Export Controls: Vulnerabilities and Inefficiencies Undermine
System's Ability to Protect U.S. Interests (26-JUL-07,
GAO-07-1135T).
In controlling the transfer of weapons and related technologies
overseas, the U.S. government must limit the possibility of
sensitive items falling into the wrong hands while allowing
legitimate trade to occur. Achieving this balance, however, has
become increasingly difficult due to redefined security threats
and an increasingly globalized economy. The export control system
is a key government program intended to balance U.S. interests.
GAO has identified and reported on many weaknesses and challenges
in the export control system. The export control system is a
complex system involving multiple departments, laws, and
regulations. It is governed primarily by the State Department,
which regulates arms exports, and the Commerce Department, which
regulates dual-use exports that have both military and civilian
applications. GAO has made a number of recommendations aimed at
improving the export control system, but many have yet to be
implemented. This statement focuses on three key areas: (1)
weaknesses and challenges that have created vulnerabilities in
the U.S. export control system, (2) inefficiencies in the export
licensing process, and (3) State's and Commerce's lack of
assessments on the effectiveness of their controls.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-1135T
ACCNO: A73467
TITLE: Export Controls: Vulnerabilities and Inefficiencies
Undermine System's Ability to Protect U.S. Interests
DATE: 07/26/2007
SUBJECT: Dual-use technologies
Export regulation
Exporting
Federal regulations
Foreign trade policies
Internal controls
International trade
Jurisdictional authority
National policies
Policy evaluation
Risk assessment
Risk management
Trade regulation
Corrective action
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GAO-07-1135T
* [1]Summary
* [2]Background
* [3]Jurisdiction Disputes, Lack of Clarity on Exemption Use, and
* [4]Export Control System is Further Hindered by Licensing Ineff
* [5]Lack of Systematic Assessments Invites Risk
* [6]Conclusions
* [7]GAO Contacts and Acknowledgments
* [8]GAO's Mission
* [9]Obtaining Copies of GAO Reports and Testimony
* [10]Order by Mail or Phone
* [11]To Report Fraud, Waste, and Abuse in Federal Programs
* [12]Congressional Relations
* [13]Public Affairs
Testimony
Before the Subcommittee on Terrorism, Nonproliferation, and Trade,
Committee on Foreign Affairs, House of Representatives
United States Government Accountability Office
GAO
For Release on Delivery
Expected at 2:00 p.m. EDT
Thursday, July 26, 2007
EXPORT CONTROLS
Vulnerabilities and Inefficiencies Undermine System's Ability to Protect
U.S. Interests
Statement of Ann Calvaresi-Barr, Director
Acquisition and Sourcing Management
GAO-07-1135T
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me here today to discuss the U.S. export control
system, a key component of the U.S. government's efforts to protect
critical technologies while allowing legitimate defense trade. As you
know, the U.S. government controls the transfer of weapons and related
technologies to other countries and foreign companies. In doing so, the
government must consider U.S. national security, foreign policy, and
economic interests and strike a balance among these interests. Achieving
such a balance, however, has become increasingly difficult due to a
redefinition of security threats after the September 2001 terrorist
attacks and an increasingly globalized and high-tech economy. This
changing environment raises concerns about the ability of government
programs, which were established decades ago, to protect critical
technologies. These concerns, along with a body of GAO work on weaknesses
in the export control system and related federal programs, prompted GAO
early this year to designate the effective protection of technologies
critical to U.S. national security interests as a high-risk area
warranting strategic examination.1
Within the safety net of government programs to protect critical,
defense-related technologies, the export control system is particularly
complex as it involves multiple agencies, laws, and regulations. This
system is governed primarily by the Departments of State and Commerce.
State is responsible for regulating arms exports2 while Commerce is
responsible for regulating exports of dual-use items, which have both
military and civilian applications. Exports subject to State's regulations
generally require a license, unless an exemption applies. Many
Commerce-controlled items do not require a license for export to most
destinations. Both departments, however, are responsible for limiting the
possibility of exported items falling into the wrong hands while allowing
legitimate trade to occur.
We have made a number of recommendations to address the weaknesses and
challenges we have identified in the U.S. export control system, but many
have yet to be implemented. My statement today focuses on three key areas:
(1) weaknesses and challenges that have created vulnerabilities in the
U.S. export control system, (2) inefficiencies in the export licensing
process, and (3) State's and Commerce's lack of assessments on the
effectiveness of their controls. In addition, the appendix contains
summaries of our export control-related reports issued from fiscal year
2000 to date, along with information on the status of the implementation
of our recommendations by the various departments involved in the system.
A list of related products that we have issued since the mid-1990s is also
included.
1GAO, High-Risk Series: An Update, [14]GAO-07-310 (Washington, D.C.:
January 2007).
2"Arms" refers to defense articles and services as specified in 22 U.S.C.
S2778.
My statement is based on GAO's extensive body of work on the export
control system, including information from our on-going review of the arms
export control system. We conducted our work in accordance with generally
accepted government auditing standards.
Summary
For over a decade, we have reported on weaknesses and challenges that have
created vulnerabilities in the U.S. export control system. Two key
weaknesses relate to the most basic aspects of the system. First, State
and Commerce have yet to clearly determine which department controls the
export of certain sensitive items. Jurisdictional disputes are often
rooted in the departments' differing interpretations of regulations and
inadequate coordination. Second, a lack of clarity on exemption use has
limited the government's ability to ensure that unlicensed exports comply
with export laws and regulations. These weaknesses compound an already
challenged enforcement community, which has difficulty in coordinating
investigations, balancing multiple priorities, and leveraging finite
resources.
To help facilitate defense trade, State has sought to reduce the amount of
time it takes to process export license applications. However,
streamlining initiatives have generally not been successful and processing
times have increased in recent years--from a median of 13 days in 2002 to
26 days in 2006. Also, at the end of 2006, State's backlog of applications
reached its highest level of more than 10,000 open cases. While Commerce's
license application processing times have been relatively stable, the
overall efficiency of Commerce's process is unknown, in part due to its
limited assessments. Commerce's assessments are limited to only the first
steps in its application review process and not the review process as a
whole.
State and Commerce can provide little assurance about the overall
effectiveness of their respective export control systems. In managing
their systems, neither department has conducted systematic assessments
that would provide a basis for determining what corrective actions may be
needed to ensure they are fulfilling their missions. Without such
assessments, the departments are ill-equipped to adapt to the changing
demands of the 21st century.
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, which have both military and
commercial applications (see table 1).
Table 1: Roles and Responsibilities in the Arms and Dual-Use Export
Control Systems
Principal Implementing
regulatory body Mission Statutory authority regulations
State Regulates export of Arms Export Control International
Department's arms by giving Acta Traffic in Arms
Directorate of primacy to national Regulations
Defense Trade security and
Controls foreign policy
concerns
Commerce Regulates export of Export Export
Department's dual-use items by Administration Act Administration
Bureau of weighing economic, of 1979b Regulations
Industry and national security,
Security and foreign policy
interests
Other federal
agencies
Department of Provides input on which items should be controlled by
Defense either State or Commerce and conducts technical and
national security reviews of export license applications
submitted by exporters to either State or Commerce
Department of Enforces arms and dual-use export control laws and
Homeland Security regulations through border inspections and
investigationsc
Department of Investigates any criminal violations in certain
Justice counterintelligence areas, including potential export
control violations, and prosecutes suspected violators
of arms and dual-use export control lawsc
Source: GAO analysis of cited laws and regulations.
a22 U.S.C. S2751 et. seq.
b50 U.S.C. App. S2401 et. seq. Authority granted by the Act lapsed on
August 20, 2001. However, Executive Order 13222, Continuation of Export
Control Regulations, issued August 2001, continues the export controls
established under the Act and the implementing Export Administration
Regulations. Executive Order 13222 requires an annual extension and was
recently renewed by Presidential Notice on August 3, 2006.
cHomeland Security, Justice, and Commerce investigate potential dual-use
export control violations. Homeland Security and Justice investigate
potential arms export control violations.
