    Export Controls: Challenges Exist in Enforcement of an Inherently
    Complex System (20-DEC-06, GAO-07-265).

    Each year, billions of dollars in dual-use items--items that have
    both commercial and military applications--as well as defense
    items are exported from the United States. To protect U.S.
    interests, the U.S. government controls the export of these
    items. A key function in the U.S. export control system is
    enforcement, which aims to prevent or deter the illegal export of
    controlled items. This report describes the roles,
    responsibilities, and authorities of export control enforcement
    agencies, identifies the challenges these agencies face, and
    determines if information on enforcement outcomes is provided to
    the export control agencies. GAO's findings are based on an
    examination of statutes, interagency agreements, and procedures;
    interviews with enforcement officials at selected field locations
    and headquarters; and an assessment of enforcement information.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-265
        ACCNO:   A64328
      TITLE:     Export Controls: Challenges Exist in Enforcement of an
    Inherently Complex System
         DATE:   12/20/2006
      SUBJECT:   Criminals
    	     Databases
    	     Dual-use technologies
    	     Export regulation
    	     Exporting
    	     Homeland security
    	     Inspection
    	     Interagency relations
    	     International trade regulation
    	     International trade restriction
    	     Law enforcement
    	     Licenses
    	     Policy evaluation
    	     Regulatory agencies
    	     Strategic planning
    	     Data coordination

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    GAO-07-265

         * [1]Results in Brief
         * [2]Background
         * [3]Export Control Enforcement Is Complex, Involving Varying Rol

              * [4]Multiple Agencies Are Responsible for Export Enforcement
              * [5]Enforcement Authorities Are Granted through Various Laws and

         * [6]Agencies Face Several Challenges in Enforcing Export Control

              * [7]Coordination on Investigative Cases Has Been Limited in Some
              * [8]Confirming Whether Items Are Controlled and Need a License I
              * [9]Challenges Exist in Taking Criminal and Administrative Punit
              * [10]Agencies Faced with Balancing Multiple Priorities and Levera

         * [11]Criminal Outcomes Are Not Systematically Provided to Export
         * [12]Conclusions
         * [13]Recommendations for Executive Action
         * [14]Agency Comments and Our Evaluation
         * [15]GAO Comments
         * [16]GAO Contact:
         * [17]Acknowledgments:
         * [18]GAO's Mission
         * [19]Obtaining Copies of GAO Reports and Testimony

              * [20]Order by Mail or Phone

         * [21]To Report Fraud, Waste, and Abuse in Federal Programs
         * [22]Congressional Relations
         * [23]Public Affairs

    Report to Congressional Committees

    United States Government Accountability Office

    GAO

    December 2006

    EXPORT CONTROLS

    Challenges Exist in Enforcement of an Inherently Complex System

    GAO-07-265

    Contents

    Letter 1

    Results in Brief 2
    Background 4
    Export Control Enforcement Is Complex, Involving Varying Roles,
    Responsibilities, and Authorities among Multiple Agencies 7
    Agencies Face Several Challenges in Enforcing Export Control Laws 13
    Criminal Outcomes Are Not Systematically Provided to Export Control
    Agencies 22
    Conclusions 23
    Recommendations for Executive Action 23
    Agency Comments and Our Evaluation 24
    Appendix I Scope and Methodology 28
    Appendix II Summary of Selected Export Control Enforcement Cases 30
    Appendix III Comments from the Department of Commerce 33
    Appendix IV Comments from the Department of Homeland Security 37
    Appendix V Comments from the Department of State 41
    Appendix VI GAO Contact and Staff Acknowledgments 44
    Related GAO Products 45

    Tables

    Table 1: Agencies, Laws, and Regulations Governing Export Control of
    Defense and Dual-Use Items 5
    Table 2: Enforcement Agencies and Primary Activities 8
    Table 3: Primary Enforcement-Related Databases at Enforcement Agencies 22
    Table 4: Selected Export Control Cases for Fiscal Year 2005 30

    Figures

    Figure 1: Authorities for Defense Items 11
    Figure 2: Authorities for Dual-Use Items 12

    Abbreviations

    AUSA Assistant U.S. Attorney
    CBP Customs and Border Protection
    FBI Federal Bureau of Investigation
    ICE Immigration and Customs Enforcement
    OEE Office of Export Enforcement

    This is a work of the U.S. government and is not subject to copyright
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    separately.

    United States Government Accountability Office

    Washington, DC 20548

    December 20, 2006

    The Honorable Henry J. Hyde
    Chairman
    Committee on International Relations
    House of Representatives

    The Honorable F. James Sensenbrenner, Jr.
    Chairman
    Committee on the Judiciary
    House of Representatives

    Each year, billions of dollars in "dual-use" items--which have both
    commercial and military applications--and defense items are exported from
    more than 300 U.S. sea, air, and land ports. To protect national security,
    foreign policy, and economic interests, the U.S. government controls the
    export of these items.1 The Departments of Commerce and State are
    principally responsible for regulating the export of dual-use and defense
    items, respectively.

    A key function in the U.S. export control system is enforcement, which
    consists of various activities that aim to prevent or deter the illegal
    export of controlled defense and dual-use items and can result in
    apprehending violators and pursuing and imposing appropriate criminal and
    administrative penalties, such as imprisonment, fines, denials of export
    privileges, or debarment. Enforcement activities--which include
    inspections, investigations, and punitive actions against violators of
    export control laws--are largely carried out by the Departments of
    Commerce, Homeland Security, Justice, and State. Enforcement activities
    can result in various outcomes. One recent case resulted in four business
    owners pleading guilty to illegally exporting defense items, including
    radars and smart weapons, to Chinese government-owned entities. Three were
    sentenced to prison, and all had to collectively forfeit almost $400,000,
    which represents their revenue from the illegal exports.

    1For the purposes of this report, "items" refers collectively to
    commodities, software, technology, and services.

    Attempts continue to be made by individuals, companies, terrorist
    organizations, and countries of concern2 to illegally obtain defense and
    dual-use items. In light of this, you asked us to review export control
    enforcement activities. In response, we (1) described the roles,
    responsibilities, and authorities of the agencies responsible for export
    control enforcement; (2) identified any challenges the agencies face in
    enforcing export control laws and regulations; and (3) assessed whether
    information on enforcement outcomes is provided to the export control
    agencies to inform the export control process and licensing decisions.
    This report is a publicly releasable version of a law enforcement
    sensitive report we issued on November 15, 2006. Therefore, some examples
    that involved law enforcement techniques or methods and that support our
    findings have been removed from this version.

    To conduct our work, we identified enforcement roles, responsibilities,
    and authorities through an examination of export control statutes,
    regulations, formal interagency agreements, policies, procedures, and
    operating manuals. We interviewed agency officials at headquarters and
    selected field locations responsible for export enforcement--including
    inspectors3 and investigators from the Department of Homeland Security,
    investigators from the Department of Commerce, investigators and criminal
    prosecutors from the Department of Justice, and compliance officers from
    the Department of State--about enforcement activities and challenges. We
    also identified export control enforcement information maintained at the
    various agencies and spoke with State licensing and policy officials and
    Commerce officials to assess whether they obtain this information for
    decision making. We performed our review from September 2005 through
    August 2006 in accordance with generally accepted government auditing
    standards. For more on our scope and methodology, see appendix I.

    Results in Brief

    Export control enforcement is inherently complex, involving multiple
    agencies that perform various functions using differing authorities.
    Several agencies within the Departments of Commerce, Homeland Security,
    Justice, and State are primarily responsible for export control
    enforcement. These enforcement agencies conduct a variety of activities,
    including inspecting items to be exported, investigating potential export
    control violations, and pursuing and imposing appropriate criminal and
    administrative penalties. These agencies' enforcement authorities are
    granted through a complex set of laws and regulations, which give
    concurrent jurisdiction to Commerce, Homeland Security, and Justice's
    Federal Bureau of Investigation (FBI) to conduct investigations of
    potential violations of export control laws for dual-use items, and to
    Homeland Security and the FBI to investigate potential defense item
    violations.

    2"Countries of concern" refers to those countries that the U.S. government
    believes may support terrorism or contribute to the proliferation of
    weapons of mass destruction.

    3Inspections are primarily conducted by Homeland Security's Customs and
    Border Protection officers.

    Enforcement agencies face several challenges in enforcing export control
    laws and regulations. For example, agencies have had difficulty
    coordinating investigations and agreeing on how to proceed on cases.
    Agreements for coordinating investigations do not exist among all the
    various agencies, and coordination and cooperation often hinge on the
    relationships developed by individual investigators from the various
    agencies. Some enforcement activities have also been affected by license
    determinations, which are used to confirm whether an item is controlled
    and requires a license and thereby confirm whether an export violation has
    occurred. State and Commerce officials said they need complete and
    accurate information from inspectors and investigators to make correct
    determinations. In some instances, inspectors and investigators said the
    time it takes to obtain a determination or changes in determinations has
    affected their enforcement activities. Other challenges that enforcement
    agencies face include balancing priorities and leveraging finite
    resources.

