Export Controls
Observations on Selected Countries' Systems and Proposed Treaties Gao ID: GAO-10-557 May 27, 2010The U.S. government annually controls billions of dollars worth of U.S. arms and dual-use items exported to its allies and partners through a system of laws, regulations, and processes. Weaknesses in this system led GAO in 2007 to include export controls as part of a high-risk area and called for a reexamination, including evaluating alternative approaches. Increasing international collaboration on defense programs also makes it important to understand how other countries control exports. Proposed treaties would change the process for the export or transfer of certain U.S. arms to the United Kingdom and Australia. Based on a request to review allies' export control systems and the proposed treaties, this report (1) identifies how selected allies' systems differ from the U.S. system, and (2) assesses how the proposed treaties will change controls on arms exports. To conduct its work, GAO selected six countries--Australia, Canada, France, Germany, Japan, and the United Kingdom--based on factors such as whether they were major destinations for U.S. goods or significant arms exporters; conducted site visits in four countries; analyzed agency documentation on the foreign and U.S. systems and treaty related documents; and interviewed officials.
Just as in the United States, selected allies' export control systems have changed over time to address security interests and to satisfy international commitments. Significant structural and other differences exist between selected allies' export control systems and the U.S. system. Five of the six countries have a single agency in charge of administering export control regulations for arms and dual-use items. In the United States, the Department of State administers controls for arms and the Department of Commerce does so for dual-use items. This difference and others are evident in several major areas of the export control process--jurisdiction, licensing, enforcement, outreach, and performance assessments. For example, in licensing, France and the United Kingdom use a risk-based approach, allowing a company with a satisfactory compliance record and an established business case to export multiple shipments of less sensitive defense items to particular destinations or identified recipients under a single license. The U.S. export control system for arms is transaction based, generally requiring a license for each proposed arms export unless an exemption applies. Under this approach, exporters submit a separate license application to State for each destination when exporting arms to multiple parties. In another example of how the systems differ, four of the six countries have one agency in charge of enforcing export controls. In the U.S. system, multiple agencies have concurrent authority to enforce arms and dual-use export controls. Four countries have conducted performance assessments of their export control systems that resulted in significant changes. The United States has made several changes to improve certain aspects of its control system and, in April 2010, the Administration announced proposed reforms following an interagency review. While GAO did not assess the effectiveness of other countries' systems, the practices highlighted in this report may inform U.S. reform efforts to increase the efficiency while maintaining or improving the effectiveness of the U.S. system. Two proposed Defense Trade Cooperation Treaties, one with the United Kingdom and the other with Australia, will establish significant changes in U.S. controls of certain arms exports and transfers. Case-by-case reviews prior to export or transfer of arms under the treaties will not be required. Instead, treaty parties will establish approved communities of entities, facilities, and personnel eligible to export, transfer, or receive certain arms without licenses. State officials told GAO the treaties represent a move from transactional licensing and towards a more risk-based approach. To ensure security, the treaties will utilize existing safeguards and implement new ones. For example, record keeping requirements and the requirement to obtain U.S. government approval to export or transfer its arms outside of the approved community will remain in use under the treaties. A new safeguard under the treaties will require community members in the United Kingdom and Australia to handle unclassified U.S. arms at an increased security level. Several implementation issues, however, have yet to be resolved regarding enforcement, congressional oversight, and participation by small- and medium-sized businesses in the United Kingdom and Australia. GAO is not making recommendations in this report.
GAO-10-557, Export Controls: Observations on Selected Countries' Systems and Proposed Treaties
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Report to the Committee on Foreign Affairs, House of Representatives:
United States Government Accountability Office:
GAO:
May 2010:
Export Controls:
Observations on Selected Countries' Systems and Proposed Treaties:
GAO-10-557:
GAO Highlights:
Highlights of GAO-10-557, a report to the Committee on Foreign
Affairs, House of Representatives.
Why GAO Did This Study:
The U.S. government annually controls billions of dollars worth of
U.S. arms and dual-use items exported to its allies and partners
through a system of laws, regulations, and processes. Weaknesses in
this system led GAO in 2007 to include export controls as part of a
high-risk area and called for a reexamination, including evaluating
alternative approaches. Increasing international collaboration on
defense programs also makes it important to understand how other
countries control exports. Proposed treaties would change the process
for the export or transfer of certain U.S. arms to the United Kingdom
and Australia.
Based on a request to review allies‘ export control systems and the
proposed treaties, this report (1) identifies how selected allies‘
systems differ from the U.S. system, and (2) assesses how the proposed
treaties will change controls on arms exports.
To conduct its work, GAO selected six countries”Australia, Canada,
France, Germany, Japan, and the United Kingdom”based on factors such
as whether they were major destinations for U.S. goods or significant
arms exporters; conducted site visits in four countries; analyzed
agency documentation on the foreign and U.S. systems and treaty
related documents; and interviewed officials.
What GAO Found:
Just as in the United States, selected allies‘ export control systems
have changed over time to address security interests and to satisfy
international commitments. Significant structural and other
differences exist between selected allies‘ export control systems and
the U.S. system. Five of the six countries have a single agency in
charge of administering export control regulations for arms and dual-
use items. In the United States, the Department of State administers
controls for arms and the Department of Commerce does so for dual-use
items. This difference and others are evident in several major areas
of the export control process”jurisdiction, licensing, enforcement,
outreach, and performance assessments. For example, in licensing,
France and the United Kingdom use a risk-based approach, allowing a
company with a satisfactory compliance record and an established
business case to export multiple shipments of less sensitive defense
items to particular destinations or identified recipients under a
single license. The U.S. export control system for arms is transaction
based, generally requiring a license for each proposed arms export
unless an exemption applies. Under this approach, exporters submit a
separate license application to State for each destination when
exporting arms to multiple parties. In another example of how the
systems differ, four of the six countries have one agency in charge of
enforcing export controls. In the U.S. system, multiple agencies have
concurrent authority to enforce arms and dual-use export controls.
