one-fourth of
the exemption certifications, with one receiving over 200 certifications.
However, more than 80 percent of the exporters were identified five or
fewer times in the certifications we reviewed from DOD components. A total
of 266 different programs and activities were identified in the
certifications, with the Missile Defense Agency having the largest
number.11 Over 90 foreign destinations, including NATO, were identified on
DOD certifications. The most frequently cited destination country was the
United Kingdom--identified 900 times. Thirteen countries were only
identified once as exempted export destinations--some of which were
situations in which U.S. entities located in the countries were the
recipients, not the foreign government or industry of that country.12 Some
certifications were for exports to multiple countries within one
geographic region, such as Latin America.
11 Not all certification letters had a specific program listed. Some
certification letters had just a description of a meeting, an activity, or
a topic.
12 U.S. entities included U.S. government personnel, U.S. military
services, and U.S. military personnel.
State and DOD Lack Complete Data to Oversee Exemptions Certified by DOD
State and DOD lack comprehensive data to oversee the use of DOD-certified
exemptions, limiting their knowledge of defense activities under this
process. DOD's annual report to State on the use of exemptions captures
data from the military services but not from other DOD components. In
addition, the data may not capture the magnitude of transfers certified
for exemption use. Specifically, we found that one DOD component used one
letter to certify multiple companies' use of an ITAR exemption during a
1-year period. This information was not included in the DOD component's
reporting on exemption certification use. In addition, we found that some
of the certification letters that we reviewed lacked key information that
could be helpful in overseeing exemptions certified by DOD components.
The DOD exemption guidelines state that the military services must record
the exemption in a centralized DOD database. However, nonservice
components, such as the Missile Defense Agency--which had the largest
number of certifications from 2004 through 2006--do not record their
exemption certification data in the centralized DOD database, known as
USXPORTS.13 Instead, the nonservice components retain their own records on
certified exemptions. In addition, DOD guidelines provide that DOD submit
a report to State on exemptions certified for use on an annual basis. In
July 2007, DOD submitted its 2006 report to State based on the data
contained in USXPORTS. However, the utility of DOD's report to State on
exemption use is limited in several areas. First, since DOD collects data
for only the military services, its exemption report to State does not
provide total exemption data for all DOD components. Specifically, DOD's
report to State contained data on 161 certification letters issued by the
military services in 2006; for the same year, we collected an additional
271 letters from nonservice components. Second, for each certification
letter, the report contains (1) a certification tracking number, (2)
certification date, (3) certifying organization, (4) destination country
or countries, (5) description of export, and (6) exporter name. However,
it does not contain other information that the DOD guidelines specify for
inclusion in the certification letters and maintenance in the military
services' records on exemption certifications, such as which ITAR
exemption is being certified and the expiration date for each exemption.14
Therefore, State does not have a complete report for the exemptions
certified for use by all of DOD's components.
13 USXPORTS is a DOD automated system containing export licenses and other
related information.
14 While the DOD guidelines provide that DTSA will annually forward a
consolidated report to State, they do not specifically provide for the
content of the report.
While the certification letters we reviewed frequently contained the
information as called for in the DOD exemption guidelines, some
differences existed that resulted in DOD not having insight into the
magnitude of transfers certified for exemption use. For example, for its
Joint Strike Fighter program, the Air Force issues an annual certification
letter--to more than 50 companies--that certifies their use of one ITAR
exemption for the purposes of responding to written requests from DOD for
a quote or bid proposal. These letters are broad in scope and do not
specify what technical data would be released for the program. When these
companies listed on the certification letter cite a specific need for
using this exemption throughout the year for an export, they submit their
request directly to the program office. However, because the Air Force
does not require the program office to report these specific data on these
program office approvals for transfers, it is likely that the Air Force
lacks comprehensive knowledge on exports transferred under the use of this
ITAR exemption. From 2004 through 2006, we found that the Joint Strike
Fighter program had authorized the release of more than 600 transfers of
technical data under the quote or bid proposal exemption containing
specific information--such as the types of technical data and related
drawings exported and the frequency of these exports--which the Air Force
lacks in its central record keeping on exemptions. Further, DOD's 2006
report to State includes only the certification letter that was broad in
scope, but it does not include the magnitude of transfers under this
certification.