    Criminal indictments and convictions are key to informing the export
    control process and licensing decisions. While enforcement agencies have
    databases to capture information relating to their own export enforcement
    activities, neither State nor Commerce systematically receives from
    Justice notification of the outcomes of criminal cases, including
    indictments and convictions for both defense and dual-use items and,
    therefore, lacks the full scope of information on individuals and
    companies that have been prosecuted. Such information is needed, in part,
    because indicted or convicted exporters may have their license
    applications or export privileges denied. Without outcomes of criminal
    cases, export control agencies may not gain a complete picture of
    individuals or companies seeking export licenses or trends in illegal
    export activities.

    We are recommending that the Departments of Commerce, Homeland Security,
    Justice, and State take a number of actions to improve coordination and
    licensing determination efforts and facilitate information sharing of
    enforcement outcomes with the export control agencies within State and
    Commerce. In commenting on a draft of this report, Commerce, Homeland
    Security, and State generally agreed with the need for coordination but
    some noted differences in possible approaches. In some instances, they
    indicated that actions to address our recommendations were already under
    way. Justice did not provide formal comments, and Defense had no comments
    on the draft report. Commerce, Homeland Security, Justice, and State
    provided technical comments, which we incorporated in this report as
    appropriate.

    Background

    The U.S. government's control over the export of defense and dual-use
    items is intended to ensure that U.S. interests are protected in
    accordance with the Arms Export Control Act and the Export Administration
    Act.4 The U.S. government's control over the export of defense and
    dual-use items is primarily divided between two departments--State and
    Commerce, respectively (see table 1)--with support for enforcement
    activities primarily from Commerce, through its Bureau of Industry and
    Security's Office of Export Enforcement (OEE); Department of Homeland
    Security, through its Customs and Border Protection (CBP) and Immigration
    and Customs Enforcement (ICE); and Justice, through the FBI and the U.S.
    Attorneys Office.5

    422 U.S.C. S 2751 et seq. and 50 U.S.C. App. S 2401 et seq. The Export
    Administration Act is not permanent legislation. 50 U.S.C. App. S 2419.
    Authority granted under the act lapsed in August 2001. However, Executive
    Order 13222, Continuation of Export Control Regulations, which was issued
    in August 2001 under the authority provided by the International Emergency
    Economic Powers Act (50 U.S.C. SS1701 et seq.), continues the 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. 71 Fed. Reg.
    44551.

    5Other departments, including Defense and Energy, may provide technical
    expertise on items to enforcement agencies. Also, Defense and the military
    services have investigative units that may provide support to the
    enforcement agencies.

    Table 1: Agencies, Laws, and Regulations Governing Export Control of
    Defense and Dual-Use Items

                         Defense items                  Dual-use items
    Regulating agency State's Directorate of Defense Commerce's Bureau of
                         Trade Controls                 Industry and Security
    Enforcement       CBP, ICE, FBI,a and U.S.       CBP, OEE, ICE, FBI,a and
    agencies          Attorneys Office               U.S. Attorneys Office
    Statute           Arms Export Control Act        Export Administration Act
                                                        /International Emergency
                                                        Economic Powers Act
    Implementing      International Traffic In Arms  Export Administration
    regulations       Regulations                    Regulations
    Control list      U.S. Munitions List specifies  Commerce Control List
                         the defense articles,          specifies dual-use items
                         services, and related          and technologies to be
                         technical data to be           controlled
                         controlled

    Source: GAO analysis of export control laws, regulations, and agency
    information.

    aFBI investigates criminal violations of law in certain foreign
    counterintelligence areas.

    State and Commerce require exporters to identify items that are on the
    departments' control lists and to obtain license authorization from the
    appropriate department to export these items, unless an exemption applies.
    Exemptions are permitted under various circumstances, such as allowing for
    the export of certain items to Canada without a license. Many dual-use
    items are exempt from licensing requirements. While items can be exempt
    from licensing requirements, they are still subject to U.S. export control
    laws. Because exporters are responsible for complying with export control
    laws and regulations, regulatory and investigative enforcement agencies
    conduct outreach to educate exporters on these laws and regulations. When
    shipping controlled items, exporters are required to electronically notify
    CBP officials at the port where the item will be exported, including
    information on the quantity and value of the shipment, the issued export
    license number, or an indication that the item is exempt from licensing
    requirements.6

    Export enforcement aims to ensure U.S.-controlled items do not fall into
    the wrong hands and to limit the possibility that illegal exports will
    erode U.S. military advantage. Export enforcement involves inspecting
    items to be shipped, investigating potential violations of export control
    laws, and punishing export control violators.7 When inspectors,
    investigators, and prosecutors have questions about whether an item is
    controlled and requires a license, they request a license determination.8
    CBP and ICE request license determinations through ICE's Exodus Command
    Center,9 which refers the request to State and Commerce; OEE requests
    determinations directly from Commerce licensing officers. Some FBI agents
    request license determinations through the Exodus Command Center, while
    others make such requests directly to State or Commerce.

    6Exporters are required to electronically notify CBP officers of items to
    be shipped through the Automated Export System, which is maintained by the
    Census Bureau.

    In fiscal year 2005, Department of Justice data showed that there were
    more than 40 individuals or companies convicted of over 100 criminal
    violations of export control laws.10 State reported over $35 million and
    Commerce reported $6.8 million in administrative fines and penalties for
    fiscal year 2005. See appendix II for a list of selected export control
    cases.

    For more than a decade, we have reported on a number of weaknesses and
    vulnerabilities in the U.S. export control system and made numerous
    recommendations, several of which have not been implemented. For example,
    in September 2002, we reported that Commerce improperly classified some
    State-controlled items as Commerce-controlled, increasing the risk that
    defense items would be exported without the proper level of review and
    control to protect national interests.11 In June 2006, we reported that
    this condition remains unchanged and that Commerce has not taken the
    corrective actions that we recommended in 2002.12 We have also reported on
    long-standing problems in enforcement, including poor cooperation among
    the investigative agencies.13

    7Enforcement activities can also include reviewing disclosures by
    exporters of possible export control violations, prelicense checks, and
    postshipment verifications. See GAO, Export Controls: Post-Shipment
    Verification Provides Limited Assurance That Dual-Use Items Are Being
    Properly Used, [24]GAO-04-357 (Washington, D.C.: Jan. 12, 2004), and GAO,
    Defense Trade: Arms Export Control System in the Post 9/11 Environment,
    [25]GAO-05-234 (Washington, D.C.: Feb. 16, 2005.)

    8Commerce, upon request, can provide an initial license determination
    based on a review of data gathered by licensing officers and
    investigators/inspectors to determine whether an item requires a license.
    Commerce will also provide a certified license determination for use as
    evidence such as in criminal trials. State, also upon request, can provide
    an initial license determination based on available information. State
    also undertakes a second-level or pretrial review, which is an in-depth
    examination of a commodity, defense service, or brokering activity to
    verify whether it is covered by the Arms Export Control Act or its
    implementing regulations. Finally, State can provide a trial certification
    for use in criminal proceedings.

    9The Exodus Command Center was established in 1982 as the single point of
    contact for investigators and inspectors in the field needing operational
    support from export control agencies. For example, it responds to
    inquiries for export licensing verifications by contacting export control
    agencies within State and Commerce.

    10Convictions may cover more than one violation.

    Export Control Enforcement Is Complex, Involving Varying Roles,
    Responsibilities, and Authorities among Multiple Agencies

    Enforcing U.S. export control laws and regulations is inherently
    complex.14 Multiple agencies are involved in enforcement and carry out
    various activities, including inspecting shipments, investigating
    potential export control violations, and taking punitive actions that can
    be criminal or administrative against violators of export control laws and
    regulations. Authorities for export control enforcement are provided
    through a complex set of laws and regulations. These authorities and some
    overlapping jurisdiction for conducting enforcement activities add to the
    complexity.

    Multiple Agencies Are Responsible for Export Enforcement

    Enforcement--which includes inspections, investigations, and punitive
    actions against violators of export control laws--is largely conducted by
    various agencies within Commerce, Homeland Security, Justice, and State
    depending on the facts and circumstances of the case. These agencies' key
    enforcement responsibilities are shown in table 2.

    11GAO, Export Controls: Processes for Determining Proper Control of
    Defense-Related Items Need Improvement, [26]GAO-02-996 (Washington, D.C.:
    Sept. 20, 2002).