Four countries have conducted performance assessments of their export
control systems that resulted in significant changes. The United
States has made several changes to improve certain aspects of its
control system and, in April 2010, the Administration announced
proposed reforms following an interagency review. While GAO did not
assess the effectiveness of other countries‘ systems, the practices
highlighted in this report may inform U.S. reform efforts to increase
the efficiency while maintaining or improving the effectiveness of the
U.S. system.
Two proposed Defense Trade Cooperation Treaties, one with the United
Kingdom and the other with Australia, will establish significant
changes in U.S. controls of certain arms exports and transfers. Case-
by-case reviews prior to export or transfer of arms under the treaties
will not be required. Instead, treaty parties will establish approved
communities of entities, facilities, and personnel eligible to export,
transfer, or receive certain arms without licenses. State officials
told GAO the treaties represent a move from transactional licensing
and towards a more risk-based approach. To ensure security, the
treaties will utilize existing safeguards and implement new ones. For
example, record keeping requirements and the requirement to obtain
U.S. government approval to export or transfer its arms outside of the
approved community will remain in use under the treaties. A new
safeguard under the treaties will require community members in the
United Kingdom and Australia to handle unclassified U.S. arms at an
increased security level. Several implementation issues, however, have
yet to be resolved regarding enforcement, congressional oversight, and
participation by small- and medium-sized businesses in the United
Kingdom and Australia.
What GAO Recommends:
GAO is not making recommendations in this report.
View [hyperlink, http://www.gao.gov/products/GAO-10-557] or key
components. For more information, contact Belva M. Martin at (202) 512-
4841 or martinb@gao.gov.
[End of section]
Contents:
Letter:
Background:
Significant Differences Exist between Selected Countries' and U.S.'s
Export Control Systems:
Proposed Treaties Represent a Significant Change in Arms Export
Control, and Several Issues Have Yet to Be Resolved:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of State:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Roles and Responsibilities in the U.S. Arms and Dual-Use
Export Control Systems:
Table 2: United States' and Selected Countries' Arms and Dual-Use
Export Licenses Approved, License Officers, and Average Licenses
Approved per Officer in 2008:
Figures:
Figure 1: Major Steps in the U.S. Export Control System:
Figure 2: Events Related to the Defense Trade Cooperation Treaties:
Abbreviations:
BAFA: Federal Office of Economics and Export Control:
BIS: Bureau of Industry and Security:
DDTC: Directorate of Defense Trade Controls:
DECO: Defence Export Control Office:
DOD: Department of Defense:
DTSA: Defense Technology Security Administration:
EAR: Export Administration Regulations:
ECO: Export Control Organisation:
METI: Ministry of Economy, Trade, and Industry:
NATO: North Atlantic Treaty Organization:
OGEL: open general export licence:
ITAR: International Traffic in Arms Regulations:
USML: United States Munitions List:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 27, 2010:
The Honorable Howard L. Berman:
Chairman:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
Each year, billions of dollars' worth of U.S. arms and dual-use items
are exported to U.S. allies and strategic partners.[Footnote 1] To
advance national security, foreign policy, and economic interests, the
U.S. government controls these exports through a system of laws,
regulations, and processes, some of which were established during the
Cold War. Since that time, globalization and terrorist threats have
made it significantly more complex and challenging to control these
exports. For over a decade, we have documented a series of weaknesses
in the U.S. export control system, including poor coordination among
the multiple federal agencies involved, which have led to
jurisdictional disputes and enforcement challenges, and the lack of
systematic assessment of the overall effectiveness of the export
control system. These weaknesses, coupled with significant changes in
the national security and global economic environments, led us in 2007
to designate the effective protection of technologies critical to U.S.
national security interests--of which export control is a key
component--as a high-risk area. While agencies have made several
improvements in the export control system, we have called for a
fundamental reexamination of the system and an evaluation of
alternative approaches. In April 2010, the Administration announced
proposed reforms following an interagency review of the entire U.S.
export control system.
In addition, increasing international collaboration on defense
development programs and exemptions from export control processes make
it important to understand how other countries control exports.
Further, proposed treaties, known as the Defense Trade Cooperation
Treaties, will change the process for export or transfer of certain
arms to the United Kingdom and Australia.[Footnote 2] Based on your
request, we examined selected allies' export control systems and the
proposed treaties with the United Kingdom and Australia. Specifically,
within the framework of the weaknesses that we previously documented
in the U.S. export control system, we (1) identified how selected
allies' export control systems differ from the U.S. export control
system, and (2) assessed how the proposed Defense Trade Cooperation
Treaties with the United Kingdom and Australia will change controls on
arms exports.
To identify how selected allies' export control systems differ from
the U.S. export control system, we selected six countries to include
in our review--Australia, Canada, France, Germany, Japan, and the
United Kingdom. We selected these countries based on several factors,
including whether they were major destinations for U.S. arms and dual-
use exports, members of international export control regimes, or
significant arms exporters. While their defense export markets are
individually much smaller than that of the United States, these
selected countries provide examples of how some U.S. allies have
designed and implemented their export control systems. We used the
broad areas in the U.S. export control system where, in our prior
work, we found weaknesses--jurisdiction, licensing, enforcement,
outreach, and performance assessments--to guide our examination of
other countries' systems. We analyzed background documentation on
selected allies' export control systems to gain a broader
understanding of each system. We submitted a structured question set
to countries in our review and obtained related documentation, such as
export control system annual reports and export guidelines. We also
conducted site visits to Australia, France, Germany, and the United
Kingdom and interviewed officials in charge of administering and
enforcing export controls. To obtain current information on the U.S.
export control system, we reviewed agency documents on changes to the
system and interviewed officials from the Department of State's
Directorate of Defense Trade Controls (DDTC), the Department of
Commerce's Bureau of Industry and Security (BIS), and the Department
of Defense's (DOD) Defense Technology Security Administration (DTSA).