We found some variations in the type of information contained in the
certification letters provided by the military services and non-service
components, which can lessen DOD's insight into the specific export
activities that DOD is certifying.15 For example, 163 did not specify
whether the foreign export destination entity was a foreign government,
foreign industry, or U.S. entity.16 Over 70 certifications--about 4
percent of the total certifications we reviewed--did not contain an
expiration date for the exemption; 17 for the remainder, the length of
coverage from certification date to expiration date ranged from less than
1 day to more than 4.5 years. The scope of the letters ranged from
covering one exporter to covering multiple exporters, and about 30 percent
of the certifications that we reviewed included subcontractors. While
covering more than one exporter under one certification letter may create
some workforce efficiencies, it could limit DOD's insight into exporters
receiving exemption certifications. In addition, this practice, while not
specifically addressed in the DOD guidelines, has raised concern among
some contractors that doing so could blur transparency and create some
liability issues. Export control officials from each of the four companies
we spoke with said they would prefer that each subcontractor have a
separate certification letter from DOD to provide a clearer record of, and
decrease their liability for, subcontractors' exports.
15 Some of the information that varied included elements provided for in
the DOD exemption guidelines that were issued to the military services.
16 The DOD guidelines do not provide a level of specificity concerning the
foreign end user category, such as whether it is a foreign country,
government, or industry official, or a U.S. entity in a foreign country.
Conclusions
While the exemption certification process is one way to facilitate defense
cooperation with friendly nations and allies, the U.S. government needs a
consistent approach to and knowledge of defense export activities
certified through this process. However, State and DOD have disparate
understandings of regulatory exemption use and guidance, and efforts to
resolve these differences have proven unsuccessful. Further, neither State
nor DOD has complete and accurate data to obtain sufficient knowledge of
the extent to which all DOD components are certifying the use of
exemptions for the export of defense items. Therefore, State and DOD
cannot readily identify in total and on a program-by-program basis the
defense items that DOD has certified for exemption use in support of DOD's
activities.
Recommendations for Executive Action
To ensure a common understanding of the use of ITAR exemptions available
for DOD's activities, we recommend that the Secretary of State direct the
Deputy Assistant Secretary for the Directorate of Defense Trade Controls
and the Secretary of Defense direct the Director of the Defense Technology
Security Administration to establish a work group to define and resolve
disagreements on exemption use and guidelines and to document decisions
reached. If the work group cannot reach agreement before the existing DOD
exemption guidelines expire, then it should elevate the matter for
resolution within its appropriate chain of command. If needed, the
Secretary of State should direct the Deputy Assistant Secretary for the
Directorate of Defense Trade Controls to revise the ITAR to incorporate
any necessary changes. Once agreement is reached, the Secretary of
Defense, with concurrence from the Secretary of State, should direct that
the guidelines be revised and made applicable to all DOD components.
17 While the ITAR does not specify an expiration date for the use of an
exemption, the DOD guidelines specify that the certification letter
provide an expiration date, not to exceed 1-year from the date the letter
is issued.
We are also recommending that the Secretary of Defense should direct the
Director of the Defense Technology Security Administration to ensure that
the revised exemption certification guidelines provide the appropriate
mechanisms for overseeing the exemption certification process, such as the
collection of data from all DOD components on exemptions they certified.
Agency Comments
The Departments of Defense and State provided comments on a draft of this
report. DOD also provided technical comments, which we incorporated as
appropriate. In commenting on our first recommendation, Defense and State
both concurred with the need to establish a work group to define and
resolve disagreements on exemption use and guidelines, and to document
decisions reached. State indicated that initial discussions with DOD have
begun, and DOD stated that it plans to codify the understandings in a
clear set of guidelines to be issued to DOD components.
In its comments on our second recommendation, DOD did not agree, stating
that there is no existing mechanism whereby the U.S. government can
collect data from exporters to monitor exports of defense items made under
exemptions. DOD further stated that such a mechanism would exceed DOD's
existing statutory and regulatory authority because the ultimate
responsibility for obtaining appropriate authorization to export defense
items rests with the exporter. Our intent was not for DOD to collect
information directly from exporters. Instead, our recommendation is
intended for DOD to expand its existing data collection of exemptions
certified by the military services to include those from all DOD
components. To clarify this intent, we modified the language in the
recommendation.
Formal written comments provided by DOD and State are reprinted in
appendixes III and IV, respectively.