    12GAO, Export Controls: Improvement to Commerce's Dual-Use System Needed
    to Ensure Protection of U.S. Interests in the Post-9/11 Environment,
    [27]GAO-06-638 (Washington, D.C.: June 26, 2006).

    13GAO, Export Controls: Actions Needed to Improve Enforcement,
    [28]GAO/NSIAD-94-28 (Washington, D.C.: Dec. 30, 1993), and GAO, Export
    Control Regulation Could Be Reduced Without Affecting National Security,
    [29]GAO/ID-82-14 (Washington, D.C.: May 26, 1982).

    14Adding to the complexity is the sale of defense items through the U.S.
    government's Foreign Military Sales program, which are subject to a
    different process and inspection procedures than those items sold directly
    by the exporter and subject to State's export control system.

    Table 2: Enforcement Agencies and Primary Activities

                                       Inspection at U.S.               Punitive
    Agency                                portsa       Investigation action b
    Commerce
    Bureau of Industry and Security
    Office of Export Enforcement
    Homeland Security
    Customs and Border Protection
    Immigration and Customs
    Enforcement
    Justice
    U.S. Attorneys Office
    Federal Bureau of Investigation
    State
    Directorate of Defense Trade
    Controls

    Source: GAO analysis of information provided by each agency.

    aCBP and ICE both have the authority to conduct inspections at U.S. ports,
    but CBP has a primary role in this area.

    bFor purposes of this report, punitive actions can be either criminal or
    administrative against potential violators of export control laws and
    regulations. Criminal actions taken against violators of export control
    laws and regulations can result in imprisonment, fines, forfeitures, and
    other penalties. Administrative actions against violators can include
    fines, suspension of an export license, or denial or debarment from
    exporting.

    Inspections of items scheduled for export are largely the responsibility
    of CBP officers at U.S. air, sea, and land ports, as part of their border
    enforcement responsibilities. To help ensure that these items comply with
    U.S. export control laws and regulations, CBP officers check items against
    applicable licenses prior to shipment, selectively conduct physical
    examinations of cargo at the port and in warehouses, review shipping
    documents, detain questionable shipments, and seize items being exported
    illegally. As part of their responsibilities, CBP officers are required by
    State to decrement (reduce) the shipment's quantity and dollar value from
    the total quantity and dollar value authorized by the exporter's
    license.15 This process helps to ensure that the shipment does not exceed
    what is authorized and that the license has not expired. However, Commerce
    does not require CBP officers to decrement Commerce licenses.16 Commerce
    officials said they have shipping tolerances that allow exporters to ship
    controlled items exceeding the quantity and value approved in a license,
    but this varies based on the controlled item. CBP officers do not
    currently have a formal means for determining if exporters have exceeded
    authorized license quantities and values for dual-use items within any
    shipment tolerances permitted for that controlled item. As a result, they
    cannot ensure accountability on the part of exporters or that Commerce
    regulations have been properly followed. CBP has an automated export
    system, which is used for decrementing State licenses. This system has
    built-in tolerances to allow the shipment to exceed the total value of a
    State license by 10 percent, as permitted by regulations.17

    15International Traffic in Arms Regulations, 22 C.F.R. S123.22 (a) and
    (c)(1) (2006).

    Investigations of potential violations of export control laws for dual-use
    items are conducted by agents from OEE, ICE, and FBI. Investigations of
    potential export violations involving defense items are conducted by ICE
    and FBI agents. FBI has authority to investigate any criminal violations
    of law in certain foreign counterintelligence areas.18 The investigative
    agencies have varying tools such as undercover operations and overseas
    investigations for investigating potential violations19 and establishing
    cases for potential criminal or administrative punitive actions.

    Punitive actions, which are either criminal or administrative, are taken
    against violators of export control laws and regulations. Criminal
    violations are those cases where the evidence shows that the exporter
    willfully and knowingly violated export control laws. U.S. Attorneys
    Offices prosecute criminal cases in consultation with Justice's National
    Security Division. These cases can result in imprisonment, fines,
    forfeitures, and other penalties. Punitive actions for administrative
    violations can include fines, suspension of an export license, or denial
    or debarment from exporting, and are imposed primarily by State20 or
    Commerce, depending on whether the violation involves the export of a
    defense or a dual-use item. In some cases, both criminal and
    administrative penalties can be levied against an export control violator.

    16According to Commerce officials, exporters in the past were required to
    decrement Commerce licenses as shipments were made and submit the
    decremented licenses to the department. While Commerce no longer requires
    exporters to submit decremented licenses, Commerce requires exporters to
    retain shipment records for possible inspection by the department. State
    also requires exporters to retain shipment records.

    17International Traffic in Arms Regulations, 22 C.F.R. S123.23 (2006).

    18See 28 C.F.R. S 0.85(d), 69 Fed. Reg. 65542.

    19OEE currently does not have the same investigative authorities as ICE
    and FBI. However, legislation has been proposed (H.R. 4572) that, if
    enacted, would provide OEE with additional investigative authorities.

    The export control and investigative enforcement agencies also conduct
    outreach activities, primarily educating exporters on U.S. export control
    laws and regulations. For example, in fiscal year 2005, ICE agents
    conducted more than 1,500 industry outreach visits around the country.
    Outreach activities can include seminars and programs, specialized
    training, publications, advice lines, Web sites, and individual meetings
    with industry, academia, and other government agencies. These activities
    can result in companies self-disclosing violations, tips and reports of
    potential violations by others, and cooperation in investigations and
    intelligence gathering.

    Enforcement Authorities Are Granted through Various Laws and Regulations

    Authorities for export control enforcement are provided through a complex
    set of laws and regulations. For defense items, authorities are granted
    under the Arms Export Control Act, the Department of Justice
    Appropriations Act of 1965, the USA Patriot Improvement and
    Reauthorization Act, and the Foreign Wars, War Materials and Neutrality
    Act. These statutes and the regulations stemming from them give concurrent
    jurisdiction for investigations to ICE and FBI (see fig. 1).

    20In addition, State officials said a company, as part of the terms of an
    agreement with State, can conduct audits to ensure compliance or assign a
    special compliance officer to oversee remediation efforts and conduct
    in-depth reviews of violations at the company.

    Figure 1: Authorities for Defense Items

    aCBP and ICE have authority to conduct inspections. ICE conducts
    investigations.

    bThe Department of Justice is responsible for prosecutions for federal
    crimes not otherwise specifically assigned. 28 C.F.R. S 0.55.

    For dual-use items, authorities are granted under the Export
    Administration Act, the International Emergency Economic Powers Act, the
    Department of Justice Appropriations Act of 1965, the USA Patriot
    Improvement and Reauthorization Act, and the Foreign Wars, War Materials
    and Neutrality Act. These laws and their implementing regulations give
    investigative authority for dual-use items to OEE as well as to ICE and
    FBI, which also have investigative authority for defense items (see fig.
    2).

    Figure 2: Authorities for Dual-Use Items

    aThe Department of Justice is responsible for prosecutions for federal
    crimes not otherwise specifically assigned. 28 C.F.R. S 0.55.

    bThe law gives the authority to U.S. Customs Service in the Department of
    Treasury. Customs Service was subsumed by the Department of Homeland
    Security in March 2003. Homeland Security's CBP and ICE have authority to
    conduct inspections. ICE conducts investigations.

    CIn times of declared national emergency, various agencies receive a
    presidential delegation of authority by executive order.

    Agencies Face Several Challenges in Enforcing Export Control Laws

    Several key challenges exist in enforcing export control laws--challenges
    that potentially reduce the effectiveness of enforcement activities.
    First, overlapping jurisdiction for investigating potential export control
    violations and instances where coordination among the investigative
    agencies has not been effective have had an impact on some cases. Second,
    license determinations--which confirm whether an item is controlled by
    State or Commerce, and thereby help confirm whether a violation has
    occurred--are key to ensuring the pursuit of enforcement activities and
    are dependent on complete and specific information available at the time.
    Third, prosecuting export control cases can be difficult, since securing
    sufficient evidence to prove the exporter intentionally violated export
    control laws can represent unique challenges in some cases. Finally,
    multiple and sometimes competing priorities have made it difficult for
    enforcement agencies to maximize finite resources in carrying out export
    control enforcement responsibilities.

    Coordination on Investigative Cases Has Been Limited in Some Instances

    While ICE, OEE, and FBI have jointly coordinated on investigations,
    coordination can be challenging, particularly in terms of agreeing on how
    to proceed with a case. Formal agreements for coordinating investigations
    do not exist among all the investigative agencies. The extent to which
    agencies coordinate and cooperate on investigations is largely dependent
    on individual work relationships.