The information on foreign countries' export control laws and
regulations in this report does not reflect our independent legal
analysis, but is based on interviews, questionnaires, and secondary
sources such as analyses by foreign law specialists at the U.S.
Library of Congress. We used the information gathered from our review
of documents, structured question sets, site visits, interviews, and
foreign law specialists' analyses as the basis for our comparison of
the U.S.'s and foreign countries' systems. Our comparison does not
include an assessment of the effectiveness of the selected countries'
export control systems.
To assess how the proposed Defense Trade Cooperation Treaties with the
United Kingdom and Australia will change controls on arms exports, we
reviewed the treaties, the treaties' implementing arrangements,
congressional testimony, and related documentation. We submitted a
structured question set on the treaties and analyzed responses from
the United Kingdom and Australia. We subsequently interviewed
officials from State, the United Kingdom's Ministry of Defence, and
Australia's Department of Defence on the treaties' implementation.
Additional information on our scope and methodology may be found in
appendix I.
We conducted this performance audit from January 2009 to May 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
The U.S. export control system for arms and dual-use items involves
multiple federal agencies, but two agencies administer the regulatory
framework--generally the Department of State administers controls for
arms and the Department of Commerce does so for dual-use items, which
have both military and civilian applications.[Footnote 3] In managing
its respective system, each department is responsible for limiting the
possibility of export-controlled items and technologies falling into
the wrong hands while also allowing legitimate trade to occur. The two
departments' implementing regulations contain lists that identify the
items and related technologies that each department controls, and
establish requirements for exporting those items.[Footnote 4] In most
cases, Commerce's controls over dual-use items are less restrictive
than State's controls over arms. Commerce controls many commercially
available items such as aircraft, computers, and telecommunications
equipment, which generally do not require licenses prior to export.
Conversely, State-controlled items generally require licenses for most
destinations unless an exemption applies. Exporters generally are
responsible for determining which department controls each item they
seek to export and which regulatory requirements apply.[Footnote 5]
Unless an exemption applies, exporters submit a license application if
their items are controlled to either State or Commerce to receive
approval to export, depending on which agency controls the item. When
deciding whether to approve or deny an application, State and Commerce
evaluate it against several factors, including an assessment of all
parties to the transaction and how the recipient plans to use the
item. As part of the application review process, State and Commerce
consult with other agencies.[Footnote 6] State and Commerce also
conduct outreach programs that are designed to increase companies'
knowledge of export control regulations and to promote compliance.
Figure 1 below outlines the major steps in the U.S. export control
system.
Figure 1: Major Steps in the U.S. Export Control System:
[Refer to PDF for image: illustration]
1) Exporter determines which agency controls the item and submits
license application.
2) State reviews arms license application;
2a) DOD and other agencies may provide feedback on application and
recommend to approve or deny.
2) Commerce reviews dual-use license application;
2a) DOD and other agencies may provide feedback on application and
recommend to approve or deny.
3) Exporter is notified whether license was approved or denied.
4) If approved, Customs reviews selected license information submitted
by exporters and may also inspect goods prior to shipment.
5) Item is exported to foreign recipient.
6) Agencies may conduct enforcement activities after export.
Source: GAO analysis of agencies‘ export control processes.
[End of figure]
Responsibility for enforcing U.S. export control laws and their
associated regulations largely rests with various agencies within the
Departments of Commerce, Homeland Security, Justice, and State. These
agencies engage in a variety of enforcement activities, including
inspecting items prior to export, investigating possible export
control violations, prosecuting alleged violations, and imposing
appropriate criminal and civil penalties. Table 1 below details the
roles and responsibilities in the U.S. arms and dual-use export
control systems.
Table 1: Roles and Responsibilities in the U.S. Arms and Dual-Use
Export Control Systems:
Principal regulatory agency: Commerce Department's Bureau of Industry
and Security;
Mission: Regulates and enforces controls on the export of dual-use
items by weighing economic, national security, and foreign policy
interests;
Statutory authority: Export Administration Act of 1979, as amended[A];
Implementing regulations: Export Administration Regulations.
Principal regulatory agency: State Department's Directorate of Defense
Trade Controls;
Mission: Regulates export of arms by giving primacy to national
security and foreign policy concerns[B];
Statutory authority: Arms Export Control Act, as amended[C];
Implementing regulations: International Traffic in Arms Regulations.
Other federal agency[D]: Department of Defense;
Mission: Provides input on which items should be controlled by State
and which by Commerce, and may conduct technical and national security
reviews of export license applications submitted by exporters to
either State or Commerce.
Other federal agency[D]: Department of Homeland Security;
Mission: Enforces arms and dual-use export control laws and
regulations through border inspections and investigations[E].
Other federal agency[D]: Department of Justice;
Mission: Investigates suspected criminal violations in certain areas
of counterintelligence, including potential export control violations,
and prosecutes suspected violators of arms and dual-use export control
laws[E].
Source: GAO analysis of cited laws and regulations.
[A] Authority granted by the act lapsed on August 20, 2001. 50 U.S.C.
app. § 2401 et. seq. 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. § 1702), 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 13, 2009.
[B] State also participates in the review of export license
applications submitted to Commerce and provides input on which items
should be subject to control under the Export Administration
Regulations.
[C] 22 U.S.C. § 2751 et. seq.
[D] The Department of Energy participates in the review of export
license applications submitted to Commerce and provides input on which
items should be subject to control under the Export Administration
Regulations.
[E] Homeland Security, Justice, and Commerce investigate potential
dual-use export control violations. Homeland Security and Justice
investigate potential arms export control violations.