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. We will then provide copies of this report
to interested congressional committees, as well as the Secretaries of
Defense 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 made available at no
charge on the GAO Web site at http://www.gao.gov.
Please contact me at (202) 512-4841 or [21][email protected] if you
or your staff have any questions concerning this report. Contact points
for our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Others making key contributions to this
report are listed in appendix V.
Sincerely yours,
Ann Calvaresi-Barr
Director
Acquisition and Sourcing Management
Appendix I: Scope and Methodology
To describe the approach used by the Department of Defense (DOD) for
certifying the use of export exemptions for exporters, we reviewed export
control regulations and discussed with the Department of State and DOD
their interpretation of when DOD can certify that a specific export
activity qualifies for the use of certain export exemptions. We reviewed
DOD's exemption certification guidelines, State's response to the
guidelines, DOD components' internal guidance on exemption certifications,
and DOD components' practices. We also interviewed officials from State's
Directorate of Defense Trade Controls--from the Licensing, Compliance,
Management, and Policy offices, and DOD's Defense Technology Security
Administration about their views on the International Traffic in Arms
Regulations (ITAR) allowances for exemption use by exporters, requirements
for DOD to direct the use of certain ITAR exemptions, and practices by DOD
components that certify the use of exemptions by exporters in support of
DOD activities.
We collected and summarized DOD export exemption certification letters for
calendar years 2004 through 2006 to summarize the use of DOD-certified
exemptions. We selected 2004 because the Defense Technology Security
Administration (DTSA) issued guidelines on the certification process to
the military services in that year. Prior to 2004, no formal procedures
existed for designating senior-level personnel in the military departments
for the authorization of ITAR exemption certifications. Through interviews
with knowledgeable State and DOD officials, we created a list of DOD
components potentially certifying the use of exemptions. While this
coordination helped identify the DOD components certifying the use of
exemptions, there may be other components that were not included in this
list and additional exemption letters might exist. We then contacted the
DOD components on our list to ask if they certified exemptions between
2004 and 2006. While some components on our list stated that they did not
certify export exemptions, we collected certification letters from those
DOD components that did certify the use of exemptions--the Air Force,
Army, Navy, Missile Defense Agency, National Geospatial-Intelligence
Agency, National Security Agency, and the Office of Acquisition,
Technology, and Logistics. We created a database to summarize information
provided in these certification letters, such as the exemptions certified,
types of exports, and foreign recipients. In some cases, DOD components
provided separate letters for each exporter receiving an exemption
certification for an activity, while other components combined all
exporters onto one exemption certification letter for an activity.
Therefore, to get an equitable count, we separated individual companies
from exemption certifications granted for multiple companies on one
letter. The total number of exemption certification letters provided by
the DOD components to us was 1,142. After separating out the individual
companies from the certification letters, the total number of ITAR
exemptions certified by the DOD components for the calendar years 2004
through 2006 totaled 1,960.
To examine the extent to which State and DOD oversee the use of export
exemptions certified by DOD, we reviewed DOD's 2006 report on certified
exemptions provided to State in July 2007. We also interviewed DTSA
officials about the USXPORTS automation system and what it contains. To
gain a DOD acquisition program office perspective, we interviewed the
Joint Strike Fighter Program Office about its exemption certification
processes and practices. We compared the data of the program office with
the data from the cognizant military service. We also interviewed
officials from four of the companies--Boeing, Lockheed Martin, Northrop
Grumman, and Raytheon--who most often received certification letters to
gain their perspective on DOD components' processes for and guidance to
exporters on DOD-certified exemptions. We examined the certification
letters we obtained from DOD components and identified differences among
information contained in the letters.
Appendix II: ITAR Sections Discussed in This Report
We discussed in this report a number of ITAR subparts and sections that
are cited in DOD certification letters, identified in DOD's exemption
certification guidelines, or are under discussion between State and DOD.
These ITAR sections are cited below in their entirety.
Table 3: ITAR Sections Cited in This Report
S125.4 Exemptions of general applicability.
S125.4(a) The following exemptions apply to exports of technical data for
which approval is not needed from the Directorate of Defense Trade
Controls. These exemptions, except for paragraph (b)(13) of this section,
do not apply to exports to proscribed destinations under S126.1 of this
subchapter or for persons considered generally ineligible under S 120.1(c)
of this subchapter. The exemptions are also not applicable for purposes of
establishing offshore procurement arrangements or producing defense
articles offshore (see S 124.13), except as authorized under S125.4 (c).