    Agencies have sometimes not agreed on how to proceed on cases,
    particularly those involving foreign counterintelligence. For example, FBI
    and OEE agents disagreed as to whether certain dual-use items planned for
    export warranted an investigation.21 Specifically, without coordinating
    with OEE and ICE, FBI pursued the investigation, arrested the exporter,
    and held the shipment of items, valued at $500,000. Ultimately, criminal
    charges were not pursued because the items did not require a license. With
    respect to foreign counterintelligence cases involving export controls,
    investigators have not always been certain about their respective roles on
    these cases.

    21Commerce determined that the item did not require a license. FBI asked
    for an opinion from the National Security Agency, which deemed the item
    high risk for national security. However, the National Security Agency did
    not have the authority to determine if the item was licensable.

    Formal agreements for coordination do not exist among all the
    investigative agencies. Specifically, ICE and FBI do not have a formal
    agreement to coordinate cases involving export control violations. Formal
    agreements that exist have not been updated in recent years. In 1983,
    Commerce entered into an agreement with the FBI dealing with certain
    headquarters-level coordination functions. In addition, a 1993 agreement
    between Customs and Commerce outlines the investigative responsibilities
    of each agency, but it does not reflect departmental changes that occurred
    as a result of the establishment of Homeland Security in March 2003. This
    agreement also directs these agencies to enter a joint investigation when
    it is determined that more than one agency is working on the same target
    for the same or related violations. However, it can be difficult to
    determine whether these conditions exist because these agencies do not
    always have full access to information on ongoing investigations.
    According to several agents we spoke with, sharing information on ongoing
    investigations in general can be challenging because of the agencies'
    varying and incompatible databases, the sensitivity of certain case
    information, and the agencies' varying protocols for classifying
    information.

    The extent to which agencies coordinate their investigative efforts in the
    field can depend on individual work relationships and informal mechanisms
    that facilitate communication. Some field locations have established joint
    task forces to discuss investigative cases. For example, OEE, ICE, and FBI
    agents in one field location told us that they routinely collaborate on
    investigations as part of a joint task force that meets monthly. Agents in
    another location recently established a task force to locally coordinate
    export control investigations. In addition, some agencies have agents on
    detail to other investigative agencies. For example, in one field
    location, an ICE agent is detailed to FBI to coordinate cases and share
    export control information. FBI officials told us the detail has been
    useful because the ICE agent can readily provide FBI access to certain
    Homeland Security data, which saves critical investigative time for the
    FBI agents. At another field location, an OEE agent has been on detail at
    ICE for 7 years, which has facilitated information sharing and joint cases
    between the two agencies. According to several agents with whom we spoke,
    personalities can be a key factor in how well agents from different
    agencies work together on investigations. For example, an OEE agent in
    charge of one field location told us that the field agents work
    effectively on cases with ICE agents in one field location, but not with
    ICE agents in another field location because of disagreements stemming
    from 15 years ago about how to proceed with investigations.

    Confirming Whether Items Are Controlled and Need a License Is Key to Pursuing
    Enforcement Activities

    Confirming whether a defense or dual-use item is controlled and requires a
    license, known as a license determination, is integral to enforcement
    agencies' ability to seize items, pursue investigations, or seek
    prosecutions. However, confirmation can sometimes be difficult. Many
    inspectors and investigators told us that the time it takes to make
    determinations or sometimes changes to previously made determinations can
    affect some of their enforcement activities. According to Commerce and
    State officials, they depend on complete, specific, and pertinent
    information from the inspectors and investigators to make timely and
    correct determinations so that appropriate enforcement actions can be
    pursued. Moreover, new or additional information may become available as
    an investigation proceeds, which can affect a license determination.

    Some inspectors and investigators--including OEE field agents who request
    license determinations directly from Commerce--stated that obtaining
    license determination decisions can be time consuming and has taken as
    much as several months. In several instances, State and Commerce licensing
    officers needed more information about the item before making a license
    determination, which added to the time it took to respond. In addition,
    State officials said they often request technical support from the
    Department of Defense when making determinations for defense items, which
    can add to the time it takes to make a license determination. We found
    that responses to requests for license determinations ranged from 1 day to
    8 months during fiscal year 2005. While State established in September
    2004 a goal of 30 days for processing license determinations, it revised
    this time frame to 60 days in April 2005 because of resource limitations.
    Commerce recently established a 35-day time frame to make a license
    determination requested by OEE agents. However, Commerce, in conjunction
    with the Exodus Command Center, has not established goals or a targeted
    time frame for responding to license determination requests. Goals help
    establish transparency and accountability in the process.

    While some inspectors and investigators told us that their enforcement
    actions have been affected by unclear determinations or changes to
    previously made license determinations, Commerce and State officials said
    that determinations are dependent on such factors as the completeness and
    specificity of the information presented to them at the time of the
    request. In one instance, CBP officers were not given a clear
    determination as to whether the item was controlled, leaving officers to
    decide how to proceed. In other instances, investigators dropped their
    cases or pursued other charges based on changes made to the determination
    or inconsistent information provided to the exporter. For example, OEE
    agents executed search warrants based on a license determination that the
    equipment was controlled for missile technology and antiterrorism
    purposes. Subsequently, Commerce determined that no license was required
    for this equipment, and thereby the case was closed. In another example,
    licensing officers provided OEE agents with a license determination that
    differed from the commodity classification22 provided to the exporter. As
    a result of the inconsistency between the license determination and
    classification, Commerce pursued a lesser charge against the exporter. In
    addition, in June 2005, ICE led a joint investigation of a Chinese
    national for allegedly exporting critical U.S. technology to China, and on
    the basis of an initial license determination review23 by State that the
    item was controlled, ICE obtained search and arrest warrants. However, 9
    months later, ICE agents requested a subsequent license determination to
    confirm that the item was controlled. It was determined that the item was
    not subject to State or Commerce export control, and therefore the case
    was dropped. Both State and Commerce headquarters officials stated that
    their ability to make license determinations is dependent upon several
    factors, including the completeness and accuracy of the information
    provided by the inspectors and investigators at the time of the request.
    These determinations can be subject to change as new or additional
    pertinent information becomes available as the case proceeds.

    Commerce and ICE have recently taken actions to address problems in the
    license determination process. In June 2006, Commerce established new
    procedures on how to request and process license determinations internally
    and is currently revising and providing training for its licensing
    officers and OEE agents. In August 2006, ICE's Exodus Command Center
    implemented a new system, known as the Exodus Accountability Referral
    System, to track license determination requests, provide enforcement
    agencies access to the status of their requests, and provide performance
    statistics to field agents, inspectors, and regulatory agencies. These
    actions recognize some of the problems with license determinations.
    However, it is too early to determine their impact on export enforcement
    activities.

    22If exporters have determined that their items are Commerce controlled,
    but are uncertain of export licensing requirements, they may request a
    commodity classification from Commerce. See [30]GAO-02-996 .

    23In September 2004, ICE issued guidance to its investigators indicating
    that State strongly recommends a second-level review in cases that are
    heading toward indictment or a plea agreement. This review is an in-depth
    examination of items to verify that they are controlled by State.

    Challenges Exist in Taking Criminal and Administrative Punitive Actions against
    Alleged Export Violators

    When developing a case for criminal prosecution, Assistant U.S. Attorneys
    (AUSA) must obtain sufficient evidence of the exporter's intent to violate
    export control laws. Gathering evidence of intent is particularly
    difficult in export control cases, especially when the item being exported
    is exempted from licensing or the case requires foreign cooperation. For
    dual-use violations, Commerce officials said that the lapsed status of the
    Export Administration Act has made it cumbersome for prosecuting cases.
    When pursuing administrative cases, State, unlike Commerce, has limited
    access to attorneys and an Administrative Law Judge, making it challenging
    to pursue the full range of administrative actions against export control
    violators.

    Several AUSAs who prosecute many different types of cases, told us that it
    can be challenging to secure sufficient evidence that an exporter
    intentionally violated export control laws. In particular, securing such
    evidence can be especially difficult when the items to be exported are
    exempted from licensing requirements. We previously reported similar
    concerns of officials from Customs (now within Homeland Security) and
    Justice about investigating and prosecuting violations when exemptions
    apply, noting that it is particularly difficult to obtain evidence of
    criminal intent since the government does not have license applications
    and related documents that can be used as proof that the violation was
    committed intentionally.24

    Investigations and prosecutions that involve items and individuals in
    foreign locations can further complicate evidence-gathering efforts.
    According to ICE officials, a foreign government may or may not cooperate
    in an overseas export control investigation or arrest, and foreign and
    U.S. laws on export controls may differ as to what constitutes a
    violation. One OEE field office estimated that over half of its cases
    involve foreign persons or entities.

    24GAO, Defense Trade: Lessons to Be Learned from the Country Export
    Exemption, [31]GAO-02-63 (Washington, D.C.: Mar. 29, 2002).