Implementing regulations for both 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, Commerce's controls over dual-use items
are less restrictive than State's controls over arms and provide less
up-front government visibility into what is being exported. For example,
many items controlled by Commerce 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 arms exports to China are generally prohibited.
In carrying out their respective export control functions, Commerce and
State have different levels of workload and personnel (see table 2).
Table 2: Case Workload and Staffing for the Dual-Use and Arms Export
Control Systems for Fiscal Year 2006
Number of cases Number of positions
closeda filledb
Commerce Department's Bureau of 23,673 351
Industry and Security
State Department's Directorate of 65,274 64
Defense Trade Controls
Source: GAO analysis of Commerce and State budget documents and State
licensing data (data).
aFor Commerce, cases include both export license applications and
commodity classification requests. For State, cases include applications
for permanent exports, temporary exports and imports, agreements, license
amendments, and jurisdiction determinations.
bCommerce's positions include licensing officers, enforcement agents,
analysts, and other staff. State's positions include licensing officers,
compliance officials, and other staff. Numbers provided do not include
contractors or staff on loan from other organizations.
Jurisdiction Disputes, Lack of Clarity on Exemption Use, and Enforcement
Challenges Have Weakened the Export Control System
Our reports have clearly documented weaknesses and challenges in the
export control system that point to vulnerabilities in the system and its
ability to protect U.S. security, foreign policy, and economic interests.
Two key weaknesses relate to the most basic aspects of the export control
system: (1) whether items are controlled by State or Commerce and (2)
whether items should be subject to government review prior to export.
Because State and Commerce have different restrictions on the items they
control, determining which exported items are controlled by State and
which are controlled by Commerce is fundamental to the U.S. export control
system's effectiveness. However, as we have previously reported, State and
Commerce have disagreed on which department controls certain items. In
some cases, both departments have claimed jurisdiction over the same
items, such as certain missile-related technologies. In another case, for
example, Commerce improperly determined that explosive detection devices
were subject to Commerce's less restrictive export control requirements
when they were, in fact, State-controlled. Such jurisdictional
disagreements and problems are often rooted in the departments' differing
interpretations of the regulations and minimal or ineffective coordination
between the departments. Until these disagreements and problems are
resolved, however, exporters--not the government--determine which
restrictions apply and the type of governmental review that will occur.
Not only does this create an unlevel playing field and competitive
disadvantage--because some companies will have access to markets that
others will not, depending on which system they use--but it also increases
the risk that critical items will be exported without the appropriate
review and resulting protections. Despite these risks, no one has held the
departments accountable for making clear and transparent decisions about
export control jurisdiction.
Even when jurisdiction is clearly established, limitations exist in the
government's ability to ensure that exports exempt from licensing
requirements comply with laws and regulations. While State generally
requires a license for exports, some exports are exempt from licensing,
such as certain arms exports to Canada. In such cases, it becomes the
exporter's responsibility--not the government's--to ensure the legitimacy
of the export. Therefore, exporters need sufficient guidance to minimize
the possibility of incorrect interpretations of the regulations and
improper use of an exemption to export an item. At times, State has
provided conflicting information to exporters on the proper use of the
Canadian exemption, which has resulted in some exporters using the
exemption while others applied for licenses to export the same item.
Together, these weaknesses create considerable challenges for enforcement
agencies in carrying out their respective inspection, investigation, and
prosecution responsibilities. For example, obtaining timely and complete
information to confirm whether items are controlled and need a license is
a challenge. In one case, investigative agents executed search warrants
based on Commerce's license determination that missile technology-related
equipment was controlled. Subsequently, Commerce determined that no
license was required for this equipment, and the case was closed. The use
of license exemptions has also raised serious concerns for enforcement
officials. Homeland Security officials explained that they generally
oppose licensing exemptions because items can be more easily diverted
without detection, which complicates potential investigations. Justice
officials similarly noted that prosecuting export violations under an
exemption is difficult because of the challenges in acquiring evidence of
criminal intent, given the limited "paper trail" generated under an
exemption. Other enforcement challenges include difficulty in coordinating
investigations among several departments, balancing multiple priorities,
and leveraging finite resources.
Export Control System is Further Hindered by Licensing Inefficiencies
While exporters and foreign governments have complained about processing
times, reviews of arms export license applications require time to
deliberate and ensure that license decisions are appropriate. However,
such reviews should not be unnecessarily delayed due to inefficiencies nor
should they be eliminated for efficiency's sake--both of which could have
unintended consequences for U.S. security, foreign policy, and economic
interests. Over the last several years, State has initiated various
efforts to reduce license application processing times. Yet, these
initiatives have generally not been successful:
o The establishment in 2004 of D-Trade, a new automated system for
processing licensing applications, has been cited as State's most
significant effort to improve efficiency. However, the anticipated
efficiencies have not been realized. Our current analysis of
processing times for permanent export licenses does not show a
significant difference between D-Trade and paper processing for
fiscal years 2004 through 2006.
o State also implemented initiatives to expedite applications in
support of on-going military operations. In 2005, however, we
reported that only 19 percent of the applications submitted under
the initiatives for Operations Enduring Freedom and Iraqi Freedom
were processed within the time frames set by State. Our current
work shows that even fewer cases are being processed within the
department's current 2-day goal for applications in support of
these operations.
o Other initiatives have not been widely used by exporters. For
example, we reported that between 2000 and 2005, State had only
received three applications for comprehensive export
authorizations 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. State also has not
implemented procedures to expedite license applications for exports to
Australia or the United Kingdom, as required by a 2004 law.3 Our current
work shows that processing times for Australia and the United Kingdom do
not significantly differ from other major trading partners, taking a
median of 21 days to process in fiscal year 2006.
3Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005,
Pub. L. No. 108-375 S1225(b) (2004).
Despite efforts to improve efficiency, State's median processing times of
license applications for arms exports have been increasing since 2003,
reversing a downward trend since 1999 (see fig. 1). Furthermore, State has
not kept pace with a growing number of applications, which has increased
almost 23 percent over the last 3 years. At the end of fiscal year 2006,
the backlog reached its highest level of over 10,000 cases.
Figure 1: Median Processing Times for Arms Export Cases, Fiscal Year 1999
through April 2007 (in days)
Concerns about licensing efficiency have largely focused on State, in
part, because most Commerce-controlled exports can occur without a
license. In 2005, for example, only 1.5 percent of dual-use exports, by
dollar value, were licensed.4 However, the overall efficiency of
Commerce's licensing process is unknown. For example, in assessing its
license processing times, which have remained relatively stable, Commerce
only measures the first steps of its application review process--how long
it takes to review an application internally and refer it to another
agency for review. Commerce does not have efficiency-related measures for
other steps in the license application review process, such as how quickly
a license should be issued once other agencies provide their input, or for
the review process as a whole.
4This amount reflects only the export of items specifically identified on
Commerce's control list. If an item is not listed on the control list but
is subject to Commerce's regulations, it falls into the category known as
EAR99. In 2005, 99.98 percent of EAR99 items were exported without
licenses. Amounts do not include data for exports to Canada.
Lack of Systematic Assessments Invites Risk
To be able to adapt to 21st century challenges, federal programs need to
systematically reassess priorities and approaches and determine what
corrective actions may be needed to fulfill their missions.5 Given their
export control responsibilities, State and Commerce should not be
exceptions to this basic management tenet. However, neither department has
conducted such assessments to determine overall effectiveness, despite the
existence of known vulnerabilities.
While GAO has made numerous recommendations to improve the effectiveness
and efficiency of the arms export control system, State has not made
significant changes to its system. State does not know how well it is
fulfilling its mission and what additional corrective actions may be
needed since it has not systematically assessed its controls, even in
light of the September 2001 terror attacks.