If S126.8 of this subchapter requirements are applicable, they must be met
before an exemption under this section may be used. Transmission of
classified information must comply with the requirements of the Department
of Defense National Industrial Security Program Operating Manual and the
exporter must certify to the transmittal authority that the technical data
does not exceed the technical limitation of the authorized export.
S125.4(b) The following exports are exempt from the licensing requirements
of this subchapter.
S125.4(b)(1) Technical data, including classified information, to be
disclosed pursuant to an official written request or directive from the
U.S. Department of Defense;
S125.4(b)(3) Technical data, including classified information, in
furtherance of a contract between the exporter and an agency of the U.S.
Government, if the contract provides for the export of the data and such
data does not disclose the details of design, development, production, or
manufacture of any defense article;
S125.4(c) Defense services and related unclassified technical data are
exempt from the licensing requirements of this subchapter, to nationals of
NATO countries, Australia, Japan, and Sweden, for the purposes of
responding to a written request from the Department of Defense for a quote
or bid proposal. Such exports must be pursuant to an official written
request or directive from an authorized official of the U.S. Department of
Defense. The defense services and technical data are limited to paragraphs
(c)(1), (c)(2), and (c)(3) of this section and must not include paragraphs
(c)(4), (c)(5), and (c)(6) of this section which follow:
(1) Build-to-Print. "Build-to-Print" means that a foreign consignee can
produce a defense article from engineering drawings without any technical
assistance from a U.S. exporter. This transaction is based strictly on a
"hands-off" approach since the foreign consignee is understood to have the
inherent capability to produce the defense article and only lacks the
necessary drawings. Supporting documentation such as acceptance criteria,
and specifications, may be released on an as-required basis (i.e. "must
have") such that the foreign consignee would not be able to produce an
acceptable defense article without this additional supporting
documentation. Documentation which is not absolutely necessary to permit
manufacture of an acceptable defense article (i.e. "nice to have") is not
considered within the boundaries of a "Build-to-Print" data package;
(2) Build/Design-to-Specification. "Build/Design-to-Specification" means
that a foreign consignee can design and produce a defense article from
requirement specifications without any technical assistance from the U.S.
exporter. This transaction is based strictly on a "hands-off" approach
since the foreign consignee is understood to have the inherent capability
to both design and produce the defense article and only lacks the
necessary requirement information;
(3) Basic Research. "Basic Research" means a systemic study directed
toward greater knowledge or understanding of the fundamental aspects of
phenomena and observable facts without specific applications toward
processes or products in mind. It does not include "Applied Research"
(i.e. a systemic study to gain knowledge or understanding necessary to
determine the means by which a recognized and specific need may be met. It
is a systematic application of knowledge toward the production of useful
materials, devices, and systems or methods, including design, development,
and improvement of prototypes and new processes to meet specific
requirements.);
(4) Design Methodology, such as: The underlying engineering methods and
design philosophy utilized (i.e., the ``why'' or information that explains
the rationale for particular design decision, engineering feature, or
performance requirement); engineering experience (e.g., lessons learned);
and the rationale and associated databases (e.g., design allowables,
factors of safety, component life predictions, failure analysis criteria)
that establish the operational requirements (e.g., performance,
mechanical, electrical, electronic, reliability and maintainability) of a
defense article. (Final analytical results and the initial conditions and
parameters may be provided.)
(5) Engineering Analysis, such as: Analytical methods and tools used to
design or evaluate a defense article's performance against the operational
requirements. Analytical methods and tools include the development and/or
use of mockups, computer models and simulations, and test facilities.
(Final analytical results and the initial conditions and parameters may be
provided.)
(6) Manufacturing Know-how, such as: information that provides detailed
manufacturing processes and techniques needed to translate a detailed
design into a qualified, finished defense article. (Information may be
provided in a build-to-print package that is necessary in order to produce
an acceptable defense article.)
S 125.5 Exemptions for plant visits.