    According to Commerce officials, enforcement of dual-use export controls
    under the expired Export Administration Act is a key challenge for them
    because it adds an element of complexity to cases and can encumber
    prosecutions. These officials said they have encountered difficulties
    convincing AUSAs to accept cases to prosecute under a set of regulations,
    promulgated under a lapsed statute and kept in force by emergency
    legislation. To counter these difficulties, Commerce, Homeland Security,
    and Justice officials said they support the renewal of the Export
    Administration Act. Commerce stated that renewal of this act would provide
    enforcement tools to OEE for conducting investigations and increase
    penalty provisions for violators.25

    For administrative actions, export control regulations allow both State
    and Commerce to pursue administrative cases before an Administrative Law
    Judge, but State has never exercised this authority. Commerce officials
    stated that they bring cases before an Administrative Law Judge when an
    alleged export violator disputes the charges or objects to the
    administrative settlement actions proposed by Commerce. Commerce has a
    formal agreement with the Coast Guard Office of Administrative Law Judges,
    which is renewed annually, to hear its cases, and Commerce's attorneys
    bring about one to three administrative cases before an Administrative Law
    Judge each year.

    State has never brought a case to an Administrative Law Judge and does not
    have attorneys with the experience needed to pursue such export control
    cases or a standing agreement with any agency to provide an Administrative
    Law Judge. In cases where an agreed settlement with the violating company
    appears unlikely and a formal hearing is needed, State would have to seek
    services from attorneys in the private sector or from other departments to
    help represent the government's interests. To obtain access to an
    Administrative Law Judge to hear a case, State officials told us they
    would need to first request the Office of Personnel Management to appoint
    a judge on a temporary basis. State would then need to establish an
    interagency memorandum of understanding with that agency to establish
    payment and other arrangements.26 Without a formal agreement to access an
    Administrative Law Judge and ready access to attorneys to pursue such
    cases, State officials told us that it is challenging to proceed with
    administrative cases. State officials indicated that they are exploring
    various options on how to get access to attorneys with relevant experience
    to handle such cases, including seeking assistance from other departments
    on a temporary basis. However, State's options appear to rely on ad hoc
    interagency arrangements and would not build any internal expertise for
    handling such cases in the future.

    25Congress recently passed the USA Patriot Improvement and Reauthorization
    Act, which increased to $50,000 per violation the maximum civil penalty
    and to 20 years the prison term for criminal convictions under the
    International Emergency Economic Powers Act.

    Agencies Faced with Balancing Multiple Priorities and Leveraging Finite Human
    Resources

    Each enforcement agency's priorities--and the resources allocated to those
    priorities--are influenced by the mission of the department in which the
    agency resides. At times, agencies have competing priorities, making it
    difficult to effectively leverage finite enforcement personnel. Limited
    training on export controls has further challenged agencies to use their
    enforcement personnel effectively. Some agencies have recently taken
    actions to target more resources to export enforcement activities.
    However, it may be too early to determine the impact these actions will
    have in the long term. In addition, priorities could shift and necessitate
    the reassignment of staff.

    The investigative agencies have been particularly challenged to
    effectively leverage their resources.

               o Commerce's overall mission is to promote U.S. economic
               development and technological advancements. OEE resides within
               Commerce's export control agency, and its priorities emphasize
               investigating potential violations of dual-use exports related to
               weapons of mass destruction, terrorism, and unauthorized military
               end use. In carrying out these priorities, some of OEE's nine
               field offices--which are responsible for conducting investigations
               in multiple states, ranging from 3 to 11 states--have had
               difficulty pursuing investigative leads outside their home state.
               Some OEE field agents told us that not having a physical presence
               in the other states adversely affects their ability to generate
               investigative leads, and that their caseload is largely within
               their home state.

               o Homeland Security's mission is to create a unified national
               effort to secure the country while permitting the lawful flow of
               immigrants, visitors, and trade. ICE is the largest investigative
               branch within Homeland Security. In addition to investigating
               potential defense and dual-use export violations, ICE investigates
               drug smuggling, human trafficking and smuggling, financial crimes,
               commercial fraud, document fraud, money laundering, child
               exploitation, and immigration fraud. ICE has recently taken action
               to expand its existing investigation workforce devoted to export
               control. As of September 2006, ICE data showed that total arrests,
               indictments, and convictions had surpassed the totals in each
               fiscal year since ICE's creation in 2003.

               o Justice's overall mission is to enforce U.S. laws, and FBI's
               mission is to protect the United States against terrorist and
               foreign intelligence threats and to enforce criminal laws. As the
               lead counterintelligence agency in the United States, FBI
               investigates potential dual-use and defense export violations that
               have a nexus with foreign counterintelligence. FBI has over 456
               domestic offices. Fifty-six offices are required to have at least
               one team of agents devoted to counterintelligence. These teams
               cover all 50 states, and some agents are located within the 456
               domestic offices. FBI agents are also responsible for conducting
               other investigations involving espionage and counterproliferation.

    26State officials indicated that they have on occasion established such
    arrangements through the Office of Personnel Management but acknowledged
    that establishing such arrangements takes time.

    CBP, the sole border inspection agency, has also been challenged to
    leverage its resources. One of CBP's primary responsibilities is to detect
    and prevent terrorists and terrorist weapons from entering U.S. ports, and
    it devotes most of its resources to inspecting items and persons entering
    the country. For items leaving the United States, CBP uses an automated
    targeting system to identify exports for examination by its officers. The
    workload and the number of officers assigned to inspect exported cargo can
    fluctuate daily. For example, at one of the nation's busiest seaports, the
    CBP Port Director stated that there can be five officers assigned to
    inspecting exports one day and none the next. Export enforcement efforts
    are further challenged by the limited time officers have to review
    shipment documentation. State regulations require 24 hours' advance
    notification before shipment for ship or rail and 8 hours' advance
    notification for plane or truck. However, Commerce regulations do not have
    time frames specified other than Census Bureau requirements of
    notification prior to departure.27 Moreover, some officers also spend some
    of their limited time hunting down items on planes or in shipping
    containers because documents, such as air waybills, cannot be located or
    information on items to be exported is incomplete. CBP officials stated
    that they have internal initiatives under way to address resources devoted
    to export control inspections.

    27Census requirements also allow that, in certain circumstances, an
    exporter may transmit shipment information up to 10 working days from the
    date of exportation.

    U.S. Attorneys offices have many competing priorities, including
    prosecuting cases involving terrorism, counterterrorism, and government
    contractor fraud. Each of the U.S. Attorneys offices has attorneys who can
    work on cases involving potential export control violations. However,
    several investigators noted that the level of interest in and knowledge of
    export control laws varies among AUSAs.

    According to several enforcement agency officials, they would like more
    advanced training on export controls that could help them use their time
    more efficiently--and thereby better leverage finite resources--but such
    training is limited. While some specialized training has been provided to
    officers in the field, CBP has reduced the number of training courses
    directly relating to export controls for the last quarter of fiscal year
    2006 primarily because of budget constraints. CBP officials said they are
    considering restructuring the training curriculum. ICE and FBI
    investigators also said that they would like more opportunities for
    advanced training on export controls. While ICE headquarters has not
    funded its advanced strategic export controls course at the Federal Law
    Enforcement Training Center for the past 2 years, it reinstated this
    course in May 2006 and has subsequently trained over 100 agents. ICE
    officials also noted that training on weapons of mass destruction was
    provided to over 2,000 agents and analysts during fiscal years 2005 and
    2006. Commerce plans additional training for OEE agents in fiscal year
    2007. Justice, recognizing a need for training on export controls for its
    attorneys, provided a training conference in May 2006 for AUSAs, with
    presentations from Justice, Commerce, State, and the intelligence
    community. Commerce, State, and Justice have also recently sponsored
    training conferences for enforcement agencies covering topics such as
    export control laws and regulations, license determinations, and proving
    criminal intent.

    Criminal Outcomes Are Not Systematically Provided to Export Control Agencies

    Criminal indictments and convictions are key to informing the export
    control process and licensing decisions. While Justice and the other
    enforcement agencies have databases to capture information relating to
    their own export enforcement activities (see table 3), outcomes of
    criminal cases are not systematically shared with State and Commerce.