Commerce officials acknowledged that they had not comprehensively assessed
the effectiveness of dual-use export controls in protecting U.S. national
security and economic interests. Instead, they stated they conducted an ad
hoc review of the dual-use system after the events of September 2001 and
determined that no fundamental changes were needed. We were unable to
assess the sufficiency of this review because Commerce did not document
how it conducted the review or reached its conclusions.
Conclusions
At a time of evolving threats, changing allied relationships, and
increasing globalization, it is appropriate to ask how Congress can be
assured that the export control system is achieving its intended
purposes--protecting national security and promoting foreign policy
interests while allowing legitimate trade. 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 efficient and well managed. Our work
in this area demonstrates both the ineffectiveness and inefficiency of the
system--a key concern that compelled GAO to designate the effective
protection of technologies critical to U.S. national security interests as
a new high risk area. It is, therefore, time to step back, assess, and
rethink what type of system is needed to best protect U.S. national
security, foreign policy, and economic interests in a changing
environment.
5GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, [15]GAO-05-325SP (Washington, D.C.: February 2005) and 21st
Century Challenges: Transforming Government to Meet Current and Emerging
Challenges, [16]GAO-05-830T (Washington, D.C.: July 13, 2005).
GAO Contacts and Acknowledgments
For questions regarding this testimony, please contact me at (202)
512-4841 or [email protected]. Anne-Marie Lasowski and Johana R.
Ayers, Assistant Directors; Ian Jefferies, Karen Sloan, and Bradley Terry
made key contributions to this statement. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this statement.
Appendix: Summary of Prior GAO Reports on the U.S. Export Control System
Over the last several years, GAO has issued numerous reports regarding the
export control system. In those reports, we have identified weaknesses
primarily in two areas: (1) the U.S. government's controls on exports 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 the
system. To correct these weaknesses and inefficiencies, we have made
multiple recommendations. The recommendations have generally focused on
clarifying regulations and guidance, improving interagency coordination,
and obtaining sufficient information for decision making. As we followed
up with the various departments over the last year, we determined that a
number of these recommendations have not been implemented. Table 3
summarizes what we found, what we recommended, and what actions, if any,
the departments have taken to implement the recommendations.
The State Department regulates overseas arms sales by U.S. companies under
the authority of the Arms Export Control Act. State maintains a list of
the items subject to its export controls. Prior to exporting
State-controlled items to foreign companies and governments, companies
generally need to obtain State-issued licenses. The Defense Department
assists State by providing input on which items should be State-controlled
and by conducting technical and national security reviews of export
license applications. State's controls on arms exports are separate from
those maintained by the Commerce Department. Commerce regulates the export
of dual-use items, which have both military and commercial applications.
Under the authority of the Export Administration Act of 1979, Commerce
maintains its own list of items subject to its controls. Many items
controlled by Commerce do not require licenses for export to most
destinations. State and Commerce's controls differ in several key areas.
For example, many items controlled by Commerce do not require licenses for
export to most destinations, and Commerce-controlled items may be exported
to China while arms exports to China are generally prohibited.
Table 3: Summary of 2000-2007 GAO Reports on the U.S. Export Control
System
Defense Trade: Analysis of Support for Recent Initiatives (Aug. 31, 2000,
[17]GAO/NSIAD-00-191 )
Background: In 1999, Defense GAO recommendations Action taken
compiled a list of 81
defense cooperation No recommendations Not applicable
initiatives intended to
enhance cross-border defense
trade and investment.
Several initiatives were
part of an ongoing effort to
reinvent the Foreign
Military Sales 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, State
and Defense announced 17
measures, collectively known
as the Defense Trade
Security Initiative (DTSI),
to adjust the export control
system.
Main issues: Defense
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.
Export Controls: System for Controlling Exports of High Performance
Computing Is Ineffective (Dec. 18, 2000, [18]GAO-01-10 )
Background: Exports of high GAO recommendations Action taken
performance computers
exceeding a defined Commerce Commerce has
performance threshold implemented our
require an export license o in consultation with recommendation.
from Commerce. As other relevant
technological advances in agencies, convene a Defense has not
high performance computing panel of experts to implemented our
occur, it may become comprehensively assess recommendation.
necessary to explore other and report to Congress
options to maintain the U.S. on ways of addressing
lead in defense-related the shortcomings of
technology. As a step in computer export
this direction, the National controls
Defense Authorization Act
for Fiscal Year 1998 Defense
required the Secretary of
Defense to assess the o determine what
cumulative effect of countermeasures are
U.S.-granted licenses for necessary, if any, to
exports of computing respond to
technologies to countries enhancements of the
and entities of concern. It military or
also required information on proliferation
measures that may be capabilities of
necessary to counter the use countries of concern
of such technologies by derived from both
entities of concern. licensed and
unlicensed high
Main issues: The current performance computing
system for controlling
exports of high performance
computers is ineffective
because it focuses on the
performance level of
individual computers and
does not address the linking
or "clustering" of many
lower performance computers
that can collectively
perform at higher levels
than current export controls
allow. However, the act does
not require an assessment of
the cumulative effect of
exports of unlicensed
computers, such as those
that can be clustered. The
current control system is
also ineffective because it
uses millions of theoretical
operations per second as the
measure to classify and
control high performance
computers meant for export.
This measure is not a valid
means for controlling
computing capabilities.
Export Controls: Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements (May 31, 2001, [19]GAO-01-530 )
Background: Concerned GAO recommendations Action taken
about missile
proliferation, the United Commerce Our
States and several major recommendations
trading partners in 1987 o revise the Export have not been
created an international Administration implemented.
voluntary agreement, the Regulations to comply However, Commerce
Missile Technology Control with the MTCR export has a regulatory
Regime (MTCR), to control licensing requirements change pending
the spread of missiles and contained in the that, once
their related National Defense implemented, will
technologies. Congress Authorization Act for require licenses
passed the National Fiscal Year 1991, or for the export of
Defense Authorization Act o seek a statutory dual-use missile
for Fiscal Year 1991 to change from Congress technologies to
fulfill the U.S. to specifically permit Canada.
government's MTCR MTCR items to be
commitments. This act exempted from
amended the Export licensing requirements
Administration Act of o if Commerce seeks a
1979, which regulates the statutory change,
export of dual-use items, revise the Export
by requiring a license for Administration
all exports of controlled Regulations to comply
dual-use missile with the current
technologies to all statute until such
countries. The National time as a statutory
Defense Authorization Act change occurs
also amended the Arms
Export Control Act, which
regulates the export of
military items, by
providing the State
Department the discretion
to require licenses or
provide licensing
exemptions for missile
technology exports.
Main issues: State's
regulations require
licenses for the exports
of missile technology
items to all
countries--including
Canada, which is
consistent with the
National Defense
Authorization Act.
However, Commerce's export
regulations are not
consistent with the act as
they do not require
licenses for the export of
controlled missile
equipment and technology
to Canada.
Export Controls: State and Commerce Department License Review Times Are
Similar (June 1, 2001, [20]GAO-01-528 )
Background: The U.S. defense GAO recommendations Action taken
industry and some U.S. and
allied government officials No recommendations Not applicable
have expressed concerns
about the amount of time
required to process export
license applications.
Main issues: In fiscal year
2000, State's average review
time for license
applications was 46 days
while Commerce's average was
50 days. Variables
identified as affecting
application processing times
include the commodity to be
exported and the extent of
interagency coordination.
Both departments approved
more than 80 percent of
license applications during
fiscal year 2000.