[End of table]
In 2007, the United States signed separate Defense Trade Cooperation
Treaties with the United Kingdom and Australia to provide for the
license-free export or transfer of selected arms under certain
circumstances.[Footnote 7] The stated goals of each proposed treaty
include enabling treaty parties to achieve fully interoperable forces,
establishing a closer framework for security and defense cooperation
among treaty parties, and leveraging the strengths of the security and
defense industries in the treaty parties' countries. Only certain
governmental and nongovernmental entities, facilities, departments,
agencies, and personnel in each treaty party's country will be
eligible to export, acquire, or transfer applicable exported arms
under the treaties. The treaties will be applicable to exports and
transfers in support of certain activities, and will not apply to arms
that are identified as excluded from the scope of the treaties.
Exporters are not required to use the treaties and will continue to
have the option to apply for a license or other authorization to
export or transfer treaty-eligible arms. Implementation of the
treaties is currently on hold pending ratification by the U.S. Senate
and Australia's Parliament, but has already been ratified by the
United Kingdom's Parliament. A timeline of events related to the
Defense Trade Cooperation Treaties is included below in figure 2.
Figure 2: Events Related to the Defense Trade Cooperation Treaties:
[Refer to PDF for image: timeline]
June 2007:
The U.S. and the United Kingdom signed the Defense Trade Cooperation
Treaty.
September 2007:
The U.S.-Australia treaty was submitted to the U.S. Senate.
September 2007:
The U.S. and Australia signed the Defense Trade Cooperation Treaty.
December 2007:
The U.S.-United Kingdom treaty was submitted to the U.S. Senate.
February 2007:
State issued the implementing arrangements for the U.S.-United Kingdom
treaty. The United Kingdom Parliament ratified the treaty.
March 2008:
State issued the implementing arrangements for the U.S.-Australia
treaty.
May 2008:
The Senate Foreign Relations Committee held its first hearing on the
treaties.
June 2008:
State prepared draft regulations for public comment, but has not
published them in the Federal Register.
September 2008:
Australia‘s Parliamentary Joint Standing Committee on Treaties
recommended binding treaty action be taken.
December 2009:
The Senate Foreign Relations Committee held a second hearing on the
treaties.
Source: GAO analysis of data from the United Kingdom, Australia, and
U.S. Department of State.
[End of figure]
Significant Differences Exist between Selected Countries' and U.S.'s
Export Control Systems:
Selected Countries Use Single Licensing Agency and Consolidated
Control List to Determine Which Controls Apply:
Five of the six countries in our review--Australia, Canada, Germany,
Japan,[Footnote 8] and the United Kingdom--have a single agency in
charge of regulating arms and dual-use items and use consolidated
control lists to determine which controls apply. In the U.S. system,
State administers controls for arms and Commerce does so for dual-use
items and each maintains a list of controlled items. Just as in the
United States, selected allies' export control systems have changed
over time to address security interests and to satisfy international
commitments. In Australia, the Defence Export Control Office (DECO)
within the Australian Department of Defence serves as the single
regulatory body for implementing both arms and dual-use export
controls.[Footnote 9] Australian companies submit arms and dual-use
export applications to DECO, which assesses each item against its
Defence and Strategic Goods List to determine what controls apply.
DECO also further evaluates the item against the Weapons of Mass
Destruction (Prevention of Proliferation) Act 1995 to determine if it
could be used in or assist a weapon of mass destruction program.
Canada's Export Controls Division of the Department of Foreign Affairs
and International Trade uses an overarching control list--known as the
Export Control List--to evaluate export control permits for arms and
dual-use items.[Footnote 10] Germany's Federal Office of Economics and
Export Control (BAFA)[Footnote 11] and the United Kingdom's Export
Control Organisation (ECO)[Footnote 12] manage export controls within
single departments. Germany's BAFA receives arms and dual-use export
license applications and also uses a consolidated list to determine
how the item should be controlled.[Footnote 13] In the United Kingdom,
ECO receives arms and dual-use export applications and compares them
to its consolidated list of strategic military and dual-use items that
require export authorization. Japan's METI also has a single list that
it uses to review applicable arms and dual-use controls for export
license applications. These countries' systems may involve other
agencies in the review of export licenses, but having one organization
that processes both arms and dual-use export license applications also
provides a single point of entry to the system for exporters who may
be unsure of what controls apply to their exports.
France, however, is similar to the United States, in that it relies on
more than one agency to regulate proposed arms and dual-use exports.
For arms exports, France's system involves a two-step process whereby
companies apply for prior approval to export and then submit an export
license application. An interagency commission chaired by a body
within the Prime Minister's office, known as the General Secretariat
for National Defence, and which also includes the Ministries of
Defence, Foreign Affairs, and Finance, evaluates companies' requests
for prior approval to export.[Footnote 14] Export license applications
are submitted to the Ministry of Defence and assessed by the
Ministries of Defence, Foreign Affairs, and Finance, in coordination
with the General Secretariat for National Defence. Dual-use exports
are regulated through a separate process under France's Ministry of
Economy, Industry, and Employment.
In the U.S. system, companies seeking to export arms and dual-use
items generally are responsible for determining whether those items
are regulated by Commerce or State and the applicable export
requirements. Commerce maintains a list of controlled dual-use items
known as the Commerce Control List and State's USML includes the arms
that are subject to its regulations. If in doubt about whether an item
is controlled by State, or when requesting that an item be transferred
from State to Commerce control, an exporter may request a commodity
jurisdiction determination from State. If an exporter is uncertain of
how an item is classified on the Commerce Control List, it may request
a commodity classification where Commerce will provide the appropriate
export control classification number. We previously reported that
State and Commerce have disagreed on which department has jurisdiction
over certain items and recommended that they develop procedures to
improve coordination between the agencies within the existing
structure of the U.S. system. In June 2009, the National Security
Council issued new procedures for the commodity jurisdiction process.
These procedures provide for improved interagency coordination and
completion of commodity jurisdiction determinations or resolution of
commodity jurisdiction disputes within 60 days.[Footnote 15] State
officials reported that the new procedures have resulted in
improvements in commodity jurisdiction processing times.