    Table 3: Primary Enforcement-Related Databases at Enforcement Agencies

    Agency           Database                   Description
    Justice
    U.S. Attorneys   Legal Information Office   Captures information on
    Office           Network System             criminal cases, including
                                                   outcomes and closure date
    FBI              Automated Case Support     Captures details on
                                                   investigative cases
    Counterespionage Significant Export Control Captures outcome information
    Section          Cases List                 on significant criminal export
                                                   control cases
    Commerce
    OEE              Investigative Management   Captures details on
                        System                     investigative cases
    State
    Directorate of   Trade Registration,        Captures compliance
    Defense Trade    Enforcement and Compliance activities, including
    Controls         System                     voluntary disclosures, and
                                                   license determinations
    Homeland Security
    CBP/ICE          Treasury Enforcement       A system of records containing
                        Communication Systema      law enforcement information
                                                   including suspects, ongoing
                                                   investigations and enforcement
                                                   actions
                        Seized Asset and Case      Captures activities associated
                        Tracking System            with seizures and
                                                   investigations
                        Automated Targeting        A system that automatically
                        System/Anti-Terrorism      reviews electronically filed
                                                   export documentation and
                                                   compares it to
                                                   inspector-defined criteria for
                                                   high-risk shipments

    Source: GAO analysis of information provided by above agencies.

    aMany federal law enforcement agencies have certain access to the Treasury
    Enforcement Communication System.

    State and Commerce officials stated that information on the outcomes of
    criminal cases, including indictments and convictions, is important to the
    export licensing process, particularly since indicted or convicted
    exporters may be denied from participating in the process. The Arms Export
    Control Act requires that appropriate mechanisms be developed to identify
    persons who are the subject of an indictment or have been convicted of an
    export control violation. Specifically, if an exporter is the subject of
    an indictment or has been convicted under various statutes, including the
    Export Administration Act, State may deny the license application.
    Further, Commerce can deny export privileges to an exporter who has been
    criminally convicted of violating the Export Administration Act or Arms
    Export Control Act. According to both State and Commerce officials,
    information on indictments and convictions is gathered through an informal
    process. For example, an ICE agent, who serves as a liaison with State and
    is colocated with State's export control officials, compiles criminal
    statistics from ICE field offices in a monthly report that is shared with
    State compliance officials. Information on criminal export control
    prosecution outcomes could help inform the export control process by
    providing a complete picture of the individual or company seeking an
    export license or trends in illegal export activities.

    Conclusions

    Agencies responsible for enforcement have to operate within the construct
    of a complex export control system, which offers its own set of challenges
    from the outset. Further compounding this situation is the failure to
    coordinate some investigations and address a host of other challenges that
    can lead to a range of unintended outcomes, such as the termination of
    investigative cases. At a minimum, limited resources available for
    enforcement efforts may not be used effectively. Consequently, there is a
    need to ensure that enforcement agencies maximize finite resources and
    efforts to apprehend and punish individuals and companies who illegally
    export sensitive items that may be used to subvert U.S. interests.

    Recommendations for Executive Action

    To enhance coordination in the current system, we recommend that the
    Secretary of Commerce direct the Under Secretary for Industry and
    Security, the Secretary of Homeland Security direct the Assistant
    Secretary of Homeland Security for U.S. Immigration and Customs
    Enforcement, and the Attorney General direct the Director of the FBI in
    conjunction with the Assistant Attorney General in charge of the National
    Security Division to take the following two actions:

               o establish a task force to evaluate options to improve
               coordination and cooperation among export enforcement
               investigative agencies, such as creating new or updating existing
               operating agreements between and among these agencies, identifying
               and replicating best practices for routinely collaborating on or
               leading investigations, and establishing a mechanism for
               clarifying roles and responsibilities for individual export
               control cases involving foreign counterintelligence, and

               o report the status of task force actions to Congress.

    To ensure discipline and improve information needed for license
    determinations, we recommend that the Secretary of Homeland Security
    direct the Assistant Secretary of Homeland Security for U.S. Immigration
    and Customs Enforcement and the Secretary of Commerce direct the Under
    Secretary for Industry and Security to establish goals for processing
    license determinations. We also recommend that that Secretary of Homeland
    Security direct the Assistant Secretary of Homeland Security for U.S.
    Immigration and Customs Enforcement, the Secretary of Commerce direct the
    Under Secretary for Industry and Security, and the Secretary of State
    direct the Deputy Assistant Secretary for Defense Trade Controls to
    coordinate with licensing officers, inspectors, investigators, and
    prosecutors to determine what additional training or guidance is needed on
    license determinations, including the type of information needed to make
    license determinations.

    To ensure systematic reconciliation of shipments with Commerce licenses,
    we recommend that the Secretary of Commerce direct the Under Secretary for
    Industry and Security, in consultation with the Commissioner of Homeland
    Security's U.S. Customs and Border Protection, to determine the
    feasibility of establishing a requirement for CBP to decrement Commerce
    licenses and an action plan for doing so.

    To ensure that State and Commerce have complete information on enforcement
    actions, we recommend that the Attorney General direct the Director of the
    Executive Office for U.S. Attorneys, in consultation with the Assistant
    Attorney General in charge of the National Security Division, to establish
    formal procedures for conveying criminal export enforcement results to
    State's Directorate of Defense Trade Controls and Commerce's Bureau of
    Industry and Security.

    Agency Comments and Our Evaluation

    The Departments of Commerce, Homeland Security, and State provided
    comments on a draft of this report. Justice and Defense did not provide
    formal comments. Commerce, Homeland Security, Justice, and State also
    provided technical comments, which we incorporated in this report as
    appropriate. Overall, the departments providing comments agreed with the
    need for coordination, but in some instances, noted some differences in
    possible approaches. They also indicated that certain actions were already
    under way to address some of our recommendations. We modified one
    recommendation accordingly.

    In commenting on our first recommendation--to establish a task force to
    improve coordination and cooperation among export enforcement
    investigative agencies and report the status of task force actions to the
    Congress--Commerce stated that it was already taking action to improve
    coordination through various work groups and acknowledged that it will
    continue to seek ways to improve coordination. Commerce also commented
    that the draft report does not provide the data and analysis to support
    that there is a lack of coordination. We disagree. We spoke with numerous
    agents in the field who cited coordination as a challenge. The examples we
    provided were illustrations of some of the types of coordination
    challenges that existed. Our evidence indicates that coordination is a
    challenge given that three agencies with differing approaches have
    concurrent jurisdiction to investigate potential violations of export
    control laws. At times, these agencies have competing priorities, making
    it difficult to leverage finite enforcement personnel for oftentimes
    complex cases.

    Homeland Security agrees in principle with our first recommendation, but
    believes the establishment of an Export Enforcement Coordination Center
    within ICE would address coordination concerns in the most immediate and
    comprehensive manner. Homeland Security's solution is one option for
    improved coordination. However, it would need to work with the other
    enforcement agencies to determine the viability of this option. Our
    recommendation for a joint task force is the means by which to do so. In
    its technical comments related to coordination, Justice commented that FBI
    looks forward to working closely with other export enforcement agencies.

    In its comments on our second recommendation--to establish goals for the
    processing of license determinations and coordinate with other enforcement
    officials to determine what additional training or guidance is needed on
    license determinations--Commerce noted it was already taking action to
    improve license determination efforts through developing procedures and
    leading and participating in training conferences on export enforcement.
    However, these actions do not fully address our recommendation on
    establishing goals. Specifically, Commerce has not established formal
    license determination response times in conjunction with the Exodus
    Command Center, which is a key means by which license determination
    requests are processed. Homeland Security agreed to support goal setting
    by providing input from a law enforcement perspective. In its comments on
    our draft report, State indicated that it had already established goals
    for processing license determinations in conjunction with the Exodus
    Command Center. As a result, we revised our recommendation to direct that
    Commerce and Homeland Security establish goals for processing license
    determinations. State concurred with our recommendation to determine what
    additional training or guidance is needed on license determinations.
    Specifically, State has agreed with Homeland Security to update and
    clarify its guidance on license determinations. State further noted that
    consulting with FBI and ICE regarding additional training for coordinating
    State's support to their criminal investigations would build upon its past
    and ongoing work in this area.

    Regarding our third recommendation--to determine the feasibility of having
    Homeland Security's Customs and Border Protection officers decrement
    Commerce export licenses--Commerce expressed some reservation.
    Specifically, Commerce stated that it has seen no data to indicate that
    the underlying issue is of sufficient enforcement concern and that
    automated systems would need to be developed within CBP to support this
    effort. We do not believe that Commerce should dismiss this recommendation
    without further analysis. We previously reported that Commerce has not
    conducted comprehensive analyses of items that have been exported; 28
    therefore it is not in a position to know whether it is an enforcement
    concern. In addition, while resources devoted to outbound enforcement are
    limited within CBP, it has an automated export system, which is used for
    decrementing State licenses. This allows CBP officers to ensure
    accountability on the part of exporters and that State regulations have
    been properly followed. Homeland Security commented that CBP officials are
    prepared to act when contacted by Commerce regarding our recommendation.