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed (Oct. 9, 2001, [21]GAO-02-120 )
Background: The United GAO recommendations Action taken
States has committed to work
with other countries through Commerce and State Commerce and State
the Missile Technology have not
Control Regime (MTCR) to o jointly review the implemented our
control the export of listing of items recommendations
missile-related items. The included on the MTCR despite initially
regime is a voluntary list, determine the agreeing to do so.
agreement among member appropriate
countries to limit missile jurisdiction for those
proliferation and consists items, and revise
of common export policy their respective
guidelines and a list of export control lists
items to be controlled. In to ensure that
1990, Congress amended proposed exports of
existing export control regime items are
statutes to strengthen subject to the
missile-related export appropriate review
controls consistent with process
U.S. commitments to the
regime. Under the amended
statutes, Commerce is
required to place regime
items that are dual-use on
its list of controlled
items. All other regime
items are to appear on
State's list of controlled
items.
Main issues: Commerce and
State have not clearly
determined which department
has jurisdiction over almost
25 percent of the items that
the U.S. government 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 license for a
militarily sensitive item
controlled by State.
Conversely, an exporter
could seek a State 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.
Export Controls: Reengineering Business Processes Can Improve Efficiency
of State Department License Reviews (Dec. 31, 2001, [22]GAO-02-203 )
Background: The U.S. defense GAO recommendations Action taken
industry and some foreign
government purchasers have State Our
expressed concern that the recommendations
arms export control process o develop criteria for have been
is unnecessarily lengthy. determining which implemented.
While the export licensing applications should be
process can be lengthy referred to which o State's
because of foreign policy agencies and offices electronic
and national security for further review, system does not
considerations, other develop formal yet accept all
factors may also affect guidelines and types of export
processing times. training for reviewing applications.
organizations so they
Main issues: State lacks clearly understand
formal guidelines for their duties
determining which agencies o establish timeliness
and offices should review goals for each phase
arms export license of the licensing
applications and does not process and mechanisms
have procedures to monitor to ensure that
the flow of applications applications are not
through the process. As a lost or delayed
result, thousands of o implement these
applications have been recommendations before
delayed while no substantive proceeding with a
review occurred and hundreds planned upgrade to the
more have been lost. department's
electronic business
processing system
Defense Trade: Lessons to Be Learned from the Country Export Exemption
(March 29, 2002, [23]GAO-02-63 )
Background: State's export GAO recommendations Action taken
regulations do not require
licenses for the export of State State has not
many defense items to implemented our
Canada. In 2000, the U.S. o review guidance and recommendations.
government announced plans licensing officer In its response to
to extend similar licensing training to improve our report, State
exemptions for exports to clarity and ensure said it would
other countries. consistent application provide training
of the exemption and and guidance but
Main issues: Because of provide the guidance did not indicate
unclear guidance, some to U.S. Customs to how it would
exporters have implemented ensure consistent ensure that the
the Canadian exemption application of the guidance and
inconsistently and have exemption and provide training are clear
misinterpreted requirements the guidance to U.S. and understood by
to report their export Customs to ensure that those who need to
activities to State. State consistent information use them. The
has provided inconsistent is disseminated to department also
answers to exporters and exporters said it would work
U.S. Customs Servicea o work with the with law
officials when questions Justice Department and enforcement
were raised about the U.S. Customs to assess agencies to assess
exemption's use in specific lessons learned from lessons learned
situations. the Canadian exemption but did not
and ensure the lessons identify how it
State encourages exporters are incorporated in would do so.
to voluntarily disclose future agreements Subsequently,
violations but relies State signed the
primarily on U.S. Customs to U.S. Customs treaty with the
enforce export control laws United Kingdom to
and regulations, including o assess the threat of allow for
use of the Canadian illegal defense license-free
exemption. U.S. Customs' exports along the export before the
ability to enforce the Canadian border and department
proper use of exemptions is evaluate whether conducted a
weakened by a lack of reallocation of lessons learned
information and resources, inspectors or other assessment.
difficulties in actions are warranted
investigating suspected to better enforce U.S. Customs has
violations, and competing export regulations implemented our
demands, such as terrorism o update, finalize, recommendations.
prevention and drug and provide guidance
interdiction. on inspection
requirements to all
inspectors
Export Controls: Issues to Consider in Authorizing a New Export
Administration Act (Feb. 28, 2002, [24]GAO-02-468T )
Background: The U.S. GAO recommendations Action taken
government's policy
regarding exports of No recommendations Not applicable
sensitive dual-use
technologies seeks to
balance economic, national
security, and foreign policy
interests. The Export
Administration Act (EAA) of
1979, as amended, has been
extended through executive
orders and law. Under the
act, the President has the
authority to control and
require licenses for the
export of dual-use items,
such as nuclear, chemical,
biological, missile, or
other technologies that may
pose a national security or
foreign policy concern. In
2002, there were two
different bills before the
107th Congress--H.R. 2581
and S. 149--that would enact
a new EAA.
Main issues: A new EAA
should take into
consideration the increased
globalization of markets and
an increasing number of
foreign competitors, rapid
advances in technologies and
products, a growing
dependence by the U.S.
military on commercially
available dual-use items,
and heightened threats from
terrorism and the
proliferation of weapons of
mass destruction.
Export Controls: Rapid Advances in China's Semiconductor Industry
Underscore Need for Fundamental U.S. Policy Review (April 19, 2002,
[25]GAO-02-620 )
Background: Semiconductor GAO recommendations Action taken
equipment and materials are
critical components in Commerce Commerce has not
everything from automobiles implemented our
to weapons systems. The U.S. o in consultation with recommendations.
government controls the Defense and State,
export of these dual-use reassess and document
items to sensitive U.S. export policy on
destinations, such as China. semiconductor
Exports of semiconductor manufacturing
equipment and materials equipment and
require a license from materials to China:
Commerce. Other departments,
such as Defense and State, o complete the
assist Commerce in reviewing analyses
license applications. The needed to
United States is a member of serve as a
the multilateral Wassenaar sound basis
Arrangement on Export for an updated
Controls for Conventional policy;
Arms and Dual-Use Goods and o develop new
Technologies. export
controls, if
Main issues: Since 1986, appropriate,
China has narrowed the gap or alternative
between the U.S. and Chinese means for
semiconductor manufacturing protecting
technology from U.S. security
approximately 7 years to 2 interests; and
years or less. China's o communicate
success in acquiring the results of
manufacturing technology these efforts
from abroad has improved its to Congress
semiconductor manufacturing and U.S.
facilities for more capable industry
weapons systems and advanced
consumer electronics. The
multilateral Wassenaar
Arrangement has not affected
China's ability to obtain
semiconductor manufacturing
equipment because the U.S.
is the only member of this
voluntary arrangement that
considers China's
acquisition of semiconductor
manufacturing equipment a
cause for concern.
Additionally, U.S.
government policies and
practices to control the
export of semiconductor
technology to China are
unclear and inconsistent,
leading to uncertainty among
U.S. industry officials
about the rationale for some
licensing decisions.
Furthermore, U.S. agencies
have not done the analyses,
such as assessing foreign
availability of this
technology or the cumulative
effects of such exports on
U.S. national security
interests, necessary to
justify U.S. policies and
practices.
Export Controls: More Thorough Analysis Needed to Justify Changes in High
Performance Computer Controls (Aug. 2, 2002, [26]GAO-02-892 )
Background: High performance GAO recommendations Action taken
computers that operate at or
above a defined performance No recommendations Not applicable
threshold, measured in
millions of theoretical
operations per second,
require a Commerce license
for export to particular
destinations. The President
has periodically changed, on
the basis of technological
advances, the threshold
above which licenses are
required. The National
Defense Authorization Act of
1998 requires that the
President report to Congress
the justification for
changing the control
threshold. The report must,
at a minimum, (1) address
the extent to which high
performance computers with
capabilities between the
established level and the
newly proposed level of
performance are available
from foreign countries, (2)
address all potential uses
of military significance to
which high performance
computers between the
established level and the
newly proposed level could
be applied, and (3) assess
the impact of such uses on
U.S. national security
interests.