S 125.5 (a) A license is not required for the oral and visual disclosure
of unclassified technical data during the course of a classified plant
visit by a foreign person, provided: (1) The classified visit has itself
been authorized pursuant to a license issued by the Directorate of Defense
Trade Controls; or (2) the classified visit was approved in connection
with an actual or potential government-to-government program or project by
a U.S. Government agency having classification jurisdiction over the
classified defense article or classified technical data involved under
Executive Order 12356 or other applicable Executive Order; and (3) the
unclassified information to be released is directly related to the
classified defense article or technical data for which approval was
obtained and does not disclose the details of the design, development,
production or manufacture of any other defense articles. In the case of
visits involving classified information, the requirements of the Defense
Industrial Security Manual (Department of Defense Manual 5220.22M) must be
met.
S 125.5 (b) The approval of the Directorate of Defense Trade Controls is
not required for the disclosure of oral and visual classified information
to a foreign person during the course of a plant visit approved by the
appropriate U.S. Government agency if: (1) The requirements of the Defense
Industrial Security Manual have been met; (2) the classified information
is directly related to that which was approved by the U.S. Government
agency; (3) it does not exceed that for which approval was obtained; and
(4) it does not disclose the details of the design, development,
production or manufacture of any defense articles.
S 125.5 (c) A license is not required for the disclosure to a foreign
person of unclassified technical data during the course of a plant visit
(either classified or unclassified) approved by the Directorate of Defense
Trade Controls or a cognizant U.S. Government agency provided the
technical data does not contain information in excess of that approved for
disclosure. This exemption does not apply to technical data which could be
used for design, development, production or manufacture of a defense
article.
S 126.4 Shipments by or for United States Government agencies.
S 126.4(a) A license is not required for the temporary import, or
temporary export, of any defense article, including technical data or the
performance of a defense service, by or for any agency of the U.S.
Government for official use by such an agency, or for carrying out any
foreign assistance, cooperative project or sales program authorized by law
and subject to control by the President by other means. This exemption
applies only when all aspects of a transaction (export, carriage, and
delivery abroad) are affected by a United States Government agency or when
the export is covered by a United States Government Bill of Lading. This
exemption, however, does not apply when a U.S. Government agency acts as a
transmittal agent on behalf of a private individual or firm, either as a
convenience or in satisfaction of security requirements. The approval of
the Directorate of Defense Trade Controls must be obtained before defense
articles previously exported pursuant to this exemption are permanently
transferred (e.g., property disposal of surplus defense articles overseas)
unless the transfer is pursuant to a grant, sale, lease, loan or
cooperative project under the Arms Export Control Act or a sale, lease or
loan under the Foreign Assistance Act of 1961, as amended, or the defense
articles have been rendered useless for military purposes beyond the
possibility of restoration.
NOTE: Special definition. For purposes of this section, defense articles
exported abroad for incorporation into a foreign launch vehicle or for use
on a foreign launch vehicle or satellite that is to be launched from a
foreign country shall be considered a permanent export.
S 126.4(c) A license is not required for the temporary import, or
temporary or permanent export, of any classified or unclassified defense
articles, including technical data or the performance of a defense
service, for end-use by a U.S. Government Agency in a foreign country
under the following circumstances:
(1) The export or temporary import is pursuant to a contract with, or
written direction by, an agency of the U.S. Government; and
(2) The end-user in the foreign country is a U.S. Government agency or
facility, and the defense articles or technical data will not be
transferred to any foreign person; and
(3) The urgency of the U.S. Government requirement is such that the
appropriate export license or U.S. Government Bill of Lading could not
have been obtained in a timely manner.
S 126.6 Foreign-owned military aircraft and naval vessels, and the Foreign
Military Sales program.
S 126.6 (a) A license from the Directorate of Defense Trade Controls is
not required if:
(1) The article or technical data to be exported was sold, leased, or
loaned by the Department of Defense to a foreign country or international
organization pursuant to the Arms Export Control Act or the Foreign
Assistance Act of 1961, as amended, and
(2) The article or technical data is delivered to representatives of such
a country or organization in the United States; and
(3) The article or technical data is to be exported from the United States
on a military aircraft or naval vessel of that government or organization
or via the Defense Transportation Service (DTS).
