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					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
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
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
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 [email protected] if you
or your staff have any questions concerning this report. Contact points
for our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Others making key contributions to this
report are listed in appendix 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 [email protected]

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.

Related GAO Products 

Defense Technologies: DOD's Critical Technologies List Rarely Informs
Export Control and Other Policy Decisions. [35]GAO-06-793 . Washington,
D.C.: July 28, 2006.

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

Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies in
the Post-9/11 Security Environment. [37]GAO-05-468R . Washington, D.C.:
April 7, 2005.

Defense Trade: Arms Export Control System in the Post-9/11 Environment.
[38]GAO-05-234 . Washington, D.C.: February 16, 2005.

Foreign Military Sales: DOD Needs to Take Additional Actions to Prevent
Unauthorized Shipments of Spare Parts. [39]GAO-05-17 . Washington, D.C.:
November 9, 2004.

Nonproliferation: Improvements Needed to Better Control Technology Exports
for Cruise Missiles and Unmanned Aerial Vehicles. [40]GAO-04-175 .
Washington, D.C.: January 23, 2004.

Export Controls: Post-Shipment Verification Provides Limited Assurance
That Dual-Use Items Are Being Properly Used. [41]GAO-04-357 . Washington,
D.C.: January 12, 2004.

Nonproliferation: Strategy Needed to Strengthen Multilateral Export
Control Regimes. [42]GAO-03-43 . Washington, D.C.: October 25, 2002.

Export Controls: Processes for Determining Proper Control of
Defense-Related Items Need Improvement. [43]GAO-02-996 . Washington, D.C.:
September 20, 2002.

Export Controls: Department of Commerce Controls over Transfers of
Technology to Foreign Nationals Need Improvement. [44]GAO-02-972 .
Washington, D.C.: September 6, 2002.

Export Controls: More Thorough Analysis Needed to Justify Changes in
High-Performance Computer Controls. [45]GAO-02-892 . Washington, D.C.:
August 2, 2002.

Export Controls: Rapid Advances in China's Semiconductor Industry
Underscore Need for Fundamental U.S. Policy Review. [46]GAO-02-620 .
Washington, D.C.: April 19, 2002.

Defense Trade: Lessons to Be Learned from the Country Export Exemption.
[47]GAO-02-63 . Washington, D.C.: March 29, 2002.

Export Controls: Issues to Consider in Authorizing a New Export
Administration Act. [48]GAO-02-468T . Washington, D.C.: February 28, 2002.

Export Controls: Actions Needed to Improve Enforcement.
[49]GAO/NSIAD-94-28 . Washington, D.C.: December 30, 1993.

(120615)

GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
[email protected] Automated answering system: (800) 424-5454 or (202)
512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548

Public Affairs

Paul Anderson, Managing Director, [email protected] (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548

www.gao.gov/cgi-bin/getrpt?GAO-07-265 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Ann Calvaresi-Barr at (202) 512-4841 or
[email protected].

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. ***