Main issues: In January
2002, the President
announced that the control
threshold--above which
computers exported to such
countries as China, India,
and Russia--would increase
from 85,000 to 190,000
millions of theoretical
operations per second. The
report to Congress
justifying the changes in
control thresholds for high
performance computers was
issued in December 2001 and
focused on the availability
of such computers. However,
the justification did not
fully address the
requirements of the National
Defense Authorization Act of
1998. The December 2001
report did not address
several key issues related
to the decision to raise the
threshold: (1) the
unrestricted export of
computers with performance
capabilities between the old
and new thresholds will
allow countries of concern
to obtain computers they
have had difficulty
constructing on their own,
(2) the U.S. government is
unable to monitor the end
uses of many of the
computers it exports, and
(3) the multilateral process
used to make earlier changes
in high performance computer
thresholds.
Export Controls: Department of Commerce Controls over Transfers of
Technology to Foreign Nationals Need Improvement (Sept. 6, 2002,
[27]GAO-02-972 )
Background: To work with GAO recommendations Action taken
controlled dual-use
technologies in the United Commerce Our recommendations
States, foreign nationals and have been
the firms that employ them o use available implemented.
must comply with U.S. export Immigration and
control and visa regulations. Naturalization
U.S. firms may be required to Service data to
obtain what is known as a identify foreign
deemed export license from nationals
Commerce before transferring potentially subject
controlled technologies to to deemed export
foreign nationals in the licensing
United States. Commerce issues requirements
deemed export licenses after o establish, with
consulting with the Defense, Defense, Energy,
Energy, and State Departments. and State, a
In addition, foreign nationals risk-based program
who are employed by U.S. firms to monitor
should have an appropriate compliance with
visa classification, such as deemed export
an H-1B specialized employment license conditions;
classification. H-1B visas to if the departments
foreign nationals residing conclude that
outside of the United States certain security
are issued by State, while the conditions are
Immigration and Naturalization impractical to
Service approves requests from enforce, they
foreign nationals in the should jointly
United States to change their develop conditions
immigration status to H-1B. or alternatives to
ensure that deemed
Main issues: In fiscal year exports do not
2001, Commerce approved 822 place U.S. national
deemed export license security interests
applications and rejected 3. at risk
Most of the approved deemed
export licenses allowed
foreign nationals from
countries of concern to work
with advanced computer,
electronic, or
telecommunication and
information security
technologies in the United
States. To better direct its
efforts to detect possible
unlicensed deemed exports, in
fiscal year 2001 Commerce
screened thousands of
applications for H-1B and
other types of visas submitted
by foreign nationals overseas.
From these applications, it
developed 160 potential cases
for follow-up by enforcement
staff in the field. However,
Commerce did not screen
thousands of H-1B
change-of-status applications
submitted domestically to the
Immigration and Naturalization
Service for foreign nationals
already in the United States.
In addition, Commerce could
not readily track the
disposition of the 160 cases
referred to field offices for
follow-up because it lacks a
system for doing so. Commerce
attaches security conditions
to almost all licenses to
mitigate the risk of providing
foreign nationals with
controlled dual-use
technologies. However,
according to senior Commerce
officials, their staff do not
regularly visit firms to
determine whether these
conditions are being
implemented because of
competing priorities, resource
constraints, and inherent
difficulties in enforcing
several conditions.
Export Controls: Processes for Determining Proper Control of
Defense-Related Items Need Improvement (Sept. 20, 2002, [28]GAO-02-996 )
Background: Companies seeking GAO recommendations Action taken
to export defense-related
items are responsible for Commerce With a limited
determining whether those exception, our
items are regulated by o promptly review recommendations have
Commerce or State and what existing guidance not been
the applicable export and develop implemented. In
requirements are. If in doubt criteria with responding to our
about whether an item is concurrence from report, State
Commerce- or State-controlled State and Defense indicated it
or when requesting a change for referring partially agreed
in jurisdiction, an exporter commodity with our
may request a commodity classification recommendations,
jurisdiction determination requests to those while Commerce and
from State. State, which departments Defense agreed to
consults with Commerce and o work with State implement our
Defense, is the only to develop recommendations.
department authorized to procedures for
change export control referring requests Commerce and Defense
jurisdiction. If an exporter that are returned have added staff to
knows an item is to companies assist with their
Commerce-controlled but is because the items respective
uncertain of the export are controlled by processes. State
requirements, the exporter State or because indicated that it
can request a commodity they require a intends to seek
classification from Commerce. commodity additional staff to
Commerce may refer jurisdiction review assist with its
classification requests to processes.
State and Defense to confirm Commerce, Defense and
that an item is State
Commerce-controlled.
o revise
Main issues: Commerce has interagency
improperly classified some guidance to
State-controlled items as incorporate any
Commerce-controlled because changes to the
it rarely obtains input from referral process
Defense and State before and time frames for
making commodity making decisions
classification o assess the
determinations. As a result, resources needed to
the U.S. government faces an make jurisdiction
increased risk that defense recommendations and
items will be exported determinations
without the proper level of within established
government review and control time frames and
to protect national reallocate them as
interests. Also, Commerce has appropriate
not adhered to regulatory
time frames for processing
classification requests.
In its implementation of the
commodity jurisdiction
process, State has not
adhered to established time
frames, which may discourage
companies from requesting
jurisdiction determinations.
State has also been unable to
issue determinations for some
items because of interagency
disputes occurring outside
the process.
Nonproliferation: Strategy Needed to Strengthen Multilateral Export
Control Regimes (Oct. 25, 2002, [29]GAO-03-43 )
Background: GAO recommendations Action taken
Multilateral export
control regimes are a State State has not
key policy instrument implemented our
in the overall U.S. o as the U.S. government's recommendations.
strategy to combat the representative to the
proliferation of multilateral regimes,
weapons of mass establish a strategy to
destruction. They are strengthen these regimes. This
consensus-based, strategy should include ways
voluntary arrangements for regime members to
of supplier countries
that produce o improve
technologies useful in information-sharing,
developing weapons of o implement regime
mass destruction or changes to their
conventional weapons. export controls more
The regimes aim to consistently, and
restrict trade in o identify
these technologies to organizational changes
prevent proliferation. that could help reform
The four principal regime activities
regimes are the
Australia Group, which o ensure that the United
controls chemical and States reports all license
biological weapons application denials to regimes
proliferation; the o establish criteria to assess
Missile Technology the effectiveness of the
Control Regime (MTCR); regimes
the Nuclear Suppliers
Group; and the
Wassenaar Arrangement,
which controls
conventional weapons
and dual-use items and
technologies. All four
regimes expect members
to report denials of
export licenses for
controlled dual-use
items, which provide
members with more
complete information
for reviewing
questionable export
license applications.
The United States is a
member of all four
regimes.
Main issues:
Weaknesses impede the
ability of the
multilateral export
control regimes to
achieve their
nonproliferation
goals. Regimes often
lack even basic
information that would
allow them to assess
whether their actions
are having their
intended results. The
regimes cannot
effectively limit or
monitor efforts by
countries of concern
to acquire sensitive
technology without
more complete and
timely reporting of
licensing information
and without
information on when
and how members adopt
and implement
agreed-upon export
controls. For example,
GAO confirmed that the
U.S. government had
not reported its
denial of 27 export
licenses between 1996
and 2002 for items
controlled by the
Australia Group.
Several obstacles
limit the options
available to the U.S.
government in
strengthening the
effectiveness of
multilateral export
control regimes. The
requirement to achieve
consensus in each
regime allows even one
member to block action
in adopting needed
reforms. Because the
regimes are voluntary
in nature, they cannot
enforce members'
compliance with regime
commitments. For
example, Russia
exported nuclear fuel
to India in a clear
violation of its
commitments under the
Nuclear Suppliers
Group, threatening the
viability of this
regime. The regimes
have adapted to
changing threats in
the past. Their
continued ability to
do so will determine
whether they remain
viable in curbing
proliferation in the
future.