    With respect to our last recommendation--that Justice establish formal
    procedures for conveying export enforcement results to State and
    Commerce--Commerce agreed, citing that it supports efforts to improve
    coordination and communication. Justice indicated support for sharing such
    information. State also supports this recommendation and noted that it
    welcomed any additional information that Justice can provide regarding the
    outcomes of criminal cases involving export control and related violations
    to help State carry out its regulatory responsibilities.

    28See [32]GAO-06-638 .

    Formal written comments provided by Commerce, Homeland Security, and State
    are reprinted in appendixes III, IV and V, respectively.

    We are sending copies of this report to interested congressional
    committees, as well as the Secretaries of Commerce, Defense, Homeland
    Security, and State; the Attorney General; the Director, Office of
    Management and Budget; and the Assistant to the President for National
    Security Affairs. In addition, this report will be made available at no
    charge on the GAO Web site at http://www.gao.gov.

    Please contact me at (202) 512-4841 or calvaresibarra@gao.gov if you
    or your staff have any questions concerning this report. Contact points
    for our Offices of Congressional Relations and Public Affairs may be found
    on the last page of this report. Others making key contributions to this
    report are listed in appendix VI.

    Ann Calvaresi-Barr
    Director Acquisition and Sourcing Management

    Appendix I: Scope and Methodology

    To describe the roles, responsibilities, and authorities of the agencies
    responsible for export control enforcement of defense and dual-use items,
    we interviewed cognizant officials, examined relevant documents, and
    analyzed export control statutes. We interviewed officials about their
    enforcement roles and responsibilities at the headquarters of the
    Departments of Commerce, Homeland Security, Justice, and State. We also
    discussed with Department of Defense officials their role in providing
    investigative support to agencies responsible for export control
    enforcement. We developed and used a set of structured questions to
    interview over 115 inspectors, investigators, and prosecutors in selected
    locations and observed export enforcement operations at those locations
    that had air, land, or seaports. We selected sites to visit based on
    various factors including geographic areas where all enforcement agencies
    were represented and areas with a mix of defense and high-tech companies
    represented; field offices with a range of investigative tools available
    to agents; and experience levels inspectors, agents, and prosecutors had
    in enforcing export control laws and regulations. On the basis of these
    factors, we visited Irvine, Long Beach, Los Angeles, Oakland, Otay Mesa,
    San Diego, San Francisco, and San Jose, California; Fort Lauderdale and
    Miami, Florida; Boston, Massachusetts; Newark and Trenton, New Jersey; and
    New York, New York. Additionally, we examined agent operating manuals,
    inspector handbooks, and a Federal Register notice, which further define
    the roles and responsibilities of enforcement agencies. To describe export
    enforcement authorities, we analyzed various statutes and identified the
    varying enforcement requirements promulgated through implementing
    regulations.

    Our structured interviews with officials also enabled us to identify
    challenges agencies faced in enforcing export control laws and
    regulations. We documented examples of coordination challenges among the
    investigative agencies and obtained and summarized information on
    significant export control cases identified by these agencies. We also
    examined existing memorandums of understanding and agency guidance on
    coordinating investigations. To document the impact that license
    determinations have on enforcement activities, we obtained examples of
    license determinations through Commerce's Office of Export Enforcement and
    conducted a case file review of license determinations for fiscal year
    2005 at Homeland Security's Exodus Command Center based on available
    information on-site. We selected a cross-section of license determination
    files to review that included requests for defense and dual-use items and
    that varied in response times. We discussed with Commerce and Homeland
    Security officials efforts to improve the license determination process.
    Through our interviews, we also identified challenges with criminal
    prosecutions and confirmed with headquarters the difficulties in obtaining
    sufficient evidence. Finally, we identified challenges with agencies'
    priorities and human resources and obtained information on staffing levels
    and priorities for assigning resources. We also reviewed agency training
    materials to identify export control training available to enforcement
    personnel.

    To assess whether information on criminal enforcement outcomes is provided
    to export control agencies, we identified export control enforcement
    information maintained at the various agencies, such as criminal
    convictions and indictments for violations of export control laws. We also
    spoke with State licensing and policy officials and Commerce officials to
    assess whether they received and used this information for informing
    licensing or other decisions for defense or dual-use items. We also spoke
    with Justice officials to determine whether the department systematically
    provided criminal export control prosecution outcome information to State
    and Commerce export control agencies.

    Appendix II: Summary of Selected Export Control Enforcement Cases

    For fiscal year 2005, investigative agencies identified several examples
    of export control enforcement cases, as shown in table 4.

    Table 4: Selected Export Control Cases for Fiscal Year 2005

    Description                          Punitive action
    Polygraph machines to China
    A company and its president          The company and its president were
    illegally exported polygraph         sentenced to probation and a criminal
    machines to China without required   fine for criminal export violations.
    export licenses.                     They also agreed to pay
                                            administrative penalties, and the
                                            company agreed to a suspended denial
                                            of export privileges.
    U.S. fighter jet components to Iran
    A businessman pled guilty to Arms    The businessman was sentenced to a
    Export Control Act and money         57-month incarceration and a 2-year
    laundering violations. The           supervised release.
    businessman sought to obtain gunnery
    systems for fighter jets for export
    to Iran, and in meetings with
    undercover agents attempted to
    acquire several fully assembled F-14
    fighter jet aircraft for future
    shipment to Iran.
    Night vision technology and electronics components to China
    Two individuals violated the Arms    The individuals were arrested and
    Export Control Act by attempting to  indicted for conspiring to violate
    obtain U.S. night vision equipment,  the Arms Export Control Act. One
    military grade power converters, and individual was found not guilty by
    traveling wave tubes used in         jury trial, while the other was
    satellite and radar applications for sentenced to 24 months in prison and
    export to China.                     a 3-year supervised release.
    U.S. fighter jet and military helicopter components to Malaysia, Belgium,
    and United Arab Emirates
    A Pakistani national illegally       The Pakistani national was indicted
    exported military aircraft parts to  on four counts of violating the Arms
    various countries. The individual    Export Control Act. He was convicted
    had a previous 1987 conviction for   and sentenced to 150 months'
    illegally exporting HAWK missile     imprisonment.
    components to Iran.
    Assault rifles to Colombian terrorist organization
    During meetings with undercover      The Colombian national was arrested
    agents, a Colombian national         and pled guilty to violating the Arms
    negotiated and attempted to purchase Export Control Act. One coconspirator
    assault rifles and machine guns for  has been arrested; the other remains
    illegal export to a U.S.-designated  at large.
    terrorist organization in Columbia.
    A subsequent investigation
    identified two coconspirators.
    Missile and fighter jet components to China
    An individual conspired to illegally The individual and her husband were
    export parts for the F-14 fighter    each sentenced to a 30-month
    jet and components for various       imprisonment, and the individual was
    missile systems to China. Agents     also fined $6,000.
    arrested the individual and her
    husband as a result of a lengthy
    undercover investigation targeting
    U.S. companies that illegally sold
    defense articles over the Internet
    to foreign buyers.
    Components with nuclear weapons applications to Pakistan and India
    An individual from Pakistan was      The individual currently remains at
    charged with illegally exporting     large. The Israeli national pled
    oscilloscopes with nuclear weapons   guilty and was sentenced to a
    applications, as well as plotting to 36-month imprisonment.
    illegally export 66 nuclear
    detonator devices to Pakistan. An
    Israeli national pled guilty to
    helping to export the oscilloscopes
    and nuclear triggers, and illegally
    exporting sensitive U.S. electronics
    to facilities in India that are
    involved in that nation's nuclear
    and missile development program.
    Military night vision equipment to China
    An individual attempted to illegally The individual pled guilty to one
    export plastic optical filters       count of conspiracy and will be
    suitable for night vision lighting,  sentenced at a later date. The U.S.
    night vision goggles with helmet     coconspirator pled guilty to one
    mounts for fixed-wing and rotary     count of violating the Export
    aircraft, as well as liquid crystal  Administration Act for his role.
    displays that can be integrated into
    avionics. A U.S. citizen conspired
    to obtain night vision goggles.
    Weapons to Colombian terrorist group
    An individual plotted to provide     The individual pled guilty and was
    arms to a Colombian terrorist group  sentenced to a 25-year federal
    in violation of the Arms Export      imprisonment.
    Control Act.
    Military laser sights to foreign locations
    A Japanese national conspired to     The individual was sentenced to a
    purchase and illegally export        15-month incarceration and was
    military laser sights to Japan in    subsequently deported from the United
    violation of the Arms Export Control States for conspiracy.
    Act.
    U.S. fighter jet components to Iran
    A Tehran-based broker attempted to   The broker was sentenced to a
    purchase and illegally export U.S.   41-month federal imprisonment.
    F-14 fighter jet components to the
    Iranian military. The individual-who
    asserted he worked on behalf of the
    Iranian Ministry of Defense-also
    negotiated with undercover agents
    over the illegal export of complete
    military helicopters and C-130
    military aircraft electrical and
    avionic upgrades to Iran.
    U.S. military night vision systems to Iranian military
    U.S. agents and Austrian authorities A grand jury indicted the individuals
    thwarted a plot to illegally supply  with conspiracy, violating the Arms
    the Iranian military with thousands  Export Control Act, money laundering,
    of advanced military night vision    forfeiture, and aiding and abetting.
    systems from the United States. U.S. These individuals remain at large.
    agents learned that an arms broker
    in Tehran was seeking U.S. military
    night vision goggles for the Iranian
    military from vendors in the United
    States. Austrian authorities
    arrested one of the individuals and
    another coconspirator after the pair
    took possession of the first night
    vision system.
    Military antenna controls to Spain
    An individual attempted to illegally The individual was sentenced to 2
    export radar antenna control boxes   years' probation and fined $2,500.
    to Spain for use by the Spanish Air
    Force without the required export
    license in violation of the Arms
    Export Control Act.
    Military helicopter engines and night vision systems to China
    A South Korean citizen attempted to  The South Korean citizen pled guilty
    illegally export Black Hawk          to violating the Arms Export Control
    helicopter engines and other         Act and was sentenced to a 32-month
    military items to China. Agents      federal imprisonment, to be followed
    arrested the individual as he        by deportation from the United
    attempted to board a plane bound for States.
    China with military night vision
    equipment in his luggage. The South
    Korean government worked closely
    with U.S. agents on the
    investigation.
    Restricted electronic equipment to China
    Four individuals conspired to        The four individuals were charged
    illegally export more than $500,000  with conspiring to violate the
    in restricted electronic components  International Emergency Economic
    to China. The components in question Powers Act, the Export Administration
    could be used in a wide variety of   Regulations, and money laundering
    military radar and communications    violations. One individual was
    applications.                        sentenced to 6 months' time served
                                            and fined $1,500. Another was
                                            sentenced to a 46-month federal
                                            imprisonment and fined $2,000. A
                                            different individual was convicted at
                                            trial for five counts of violating
                                            the International Emergency Economic
                                            Powers Act, conspiracy, money
                                            laundering, and false statements and
                                            sentenced to a 60-month incarceration
                                            and a $50,000 fine. Another
                                            coconspirator was sentenced to a
                                            42-month incarceration and was
                                            ordered to pay a $50,000 fine.
    Sensitive military technology to China
    Seven individuals were indicted on   Four of the coconspirators pled
    export violations alleging they used guilty to violating the Arms Export
    their two companies to illegally     Control Act, the International
    export sensitive national-security   Emergency Economic Powers Act,
    controlled items to state-sponsored  conspiracy to violate the Export
    institutes in China. According to    Administration Regulations, aiding
    the complaints, the individuals were and abetting, and providing false
    illegally exporting millions of      statements.
    dollars worth of items used in a
    variety of defense weapons systems,
    including smart weapons, radar, and
    electronic warfare and
    communications systems.
    Military night vision technology to China
    Two individuals and a company were   A jury failed to reach a unanimous
    indicted for illegally brokering the verdict in the trial of one
    sale of military and                 coconspirator and a new trial is
    commercial-grade night vision        scheduled.
    technology to China. Court documents
    in the case alleged the pair had
    entered into a contract with the
    Chinese military to produce
    technology for night vision
    equipment in China.