Selected Countries' License Types and Review Processes Differ from the
United States:
Several licensing system differences exist between the foreign
countries in our review and the United States, including the use of
risk-based license types, consultation with other government agencies
and access to a single electronic licensing system in licensing
reviews, the extent to which the birth countries of foreign employees
are considered when making export license decisions, and the scope of
the licensing effort.
Risk-Based License Types:
France and the United Kingdom use a risk-based approach to allow a
company with a satisfactory compliance record and an established
business case to export multiple shipments of less sensitive defense
items under a single license to particular destinations or identified
recipients, known as an open individual export or global license.
Germany uses a similar approach when granting a global license for
military items exported as part of a government cooperation program.
When granted one of these licenses, a company must have a program in
place for monitoring its compliance with license requirements and
maintain documentation of all transactions under the license. The
United Kingdom and Germany also conduct inspections to assess
companies' compliance with license requirements and Germany and France
require companies to submit periodic reports on their exports.
Specifically, the United Kingdom may issue an open individual export
license that covers multiple shipments of specified goods to
particular destinations or identified recipients. This license is
generally valid for a period of 5 years. According to United Kingdom
officials, there are usually no quantity or dollar-value limits
associated with these licenses. The United Kingdom issued 176 open
individual export licenses in 2008, and according to officials, two-
thirds were for military goods.[Footnote 16] Recent open individual
export licenses have included items involved in the removal of
unexploded ordnance and items in support of another government's naval
forces. French government officials stated that when a company would
have to submit a significant number of export license applications for
related goods or to several destinations, they issue a global license
for exports of nonsensitive military goods to European Union members
and other countries. These licenses are valid for 1 year and may be
renewed. French officials stated that they have issued 101 global
licenses since 2004. Germany's global export license--valid for 2
years with one extension for 2 more--authorizes multiple shipments of
military items to recipients in North Atlantic Treaty Organization
(NATO) or NATO-equivalent countries as part of government cooperation
programs.[Footnote 17] In 2007, Germany issued 100 global export
licenses. Furthermore, the European Union issued a directive on
intracommunity transfers in 2009 relating to the simplification of
transfers of defense-related products between European Union member
states, including the use of general transfer licenses. Under this
directive, whose provisions will be applicable as of June 30, 2012,
member states, such as France, Germany, and the United Kingdom, will
be able to establish general transfer licenses that authorize
suppliers to transfer defense-related products to certified recipients
within the European Union.[Footnote 18] In the case of Australia, a
company may export unspecified quantities of defense and related goods
to a single recipient using a military export license. These licenses
are valid for 2 years, and Australian officials reported that they
issued 87 in 2008.
The U.S. export control system for arms is transaction based,
generally requiring a license for each proposed arms export unless an
exemption applies. For example, if a U.S. exporter wants to export
arms to more than one destination, it generally must submit a separate
license application to State for each destination.[Footnote 19] State,
however, has developed three comprehensive export authorizations--for
a major program, a major project, or a global project--that are
similar to the open and global licenses used in other countries. They
were developed as part of State's Defense Trade Security Initiative to
promote transnational defense cooperation with NATO member countries,
Australia, Japan, and Sweden. The major program comprehensive
authorization, for example, provides a single U.S. exporter with
approval for a range of exports, including hardware, technical data,
and defense services.[Footnote 20] Since 2000, State has issued two
comprehensive authorizations--one for the Eurofighter program and one
for the Joint Strike Fighter program. According to State officials,
companies have opted to not use these comprehensive authorizations
because they were concerned about the difficulty of ensuring
subcontractor compliance with arms export regulations.
State officials acknowledged the value of adopting open or global
licenses, but told us that congressional reporting requirements cause
them to treat each export as an individual transaction. For example,
under the Arms Export Control Act, State must give written
notification to Congress at least 15 days in advance of State's intent
to approve licenses for defense articles and services of $100 million
or more, or for major defense equipment of $25 million or more, to
NATO member countries or Japan, Australia, or New Zealand.[Footnote
21] State officials stated that they would not know when the value of
defense articles and services or major defense equipment had hit the
threshold for notification if they were to use open or global licenses.
Consultation and Access to Single Electronic System in Licensing
Reviews:
Another licensing difference between the foreign countries in our
review and the United States involves the agencies within a respective
country that are consulted on arms license applications. In Germany,
for example, where a Commerce-like agency is the export control
regulatory body, economic perspectives are considered when evaluating
arms and dual-use export applications. In Australia's and France's
license review processes, agencies with economic perspectives are also
included in the review of sensitive arms export license applications.
Australia has established a formal group known as the Standing
Interdepartmental Committee on Defence Exports to coordinate agency
perspectives on sensitive arms and dual-use license applications.
[Footnote 22] The committee has four permanent members, including the
Department of Defence, the Department of Foreign Affairs and Trade,
the Australian Trade Commission,[Footnote 23] and representatives from
the Department of the Prime Minister and Cabinet. Members provide
advice to the Department of Defence's DECO for consideration in the
approval or denial of an application. In France's system, the
Ministries of Defence, Foreign Affairs, and Finance independently
evaluate arms export license applications and, in coordination with
the General Secretariat for National Defence, make recommendations to
approve or deny.[Footnote 24] For example, according to French
officials, the Ministry of Finance considers the capacity of a foreign
government to honor its financial commitments and the export's impact
on sustainable economic growth.