Nonproliferation: Improvements Needed to Better Control Technology Exports
for Cruise Missiles and Unmanned Aerial Vehicles (Jan. 23, 2004,
[30]GAO-04-175 )
Background: Cruise missiles and GAO recommendations Action taken
unmanned aerial vehicles (UAV)
pose a growing threat to U.S. Commerce Commerce has
national security interests as addressed our
accurate, inexpensive delivery o assess and recommendation by
systems for conventional, report to the revising its
chemical, and biological weapons. Committee on licensing
Exports of cruise missiles and Government Reform requirement for
military UAVs by U.S. companies on the adequacy missile technology
are licensed by State while of the Export exports.
government-to-government sales Administration
are administered by Defense. Regulations' While Commerce has
Exports of dual-use technologies catch-all taken some actions
related to cruise missiles and provision to to address our
UAVs are licensed by Commerce. address missile recommendations,
proliferation by the other
Main issues: U.S. export control nonstate actors; departments have
officials find it increasingly this assessment not done so.
difficult to limit or track should indicate
dual-use items with cruise ways the
missile or UAV-related provision should
capabilities that can be exported be modified
without a license. A gap in
dual-use export control authority Commerce, Defense
enables U.S. companies to export and State
certain dual-use items to
recipients that are not o as a first
associated with missile projects step, each
or countries listed in the department
regulations, even if the exporter complete a
knows the items might be used to comprehensive
develop cruise missiles or UAVs. assessment of
The gap results from current cruise missile,
"catch-all" regulations that UAV, and related
restrict the sale of unlisted dual-use
dual-use items to certain technology
national missile proliferation transfers to
projects or countries of concern, determine whether
but not to nonstate actors such U.S. exporters
as certain terrorist and foreign end
organizations or individuals. users are
Catch-all controls authorize the complying with
government to require an export the conditions on
license for items that are not on the transfers
control lists but are known or o as part of the
suspected of being intended for assessment, each
use in a missile or weapons of department
mass destruction program. conduct
additional
Commerce, Defense, and State have postshipment
seldom used their end use verification
monitoring programs to verify visits on a
compliance with conditions placed sample of cruise
on the use of cruise missile, missile and UAV
UAV, or related technology licenses
exports. For example, Commerce
conducted visits to assess the
end use of items for about 1
percent of the 2,490
missile-related licenses issued
between fiscal years 1998 and
2002. Thus, the U.S. government
cannot be confident that
recipients are effectively
safeguarding equipment in ways
that protect U.S. national
security and nonproliferation
interests.
Export Controls: Post-Shipment Verification Provides Limited Assurance
that Dual-Use Items Are Being Properly Used (Jan. 12, 2004, [31]GAO-04-357
)
Background: Commerce conducts GAO recommendations Action taken
post-shipment verification
(PSV) checks to ensure that Commerce Our recommendations
dual-use items arrive at their have been
intended destination and are o improve implemented.
used for the purposes stated in technical training
the export license. To conduct for personnel
PSV checks, Commerce personnel conducting PSV
visit foreign companies to checks to ensure
verify the use and location of they are able to
exported items. PSVs serve as verify compliance
one of the primary means of with license
checking whether end users are conditions
complying with conditions o ensure that
imposed by the license. personnel
Commerce placed conditions on conducting PSV
nearly all approved licenses checks assess
for exports to countries of compliance with
concern for fiscal years 2000 license conditions
to 2002. o require that the
exporter inform
Main issues: In fiscal years the end user in
2000 to 2002, Commerce approved writing of the
7,680 licenses for dual-use license conditions
exports to countries of
concern, such as China, India,
and Russia. However, we found
that during this time Commerce
completed PSV checks on only
428 of the dual-use licenses it
approved for countries of
concern.
We identified three key
weaknesses in the PSV process
that reduce its effectiveness.
First, PSVs do not confirm
compliance with license
conditions because U.S.
officials often lack the
technical training needed to
assess compliance and end users
may not be aware of the license
conditions by which they are to
abide. Second, some countries
of concern, most notably China,
limit the U.S. government's
access to facilities where
dual-use items are shipped,
making it difficult to conduct
a PSV. Third, PSV results have
only a limited impact on future
licensing decisions. Companies
receiving an unfavorable PSV
may receive greater scrutiny in
future license applications,
but licenses for dual-use
exports to these companies can
still be approved. In addition,
according to Commerce
officials, past PSV results
play only a minor role in
future enforcement actions.
Defense Trade: Arms Export Control System in the Post-9/11 Environment
(Feb. 16, 2005, [32]GAO-05-234 )
Background: Over the years, there have GAO recommendations Action taken
been various efforts to change the
arms export control system overseen by No recommendations Not applicable
State. One effort was the Defense
Trade Security Initiative (DTSI) in
2000, which was intended to facilitate
defense trade with allies in the
post-Cold War environment. Given the
September 2001 terror attacks, the
U.S. government has had to reevaluate
whether existing policies support
national security and foreign policy
goals.
Main issues: Since the September 2001
terror attacks, the arms export
control system has not undergone
fundamental changes because, according
to State officials, the system is
already protecting U.S. interests.
While the system essentially remains
unchanged, new trends have emerged in
the processing of arms export cases.
In particular, median processing times
for all arms export cases began
increasing in fiscal year 2003.
State and Defense have continued to
implement DTSI and related initiatives
primarily designed to streamline the
processing of arms export licenses.
According to State officials, they
have not evaluated the effects of
these initiatives on the export
control system or revised the
initiatives but maintain that the
initiatives remain relevant after
September 2001. Yet, applications
processed under these initiatives have
generally not been processed within
the time frames established by State
and Defense and exporters have not
widely used several initiatives.
State has sought limited coordination
with the agencies responsible for
enforcing U.S. arms export laws--the
Departments of Homeland Security and
Justice--regarding initiatives
designed to streamline arms export
licensing. The only exceptions have
been regarding proposed export
licensing exemptions. Enforcement
officials have raised concerns
regarding licensing exemptions,
including the increased risk of
diversion.
Export Controls: Improvements to Commerce's Dual-Use System Needed to
Ensure Protection of U.S. Interests in the Post-9/11 Environment (June 26,
2006, [33]GAO-06-638 )
Background: In regulating GAO recommendations Action taken
dual-use exports, Commerce
seeks to allow U.S. Commerce While Commerce
companies to compete indicated it has
globally while minimizing o use available data plans to evaluate
the risk of items falling and develop the effectiveness of
into the wrong hands. In so performance measures the dual-use export
doing, Commerce faces the in consultation with control system, it
challenge of weighing U.S. other agencies to has not implemented
national security and systematically them or taken action
economic interests, which evaluate the regarding the report
at times can be divergent effectiveness and to Congress.
or even competing--a efficiency of the
challenge heightened by dual-use export Commerce has
shifts in the security and control system in implemented the
economic environment. achieving the goal of recommendations
protecting U.S. concerning the
Main issues: Commerce has interests watchlist.
not systematically o correct omissions
evaluated whether the in the watchlist and
dual-use export control weaknesses in the
system is meeting its screening process
stated goal of protecting o report to Congress
U.S. national security and on the status of GAO
economic interests. recommendations, the
Specifically, Commerce has reasons why
not comprehensively recommendations have
analyzed available data to not been implemented,
determine what dual-use and what other
items have actually been actions, if any, are
exported. Commerce has also being taken to
not established performance address the
measures that would provide identified weaknesses
an objective basis for
assessing how well the
system is protecting U.S.
interests. Instead,
Commerce relies on limited
measures of efficiency, as
well as intelligence
reports and meetings with
industry to gauge how the
system is operating. After
conducting an ad hoc review
of the system, Commerce
officials determined that
no fundamental changes were
needed after September
2001, but did make some
adjustments primarily
related to controls on
chemical and biological
agents.