S 126.6 (c) Foreign Military Sales Program. A license from the
Directorate of Defense Trade Controls is not required if the defense
article or technical data or a defense service to be transferred was sold,
leased or loaned by the Department of Defense to a foreign country or
international organization under the Foreign Military Sales (FMS) Program
of the Arms Export Control Act pursuant to an Letter of Offer and
Acceptance (LOA) authorizing such transfer which meets the criteria stated
below:
(1) Transfers of the defense articles, technical data or defense services
using this exemption may take place only during the period which the FMS
Letter of Offer and Acceptance (LOA) and implementing USG FMS contracts
and subcontracts are in effect and serve as authorization for the
transfers hereunder in lieu of a license. After the USG FMS contracts and
subcontracts have expired and the LOA no longer serves as such
authorization, any further provision of defense articles, technical data
or defense services shall not be covered by this section and shall instead
be subject to other authorization requirements of this subchapter; and
(2) The defense article, technical data or defense service to be
transferred are specifically identified in an executed LOA, in furtherance
of the Foreign Military Sales Program signed by an authorized Department
of Defense Representative and an authorized representative of the foreign
government, and
(3) The transfer of the defense article and related technical data is
effected during the duration of the relevant Letter of Offer and
Acceptance (LOA), similarly a defense service is to be provided only
during the duration of the USG FMS contract or subcontract and not to
exceed the specified duration of the LOA, and
(4) The transfer is not to a country identified in S 126.1 of this
subchapter, and
(5) The U.S. person responsible for the transfer maintains records of all
transfers in accordance with Part 122 of this subchapter, and
(6) For transfers of defense articles and technical data,
(i) The transfer is made by the relevant foreign diplomatic mission of the
purchasing country or its authorized freight forwarder, provided that the
freight forwarder is registered with the Directorate of Defense Trade
Controls pursuant to part 122 of this subchapter, and
(ii) At the time of shipment, the Port Director of U.S. Customs and Border
Protection is provided an original and properly executed DSP-94
accompanied by a copy of the LOA and any other documents required by U.S.
Customs and Border Protection in carrying out its responsibilities. The
Shippers Export Declaration or, if authorized, the outbound manifest, must
be annotated ``This shipment is being exported under the authority of
Department of State Form DSP-94. It covers FMS Case [insert case
identification], expiration [insert date]. 22 CFR 126.6 applicable. The
U.S. Government point of contact is _____, telephone number _____,'' and
(iii) If, classified hardware and related technical data are involved the
transfer must have the requisite USG security clearance and transportation
plan and be shipped in accordance with the Department of Defense National
Industrial Security Program Operating Manual, or
(7) For transfers of defense services:
(i) A contract or subcontract between the U.S. person(s) responsible for
providing the defense service and the USG exists that: (A) Specifically
defines the scope of the defense service to be transferred, (B) Identifies
the FMS case identifier, (C) Identifies the foreign recipients of the
defense service, (D) Identifies any other U.S. or foreign parties that may
be involved and their roles/responsibilities, to the extent known when the
contract is executed, (E) Provides a specified period of duration in which
the defense service may be performed, and
(ii) The U.S. person(s) identified in the contract maintain a registration
with the Directorate of Defense Trade Controls for the entire time that
the defense service is being provided. In any instance when the U.S.
registered person(s) identified in the contract employs a subcontractor,
the subcontractor may only use this exemption when registered with DDTC,
and when such subcontract meets the above stated requirements, and
(iii) In instances when the defense service involves the transfer of
classified technical data, the U.S. person transferring the defense
service must have the appropriate USG security clearance and a
transportation plan, if appropriate, in compliance with the Department of
Defense National Industrial Security Program Operating Manual, and
(iv) The U.S. person responsible for the transfer reports the initial
transfer, citing this section of the ITAR, the FMS case identifier,
contract and subcontract number, the foreign country, and the duration of
the service being provided to the Directorate of Defense Trade Controls
using DDTC's Direct Shipment Verification Program.
Source: ITAR, 22 C.F.R. Parts 125 and 126 (2006).
Appendix III: Comments from the Department of Defense
Appendix IV: Comments from the Department of State
Appendix V: GAO Contact and Staff Acknowledgments
GAO Contact
Ann Calvaresi-Barr (202) 512-4841 or [22][email protected]
Acknowledgments
In addition to the contact name above, Anne-Marie Lasowski, Assistant
Director; Lisa Gardner; Sharron Candon; Peter Grana; Arthur James, Jr.;
Karen Sloan; and Marie Ahearn made key contributions to this report.
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[42]GAO/NSIAD-00-191 . Washington, D.C.: August 31, 2000.
Defense Trade: Status of the Department of Defense's Initiatives on
Defense Cooperation. [43]GAO/NSIAD-00-190R . Washington, D.C.: July 19,
2000.