To facilitate license consultations, some of the selected countries we
reviewed have the capability for agencies to access a single
electronic licensing system when reviewing licenses. For example, the
United Kingdom's SPIRE licensing system allows companies to submit
export license applications electronically and permits all agencies
involved in the export control application review process to access
the system in order to review and comment on applications. The system
also allows exporters to check the status of their applications
electronically and to use completed applications as templates for
future applications. As another example, French officials told us they
developed the Interdepartmental Information System for Export Controls
to facilitate consultation among the Ministries of Defence, Foreign
Affairs, and Finance and the General Secretariat for National Defence
on arms export license applications.[Footnote 25] Other countries in
our review--Canada, Germany, and Japan--have also developed electronic
licensing systems to facilitate license reviews. However, unlike the
United Kingdom's electronic system that permits all agencies involved
in the license application review process to access the system, German
officials told us that only BAFA, the agency responsible for
regulating both arms and dual-use export controls, can access
Germany's electronic licensing system. Similarly, Canada's system can
only be accessed by the Department of Foreign Affairs and
International Trade and the Canada Border Services Agency, but
providing access to other agencies is a priority. Australian officials
told us they are in the process of procuring an electronic system.
In the U.S. export control system, State primarily consults with DOD
and other State offices on arms export applications,[Footnote 26]
whereas Commerce consults with DOD, State, and the Department of
Energy on dual-use export applications. For arms export applications,
DOD provides State with technical and national security reviews of
proposed arms exports and other State offices provide it with
assessments of possible foreign policy, human rights, and
nonproliferation concerns. DOD and State offices also recommend
whether the export license application should be approved or denied.
State works with DOD and other State offices to reconcile conflicting
recommendations. State officials told us, however, that they do not
consult with Commerce in making license decisions because the Arms
Export Control Act authorizes arms exports in furtherance of foreign
policy and national security, but not for economic reasons. For dual-
use export applications, Commerce officials told us they refer the
applications to State's Bureau of International Security and
Nonproliferation. State officials noted that this bureau is
responsible for determining which other bureaus within State will
review dual-use export applications, but this generally does not
include referral to State's arms export license office.
While State and Commerce each have an electronic system in place to
receive most export license applications and respond to applicants,
DOD officials in charge of managing DOD reviews of export license
applications told us they do not have access to these systems and
therefore do not use them when providing advisory input. Instead, DOD
has its own electronic system for providing advisory input to both
State and Commerce. For example, State uses DTrade 2 for processing
most arms export license applications, while DOD relies on USXports to
provide State and Commerce with its technical and national security
reviews of export license applications. DOD officials also said the
lack of access to each other's electronic systems affects the U.S.
government's ability to coordinate efficiently on export license
applications or commodity jurisdiction requests. DOD and State have
signed an agreement for State to adopt DOD's USXports system in order
to improve communication and coordination in the export licensing
process.
Importance of Nationality in Export License Decisions:
In making arms and dual-use license decisions, the selected countries
in our review generally do not consider the birth countries of foreign
employees when deciding whether to grant access to controlled items,
while this can be a factor for the U.S. Department of State.
Specifically, Australian officials said they consider factors such as
the sensitivity of the goods, destination, how the goods will be used,
the recipient of the goods, and the exporter's compliance history.
Australia and Canada have citizens who were born in ITAR-proscribed
countries.[Footnote 27] Australian officials told us that seeking
information about an employee's national origin when responding to
State Department export license data requests and then using that
information to make employment-related decisions was prohibited by
Australia's antidiscrimination laws. Canadian officials also told us
that their companies have faced challenges with the State Department's
consideration of nationality because companies have to balance their
obligations under Canadian human rights law with State's licensing
requirements.
In the U.S. system, State and Commerce use different approaches when
considering a foreign person's nationality to make export control
decisions. Commerce's policy on determining nationality for release of
technology to a foreign national is generally based on a foreign
person's most recent citizenship or permanent residence.[Footnote 28]
In contrast, in making export control decisions, State considers a
foreign person's current citizenship status and his or her country of
birth if there is indication of dual nationality, which occurs when
the foreign person's country of birth is different from the country of
citizenship.[Footnote 29] Specifically, State may assess an
applicant's foreign employees' nationalities when determining whether
to approve an agreement between a U.S. company and a foreign company
to share controlled data. According to State, if a foreign person's
country of birth is different from the country where he or she
currently resides in and holds citizenship from, it raises the issue
of dual nationality and whether the individual has ties to his or her
country of birth, which would indicate a degree of loyalty and
allegiance to that country. Under these circumstances, the license
would be considered on the basis that it could be an export to both
countries.[Footnote 30] If a person's country of birth is prohibited
from receiving U.S. arms, as are China, Iran, and North Korea, State
collects additional information to confirm that the individual has no
significant ties to his or her country of birth. However, according to
State, a person born in a country prohibited from receiving U.S. arms
would not receive similar scrutiny before gaining access to export-
controlled items or information if he or she were a U.S. citizen.
State officials told us the National Security Council was reviewing a
State discussion paper on how State and Commerce have considered
nationality in order to reconcile their different approaches. State
took steps in December 2007 to mitigate the impact of its
consideration of nationality by amending the ITAR. The amendment
permits access to unclassified U.S. arms for a foreign signatory's
third country[Footnote 31] or dual national employees under a
technical assistance or manufacturing licensing agreement if those
employees are nationals of members of NATO or European Union countries
or Australia, Japan, New Zealand, or Switzerland.[Footnote 32] State
has also entered into arrangements with several Canadian government
agencies and the Australian Department of Defence to permit access to
ITAR-controlled items for agency personnel that are dual nationals and
possess at least a Canadian Secret-level security clearance or an
Australian Department of Defence security clearance.[Footnote 33] In
March 2010, the Administration announced that it would seek to
eliminate unnecessary obstacles for exporting products to companies
with dual national and third-country national employees, and State
officials told us they are working with other agencies and Congress on
this issue.