Omissions exist in the
watchlist Commerce uses to
screen export license
applications. This
screening is intended to
identify ineligible parties
or parties warranting more
scrutiny. The omissions
undermine the list's
utility, which increases
the risk of dual-use
exports falling into the
wrong hands. GAO identified
147 parties that had
violated U.S. export
control requirements, had
been determined by Commerce
to be suspicious end users,
or had been reported by
State as committing acts of
terror, but these parties
were not on the watchlist
of approximately 50,000
names. Reasons for the
omissions include a lack of
specific criteria as to who
should be on the watchlist
and Commerce's failure to
regularly review the list.
In addition, a technical
limitation in Commerce's
computerized screening
system results in some
parties on license
applications not being
automatically screened
against the watchlist.
Commerce has implemented
several but not all of
GAO's recommendations for
ensuring that export
controls on sensitive items
protect U.S. interests.
Among weaknesses identified
by GAO is the lack of
clarity on whether certain
items are under Commerce's
control, which increases
the risk of defense-related
items being improperly
exported. Commerce has yet
to take corrective action
on this matter.
Analysis of Data for Exports Regulated by the Department of Commerce (Nov.
13, 2006, [34]GAO-07-197R )
Background: GAO previously reported GAO recommendations Action taken
that Commerce has not systematically
evaluated the overall effectiveness No recommendations Not applicable
and efficiency of the dual-use export
system. Commerce has not conducted
comprehensive analyses of available
data about items that have actually
been exported from the United States.
GAO made several recommendations in
that report, including that Commerce
should use the available data to
evaluate the system's effectiveness.
Main issues: The data we obtained
provide an overall picture of the
dollar value of commodities subject to
Commerce regulations and of the
countries receiving these exports.
Most items subject to Commerce's
regulations do not require government
review and approval in the form of a
license prior to export. We found that
less than 1 percent of exports subject
to Commerce regulations were licensed
in 2005.b The dollar value of
unlicensed exports from the United
States in 2005 was about $624 billion,
while the value of licensed exports
was about $1.2 billion.
The insight we gained from analyzing
shipment data further supports the
prior recommendation to Commerce that
is use available data to evaluate the
effectiveness of its export control
system. The data could aid in
determining the economic impact of
current regulations and in evaluating
whether exporters are complying with
regulations. Commerce officials told
us they periodically use portions of
the data for enforcement activities
but currently do not use the data to
evaluate the system's effectiveness.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Companies (Dec.
5, 2006, [35]GAO-07-69 )
Background: The U.S. GAO recommendations Action taken
government controls exports of
defense-related goods and Commerce and State Commerce and State
services by companies and the have not
export of information o strategically implemented the
associated with their design, assess potential recommendations,
production, and use. vulnerabilities in but Commerce
Globalization and the protection of indicated it is
communication technologies export-controlled taking steps to
facilitate exports of information using address them.
controlled information, which available resources,
provides benefits to U.S. such as licensing
companies and increases data, and evaluate
interactions between U.S. and company practices
foreign companies--making it for protecting such
challenging to protect such information
exports. o improve
interagency
Main issues: Commerce and coordination in the
State have less oversight on following areas (1)
exports of controlled provide specific
information than they do on guidance, outreach,
exports of controlled goods. and training on how
Commerce's and State's export to protect
control requirements and export-controlled
processes provide physical information and (2)
checkpoints on the means and better target
methods companies use to compliance
export controlled goods to activities on
help the agencies ensure such company protection
exports are made under their of export-controlled
license terms, but the information
agencies cannot easily apply
these same requirements and
processes to exports of
controlled information.
Commerce and State expect
individual companies to be
responsible for implementing
practices to protect
export-controlled information.
However, one-third of the
companies GAO interviewed did
not have internal control
plans to protect
export-controlled information.
Commerce and State have not
fully assessed the risks of
companies using a variety of
means to protect
export-controlled information.
They have not used existing
resources, such as license
data, to help identify the
minimal protections for such
exports. As companies use a
variety of measures for
protecting export-controlled
information, increased
knowledge of the risks
associated with protecting
such information could improve
agency outreach and training
efforts.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Universities
(Dec. 5, 2006, [36]GAO-07-70 )
Background: U.S. export GAO recommendations Action taken
control regulations allow
foreign students and Commerce and State Commerce and State
researchers without export have not yet
licenses to partake in o strategically implemented the
fundamental research, defined assess potential recommendations,
to mean basic research and vulnerabilities in but Commerce
applied research in science the conduct and indicated it is
and engineering, the results publication of taking steps to
of which are ordinarily academic research address them.
published and shared broadly through analyzing
within the scientific available
community. U.S. policymakers information on
recognize that foreign technology
students and researchers have development and
made substantial contributions foreign student
to U.S. research efforts, but populations at
the potential transfer of universities
knowledge of controlled o on the basis of
defense-related technologies this assessment,
to their home countries could coordinate efforts
have significant consequences and improve guidance
for U.S. national interests. and outreach to
ensure that
Main issues: According to universities
university officials we understand when to
interviewed, their apply export
institutions focus almost controls
exclusively on fundamental
research, which is generally
not subject to export
controls. By conducting
fundamental research,
universities can openly share
and publish their research
findings within a broad
community that includes
international students and
scholars. To ensure their
research remains in the public
domain, most university
officials said they
extensively screen and review
potential contracts and grants
for fundamental research to
ensure there are no
publication or other
dissemination restrictions. If
export controls apply,
university officials stated
they sometimes reject the
research contract, involve
only students and scholars who
can conduct the research under
license exclusions, or refer
such work to associated
facilities that can better
regulate and control foreign
national access to such
research. However, the
universities we visited
indicated that
government-provided training
and guidance on export
regulations is limited in
informing their efforts to
manage and protect
export-controlled information,
and it does not clarify when
fundamental research
exclusions should apply.
While State and Commerce
officials expressed concerns
that universities may not
correctly interpret and apply
export regulations, they have
not conducted an overall
assessment of available trend
data on technology development
research and foreign
participation in such research
at U.S. universities to
identify potential
vulnerabilities. Although
State and Commerce provide
guidance through training
seminars, agency Web sites,
and telephone help desks to
assist exporters in
understanding and complying
with regulations, officials
stated that their focus is on
processing export license
applications--primarily from
industry. Recently, Commerce
established an advisory
committee composed of industry
and university representatives
who are expected to discuss
issues such as the nature of
university research and its
relation to export controls.
Export Controls: Challenges Exist in Enforcement of an Inherently Complex
System (Dec. 20, 2006, [37]GAO-07-265 )
Background: A key function of GAO recommendations Action taken
the U.S. export control system
is enforcement, which consists Commerce, Homeland Justice and
of various activities that aim Security, and Justice Homeland Security
to prevent or deter the indicated that
illegal export of controlled o establish a task they are taking
defense and dual-use items and force to evaluate steps to address
can result in apprehending options to improve this
violators and pursuing and coordination and recommendation.
imposing appropriate criminal cooperation among
and administrative penalties. export enforcement Commerce and State
Enforcement activities are investigative have not yet
largely carried out by agencies implemented these
Commerce, Homeland Security, o report the status recommendations.
Justice, and State. of task force Homeland Security
actions to Congress has implemented
Main issues: The enforcement the recommendation
of export control laws and Commerce and Homeland concerning
regulations involves multiple Security guidance on
agencies with varying roles, license
responsibilities, and o establish goals determinations.
authorities. The agencies for license
responsible for export control determinations Commerce and
enforcement conduct a variety Homeland Security
of activities, including Commerce, Homeland have not
inspecting items to be Security, and State implemented this
exported, investigating recommendation.
potential export control o determine what
violations, and pursuing and additional training Justice has
imposing appropriate penalties or guidance is implemented this
and fines against violators. needed on license recommendation.