    Source: GAO analysis of information provided by investigative agencies.

    Appendix III: Comments from the Department of Commerce

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 2.

    See comment 1.

    The following are GAO's comments from the Department of Commerce letter
    dated October 3, 2006.

    GAO Comments

               1. While OEE and ICE had prior contact with FBI before it pursued
               this case, the agencies did not act together in a concerted way to
               determine the best way to proceed with this case.
               2. Commerce believed that its actions prevented the commission of
               an export violation. However, its lack of coordination in taking
               this action undermined enforcement activities.

    Appendix IV: Comments from the Department of Homeland Security

    Appendix V: Comments from the Department of State

    Appendix VI: GAO Contact and Staff Acknowledgments

    GAO Contact:

    Ann Calvaresi-Barr (202) 512-4841 or calvaresibarra@gao.gov

    Acknowledgments:

    In addition to the contact name above, Anne-Marie Lasowski, Assistant
    Director; Matthew Cook; Lisa Gardner; Arthur James, Jr.; Karen Sloan;
    Lillian Slodkowski; Suzanne Sterling; and Karen Thornton made key
    contributions to this report.

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    (120615)

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    Highlights of [57]GAO-07-265 , a report to congressional committees

    December 2006

    EXPORTCONTROLS

    Challenges Exist in Enforcement of an Inherently Complex System

    Each year, billions of dollars in dual-use items--items that have both
    commercial and military applications--as well as defense items are
    exported from the United States. To protect U.S. interests, the U.S.
    government controls the export of these items. A key function in the U.S.
    export control system is enforcement, which aims to prevent or deter the
    illegal export of controlled items.

    This report describes the roles, responsibilities, and authorities of
    export control enforcement agencies, identifies the challenges these
    agencies face, and determines if information on enforcement outcomes is
    provided to the export control agencies. GAO's findings are based on an
    examination of statutes, interagency agreements, and procedures;
    interviews with enforcement officials at selected field locations and
    headquarters; and an assessment of enforcement information.

    [58]What GAO Recommends

    GAO is recommending that the enforcement agencies take several actions
    aimed at improving coordination and remedying other weaknesses in export
    control enforcement. The departments generally agreed with the need for
    coordination but noted some differences in possible approaches. They also
    indicated certain actions are under way to address some of our
    recommendations.

    The enforcement of export control laws and regulations is inherently
    complex, involving multiple agencies with varying roles, responsibilities,
    and authorities. The agencies within the Departments of Commerce, Homeland
    Security, Justice, and State that are responsible for export control
    enforcement conduct a variety of activities, including inspecting items to
    be exported, investigating potential export control violations, and
    pursuing and imposing appropriate penalties and fines against violators.
    These agencies' enforcement authorities are granted through a complex set
    of laws and regulations, which give concurrent jurisdiction to multiple
    agencies to conduct investigations.

    Enforcement agencies face several challenges in enforcing export control
    laws and regulations. For example, agencies have had difficulty
    coordinating investigations and agreeing on how to proceed on cases.
    Coordination and cooperation often hinge on the relationships individual
    investigators across agencies have developed. Other challenges include
    obtaining timely and complete information to determine whether violations
    have 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. State and Commerce may deny license applications or
    export privileges of indicted or convicted export violators. 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.

    This report is a publicly releasable version of a law enforcement
    sensitive report we issued on November 15, 2006. Therefore, some examples
    that involved law enforcement techniques or methods and that support our
    findings have been removed from this version.

    References

    Visible links
      24. http://www.gao.gov/cgi-bin/getrpt?GAO-04-357
      25. http://www.gao.gov/cgi-bin/getrpt?GAO-05-234
      26. http://www.gao.gov/cgi-bin/getrpt?GAO-02-996
      27. http://www.gao.gov/cgi-bin/getrpt?GAO-06-638
      28. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-94-28
      29. http://www.gao.gov/cgi-bin/getrpt?GAO/ID-82-14
      30. http://www.gao.gov/cgi-bin/getrpt?GAO-02-996
      31. http://www.gao.gov/cgi-bin/getrpt?GAO-02-63
      32. http://www.gao.gov/cgi-bin/getrpt?GAO-06-638
      35. http://www.gao.gov/cgi-bin/getrpt?GAO-06-793
      36. http://www.gao.gov/cgi-bin/getrpt?GAO-06-638
      37. http://www.gao.gov/cgi-bin/getrpt?GAO-05-468R
      38. http://www.gao.gov/cgi-bin/getrpt?GAO-05-234
      39. http://www.gao.gov/cgi-bin/getrpt?GAO-05-17
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-04-175
      41. http://www.gao.gov/cgi-bin/getrpt?GAO-04-357
      42. http://www.gao.gov/cgi-bin/getrpt?GAO-03-43
      43. http://www.gao.gov/cgi-bin/getrpt?GAO-02-996
      44. http://www.gao.gov/cgi-bin/getrpt?GAO-02-972
      45. http://www.gao.gov/cgi-bin/getrpt?GAO-02-892
      46. http://www.gao.gov/cgi-bin/getrpt?GAO-02-620
      47. http://www.gao.gov/cgi-bin/getrpt?GAO-02-63
      48. http://www.gao.gov/cgi-bin/getrpt?GAO-02-468T
      49. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-94-28
      57. http://www.gao.gov/cgi-bin/getrpt?GAO-07-265
    *** End of document. ***