Scope of the Licensing Effort:
The countries in our review individually approved fewer arms and dual-
use export licenses than the United States in 2008. The lower number
of approved arms licenses is consistent with the smaller volume of
defense trade in these countries in comparison to the United
States.[Footnote 34] Table 2 describes the number of arms and dual-use
export licenses approved and license officers and the average number
of export licenses approved per officer in 2008 for the United States
and selected countries in our review.[Footnote 35]
Table 2: United States' and Selected Countries' Arms and Dual-Use
Export Licenses Approved, License Officers, and Average Licenses
Approved per Officer in 2008:
Countries: Australia;
Number of export licenses approved: 2,929;
Number of license officers: 17;
Average number of export licenses approved per officer: 172.
Countries: Canada[A];
Number of export licenses approved: 4,007;
Number of license officers: 8;
Average number of export licenses approved per officer: 501.
Countries: France[B];
Number of export licenses approved: 14,576[C];
Number of license officers: 63 to 68[C];
Average number of export licenses approved per officer: 214 to 231.
Countries: Arms;
Number of export licenses approved: 12,576[C];
Number of license officers: 50 to 55[C];
Average number of export licenses approved per officer: 229 to 252.
Countries: Dual-use;
Number of export licenses approved: 2,000[C];
Number of license officers: 13;
Average number of export licenses approved per officer: 154.
Countries: Germany[D];
Number of export licenses approved: 28,652[C];
Number of license officers: 70[C];
Average number of export licenses approved per officer: 409.
Countries: Japan[E];
Number of export licenses approved: 10,000[C];
Number of license officers: 30;
Average number of export licenses approved per officer: 333.
Countries: United States;
Number of export licenses approved: 86,247;
Number of license officers: 108;
Average number of export licenses approved per officer: 799.
Countries: Arms[F];
Number of export licenses approved: 68,302;
Number of license officers: 52;
Average number of export licenses approved per officer: 1,314.
Countries: Dual-use[G];
Number of export licenses approved: 17,945;
Number of license officers: 56;
Average number of export licenses approved per officer: 320.
Countries: United Kingdom[H];
Number of export licenses approved: 9,936;
Number of license officers: 47[C];
Average number of export licenses approved per officer: 211.
Source: GAO analysis of State, Commerce, and selected foreign
countries' data.
[A] The licenses included in this table refer to those items where
Canada's Export Control Division has sole export control
responsibility. As noted previously, the Department of Foreign Affairs
and International Trade and the Canadian Nuclear Safety Commission
share export control responsibility for nuclear and nuclear-related
dual-use items. This table does not include approved licenses for
these items.
[B] France provided us with the number of decisions reached on
requests for prior approval to export arms, approved arms export
licenses, the approximate number of arms export license amendments,
and the approximate number of approved dual-use export licenses.
[C] Countries provided us with an estimated number.
[D] Germany provided us with the approximate number of licenses
approved in 2008, but did not provide the number of license amendments.
[E] The Head Office of Japan's METI provided us with an estimated
number of individual licenses approved annually by that office, which
does not include the number of license amendments or information from
their regional branch offices. As noted previously, since Japan only
exports arms in exceptional cases most of these licenses would be for
dual-use exports.
[F] State officials reported they processed a total of 83,888 actions
in 2008 with approximately 1,613 actions per license officer.
Approximately 10,000 of the actions excluded from table 2 were
applications that were not properly filled out by the exporter and
were returned without action by State. We also excluded other actions
such as applications for temporary imports, international import
certificates, general correspondence requests (such as a request to
remove or modify a license condition), and jurisdiction determination
requests, as other countries did not provide similar data.
[G] Commerce's data on the number of export licenses approved are
reported by fiscal year.
[H] The United Kingdom's 2008 Strategic Export Controls annual report
included the number of approved export licenses, but United Kingdom
officials reported that they do not keep track of the number of
license amendments.
[End of table]
The total number of export licenses approved varied among the
countries in our review. For example, in 2008, Australian officials
reported approving 2,929 licenses, while German officials reported
approving approximately 28,652. The total number of licenses approved
in that same year was similar in the United Kingdom, France, and
Japan, as officials reported approving approximately 10,000 to 15,000
licenses. In contrast, U.S. officials reported approving over 86,247
arms and dual-use licenses in 2008, an amount that exceeded the total
number of licenses approved by all countries in our review combined.
Furthermore, countries in our review generally devoted proportionately
more resources than the United States toward license approval,
averaging between 172 and 501 licenses per officer. In contrast, State
approved 1,314 arms licenses per officer, while Commerce's ratio was
comparable to Japan's at 320.
Three countries in our review--Canada, France, and the United Kingdom--
and the United States all track average license processing times. For
example, Canada reported in 2009 that its average processing time for
selected countries with comparable export controls was 5 business
days, and 20 business days for other countries. French officials
reported that it took an average of 38 days to process an arms export
license and an average of 18 days for a dual-use license in 2008. The
United Kingdom noted that it processed 73 percent of its standard
individual export licenses within 20 business days in 2008 and this
license type accounted for the overwhelming majority of those issued
by the United Kingdom. Other countries provided us their license
processing goals or estimates. For example, Australian officials told
us they had a goal of processing most applications within 15 business
days and a goal of 35 business days for sensitive applications.
Japanese officials reported that for cases where they have no
particular concern, their average processing time was between a few
days and 2 weeks. German officials told us it took 3 to 4 weeks on
average to process an arms export license, and in some cases, licenses
could be processed within a week. Recently, State took steps to
restructure its workforce to reduce processing times and the number of
open cases. For 2008, State officials reported an average license
processing time of 16.5 calendar days down from an average of 43
calendar days in 2006.[Footnote 36] Commerce averaged 27 days for its
review of licenses.[Footnote 37]
Selected Countries Have a Single Agency in Charge of Enforcing Export
Controls:
Export enforcement is another area where the structural difference
between the foreign countries and the U.S. is evident. Four of the six
countries in our review have one agency in charge of enforcing export
controls. Specifically, the customs department is the main enforcement
body in Australia, France, Germany, and the United Kingdom. For
example, United Kingdom officials reported Her Majesty's Revenue and
Customs is the sole agency responsible for the enforcement of export
controls and coordinates regularly with ECO and other United Kingdom
agencies as appropriate, sharing intelligence, utilizing resources in
coordinated risk assessment exercises, and conducting joint training
seminars. Similarly, Australian officials told us that their Customs
and Border Protection Service is the main enforcement body and
coordinates closely with DECO, the intelligence community, and the
Australian Federal Police to ensure that export controls are applied
effectively and to conduct investigations of possible violations.