These agencies' enforcement determinations
authorities are granted
through a complex set of laws Commerce and Homeland
and regulations, which give Security
concurrent jurisdiction to
multiple agencies to conduct o determine the
investigations. feasibility of
establishing a
Agencies face several requirement for
challenges in enforcing export Customs and Border
control laws and regulations. Protection to
For example, agencies have had decrement Commerce
difficulty coordinating licenses and an
investigations and agreeing on action plan for
how to proceed on cases. doing so
Coordination and cooperation
often hinge on the Justice
relationships individual
investigators across agencies o establish formal
have developed. Other procedures for
challenges include obtaining conveying criminal
timely and complete export enforcement
information to determine results to State and
whether violations have Commerce
occurred and enforcement
actions should be pursued, and
the difficulty in balancing
multiple priorities and
leveraging finite human
resources.
Each enforcement agency has a
database to capture
information on its enforcement
activities. However, outcomes
of criminal cases are not
systematically shared with
State and Commerce, the
principal export control
agencies. Without information
on the outcomes of criminal
cases, export control agencies
cannot gain a complete picture
of an individual or a company
seeking export licenses or
discover trends in illegal
export activities.
Source: GAO analysis of prior work.
aThe U.S. Customs Service is now part of the Homeland Security
Department's Customs and Border Protection and Immigration and Customs
Enforcement.
bAmounts do not include data for exports to Canada.
Related GAO Products
Export Controls: Challenges Exist in Enforcement of an Inherently Complex
System. [38]GAO-07-265 . Washington, D.C.: December 20, 2006.
Analysis of Data for Exports Regulated by the Department of Commerce.
[39]GAO-07-197R . Washington, D.C.: November 13, 2006.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled Information at Universities.
[40]GAO-07-70 . Washington, D.C.: December 5, 2006.
Export Controls: Agencies Should Assess Vulnerabilities and Improve
Guidance for Protecting Export-Controlled information at Companies.
[41]GAO-07-69 . Washington, D.C.: December 5, 2006.
Defense Technologies: DOD's Critical Technologies Lists Rarely Inform
Export Control and Other Policy Decisions. [42]GAO-06-793 . Washington,
D.C.: July 28, 2006.
Export Controls: Improvements to Commerce's Dual-Use System Needed to
Ensure Protection of U.S. Interests in the Post-9/11 Environment.
[43]GAO-06-638 . Washington, D.C.: June 26, 2006.
Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies in
the Post-9/11 Environment. [44]GAO-05-468R . Washington, D.C.: April 7,
2005.
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. [45]GAO-04-519 .
Washington, D.C.: May 13, 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. [46]GAO-03-775 . Washington, D.C.: July
21, 2003.
Defense Trade: Better Information Needed to Support Decisions Affecting
Proposed Weapons Transfers. [47]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. [48]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.
[49]GAO-02-63 . Washington, D.C.: March 29, 2002.
Export Controls: Issues to Consider in Authorizing a New Export
Administration Act. [50]GAO-02-468T . Washington, D.C.: February 28, 2002.
Export Controls: Reengineering Business Processes Can Improve Efficiency
of State Department License Reviews. [51]GAO-02-203 . Washington, D.C.:
December 31, 2001.
Export Controls: Clarification of Jurisdiction for Missile Technology
Items Needed. [52]GAO-02-120 . Washington, D.C.: October 9, 2001.
Export Controls: State and Commerce Department License Review Times are
Similar. [53]GAO-01-528 . Washington, D.C.: June 1, 2001.
Export Controls: Regulatory Change Needed to Comply with Missile
Technology Licensing Requirements. [54]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.
[55]GAO/NSIAD-00-191 . Washington, D.C.: August 31, 2000.
Defense Trade: Status of the Department of Defense's Initiatives on
Defense Cooperation. [56]GAO/NSIAD-00-190R . Washington, D.C.: July 19,
2000.
Export Controls: Better Interagency Coordination Needed on Satellite
Exports. [57]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. [58]GAO/NSIAD-98-176 . Washington, D.C.: June
16, 1998.
Export Controls: Change in Export Licensing Jurisdiction for Two Sensitive
Dual-Use Items. [59]GAO/NSIAD-97-24 . Washington, D.C.: January 14, 1997.
Export Controls: Sensitive Machine Tool Exports to China.
[60]GAO/NSIAD-97-4 . Washington, D.C.: November 19, 1996.
Export Controls: Sale of Telecommunications Equipment to China.
[61]GAO/NSIAD-97-5 . Washington, D.C.: November 13, 1996.
Export Controls: Concerns over Stealth-Related Exports.
[62]GAO/NSIAD-95-140 . Washington, D.C.: May 10, 1995.
Export Controls: Some Controls Over Missile-Related Technology Exports To
China Are Weak. [63]GAO/NSIAD-95-82 . Washington, D.C.: April 17, 1995.
Export Controls: License Screening and Compliance Procedures Need
Strengthening. [64]GAO/NSIAD-94-178 . Washington, D.C.: June 14, 1994.
(120881)
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Highlights of [72]GAO-07-1135T , a testimony before the Subcommittee on
Terrorism, Nonproliferation, and Trade, Committee on Foreign Affairs,
House of Representatives
July 26, 2007
EXPORT CONTROLS
Vulnerabilities and Inefficiencies Undermine System's Ability to Protect
U.S. Interests
In controlling the transfer of weapons and related technologies overseas,
the U.S. government must limit the possibility of sensitive items falling
into the wrong hands while allowing legitimate trade to occur. Achieving
this balance, however, has become increasingly difficult due to redefined
security threats and an increasingly globalized economy. The export
control system is a key government program intended to balance U.S.
interests. GAO has identified and reported on many weaknesses and
challenges in the export control system.
The export control system is a complex system involving multiple
departments, laws, and regulations. It is governed primarily by the State
Department, which regulates arms exports, and the Commerce Department,
which regulates dual-use exports that have both military and civilian
applications.
GAO has made a number of recommendations aimed at improving the export
control system, but many have yet to be implemented. This statement
focuses on three key areas: (1) weaknesses and challenges that have
created vulnerabilities in the U.S. export control system, (2)
inefficiencies in the export licensing process, and (3) State's and
Commerce's lack of assessments on the effectiveness of their controls.
For over a decade, GAO has documented vulnerabilities in the export
control system's ability to protect U.S. security, foreign policy, and
economic interests. Two key weaknesses relate to the most basic aspects of
the system's effectiveness. First, State and Commerce have yet to clearly
determine which department controls the export of certain sensitive items.
Unclear jurisdiction lets exporters--not the government--determine which
export restrictions apply and the type of government review that will
occur. Not only does this create an unlevel playing field among U.S.
companies, it also increases the risk that items will fall into the wrong
hands. Second, a lack of clarity on exemption use has limited the
government's ability to ensure that unlicensed exports comply with export
laws and regulations. These weaknesses compound an already challenged
enforcement community, which has had difficulty coordinating
investigations, balancing multiple priorities, and leveraging finite
resources.
State's initiatives to facilitate defense trade by reducing the time it
takes to process export license applications have generally not been
successful. For example, D-Trade, State's new automated application
processing system, has not yet achieved anticipated efficiencies. Overall,
processing times have increased--from a median of 13 days in 2002 to 26
days in 2006. Also, at the end of 2006, State's backlog of applications
reached its highest level--more than 10,000 open cases. While Commerce's
license processing times have been relatively stable, the overall
efficiency of its processing is unknown.
Despite the existence of known vulnerabilities, neither department has
conducted systematic assessments of its export control system. Federal
programs need to reexamine their priorities and approaches and determine
what corrective actions may be needed to ensure they are fulfilling their
missions in the 21st century. Given their export control responsibilities,
State and Commerce should not be excused from this basic management tenet.
Ultimately, GAO's work demonstrates both the ineffectiveness and
inefficiency of the export control system--a key concern that compelled
GAO to designate the effective protection of technologies critical to U.S.
national security interests as a new high risk area. In its 21st century
challenges report, GAO has identified the need for basic reexamination of
programs established decades ago. Given the importance of the system in
protecting U.S. national security, foreign policy, and economic interests,
it is necessary to assess and rethink what type of system is needed to
best protect these interests in a changing environment.
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