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.

References

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