Export Controls: Better Interagency Coordination Needed on Satellite
Exports. [44]GAO/NSIAD-99-182 . Washington, D.C.: September 17, 1999.
Export Controls: Some Controls over Missile-Related Technology Exports to
China Are Weak. [45]GAO/NSIAD-95-82 . Washington, D.C.: April 17, 1995.
Export Controls: Actions Needed to Improve Enforcement.
[46]GAO/NSIAD-94-28 . Washington, D.C.: December 30, 1993.
(120617)
To view the full product, including the scope
and methodology, click on [47]GAO-07-1103 .
For more information, contact Ann Calvaresi-Barr at (202) 512-4841 or
[email protected].
Highlights of [48]GAO-07-1103 , a report to the Chairman, Committee on
Foreign Affairs, House of Representatives
September 2007
DEFENSE TRADE
Clarification and More Comprehensive Oversight of Export Exemptions
Certified by DOD Are Needed
In support of Department of Defense (DOD) activities, U.S. defense
companies may export defense items. The Department of State (State)
controls such exports through its International Traffic in Arms
Regulations (ITAR), which provides for some exemptions from export
licensing requirements. For a limited number of these exemptions, DOD may
confirm--or certify--that the export activity qualifies for the use of an
ITAR exemption. As part of an initiative, DOD is to make more effective
use of ITAR exemptions, but little is known about the extent to which this
is done.
This report (1) describes DOD's approach for certifying exporters'
exemption use in support of defense activities, (2) summarizes the use of
selected DOD-certified exemptions, and (3) examines State and DOD's
oversight of exemption use. GAO's findings are based on its review of
export control law, regulation, and DOD guidelines; interviews with State,
DOD, and defense industry officials; and a GAO-developed database of DOD
certification letters.
[49]What GAO Recommends
GAO is recommending that State and DOD resolve disagreements on exemption
use and guidelines, and strengthen oversight through data collection.
State and DOD agreed to resolve disagreements, but DOD misunderstood the
intent of the recommendation on oversight. In response, GAO clarified the
language in this recommendation.
In support of defense activities, DOD prepares letters certifying that a
proposed export qualifies for the use of certain ITAR exemptions by
exporters. To guide this approach, DOD issued exemption certification
guidelines in March 2004 to the military services because they are the DOD
components primarily responsible for managing and implementing defense
international cooperative programs. However, GAO found other DOD
components that also certify the use of exemptions in support of
international activities but are not subject to the DOD guidelines.
Officials from State, which regulates and controls defense exports, have
raised several concerns to DOD about its guidelines, including the use of
one ITAR exemption by contractors and the comprehensiveness of the
guidelines. While State and DOD officials have met and exchanged
correspondence on these issues, to date, they have not resolved
fundamental disagreements. A lack of common understanding of regulatory
exemption use could result in inconsistent application of the regulations.
The exemption certification letters from DOD components that we reviewed
showed that over 1,900 exemptions were certified for about 270 exporters
in calendar years 2004 through 2006. The majority of the certifications
related to missile defense and Air Force programs and included the export
of technical data. While most of the exporters identified in the
DOD-certified exemption letters were defense contractors, other exporters
included university laboratories and federally funded research and
development centers. The United Kingdom, Australia, Canada, and the North
Atlantic Treaty Organization were the most frequently cited recipients for
exports under exemptions certified by DOD components.
State and DOD lack comprehensive data to oversee the use of DOD-certified
exemptions, limiting their knowledge of defense activities under this
process. While DOD's guidelines provide for annual reporting to State on
certified exemptions, this report captures data from the military
services, but not from other DOD components. GAO identified 271 letters
from nonservice components that were not included in DOD's 2006 report to
State. In addition, DOD's report to State may not capture the magnitude of
transfers certified for exemption use. For example, one letter that GAO
reviewed certified the use of an exemption for more than 50 companies, but
only the certification letter--not the actual transfers, which totaled 600
over a 3-year period--was captured in the cognizant military service's
record keeping on exemption certifications. Furthermore, the details on
these transfers were not included in DOD's report to State, limiting
insight into the number of transfers under this certification.
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References
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50. http://www.gao.gov/
51. http://www.gao.gov/
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53. mailto:[email protected]
54. mailto:[email protected]
55. mailto:[email protected]
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