United Kingdom and Australian officials reported that there are no
significant challenges for their respective enforcement agencies in
coordinating with export licensing and other agencies.
In Canada and Japan, enforcement responsibilities are shared between
two agencies. Specifically, the Canada Border Services Agency and the
Royal Canadian Mounted Police are responsible for the enforcement of
export controls in Canada. Canada Border Services Agency officers must
be satisfied that an exporter has fully complied with the provisions
of their export control legislation before allowing the export of any
goods and may exercise certain powers including search, detention, and
seizure. The Royal Canadian Mounted Police are responsible for
enforcing all laws between ports of entry along the U.S.-Canadian
border, including those laws concerning the illegal export of
controlled items. The Royal Canadian Mounted Police and the Canada
Border Services Agency cooperate in the conduct of investigations
related to possible criminal violations of export controls that occur
along the U.S.-Canadian border. Canadian officials told us that their
export control system has faced enforcement challenges similar to
those we previously identified in the U.S. system. However, they also
reported that Canada has taken steps to overcome these challenges by
enhancing communication between enforcement agencies and improving
training and outreach to enforcement agencies. In Japan, the Customs
bureau is involved in enforcing export controls by determining at the
border whether the items being exported are subject to controls and
whether or not a license has been obtained. Japan's National Police
Agency is in charge of conducting investigations when laws and
regulations have been violated, including the primary law governing
export controls.
In the U.S. system, export 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 to conduct investigations of potential
violations of export control laws for dual-use items, and to Homeland
Security and the Federal Bureau of Investigation to investigate
potential arms violations. We previously reported that enforcement
agencies faced several challenges in enforcing export control laws and
regulations, such as coordinating investigations. Similar to Canada,
in 2007, the Department of Justice established the National Export
Enforcement Initiative, a cooperative effort among export enforcement
and regulatory agencies to increase training, improve interagency
coordination, and enhance prosecution. Additional coordination occurs
through the Immigration and Customs Enforcement's National Export
Enforcement Coordination Network. We view this as a positive step, but
have not reviewed to what extent these initiatives have addressed the
challenges identified in our prior work.
Some Countries Reported Extensive Outreach Programs:
As in the United States, countries in our review have outreach
programs. Two countries, the United Kingdom and Australia, have
extensive outreach programs that are similar to Commerce's, but
State's outreach effort is limited. These programs are generally
designed to increase companies' knowledge of export control
regulations and to promote compliance. Exporters need sufficient
guidance to interpret regulations correctly, properly use exemptions,
and protect critical technologies. The United Kingdom and Australia
have staff dedicated to outreach activities, including four personnel
in the United Kingdom's Export Control Training and Skills Academy,
and four personnel within Australia's Treaty and Outreach Branch. With
this dedicated staff, these organizations conduct multiple seminars
and workshops during the year throughout their respective countries.
The United Kingdom conducted 38 seminars and training courses
nationwide, attended by over 750 people from 300 organizations during
2008. Also in 2008, Australian officials reported providing 1-day
workshops to 364 individuals from 140 companies throughout the
country. Australian officials told us they attribute the recent
increase in the number of dual-use applications, improvement in the
overall quality of license applications, and an increase in the amount
of voluntary disclosures of violations to their outreach efforts over
the last few years. United Kingdom industry officials reported close
collaboration with ECO in the development of publications, training
seminars, and the SPIRE electronic licensing system.
The United Kingdom and Australia also reported providing formal
training to government staff about export controls. ECO conducts the
Staff and Partners Export Control Awareness School for staff across
the United Kingdom's government, including the Foreign Office,
Ministry of Defence, and Department for International Development that
support the export licensing process. Australia's outreach includes an
export control seminar for its Department of Defence staff and
workshops for other government agencies, such as Foreign Affairs and
Trade, Customs, and the Attorney General's Department, upon request.
The United Kingdom also has two Web-based search tools to help
exporters identify the items that require export licenses. The Goods
Checker can be used to search for items on the United Kingdom's
Strategic Export Control List. The OGEL Checker helps users determine
what items they can export using an open general export licence.
[Footnote 38] The United Kingdom reported that over 2,300 individuals
from more than 30 countries registered to use these tools during 2008.
Other countries in our review have outreach programs that may include
interaction between government officials and industry, publication of
written material, and websites. For example, French officials conduct
meetings with industry representatives to keep them informed of export
control issues, and Japan reported providing training courses for
industry. Also, both Canada and Germany publish handbooks on their
export control systems. Finally, all of the countries in our review
maintain websites that contain export control information. These
websites vary in content, but may include the procedures for obtaining
a license, control lists, and compliance guidelines.
In the United States, Commerce reported that it has 14 personnel that
conducted a range of outreach activities in fiscal year 2008. For
example, Commerce conducted 41 domestic and 7 international dual-use
export control outreach seminars, an annual export controls and policy
conference, and 33 presentations with public and private sector
organizations, reaching over 8,000 people. Commerce also reported
assisting approximately 53,000 business representatives through its
telephone counseling program and providing dual-use export control
training to approximately 150 government officials. In addition,
Commerce reported that it launched an online training room with a
series of introductory training modules, which were viewed more than
45,000 times, and developed four online seminars that reached over 550
participants. These online training modules and seminars help
exporters identify which dual-use products need a license and cover
other topics such as license applications, prohibited end users, and
compliance programs.
State conducts speaking engagements at companies and conferences and
hosts quarterly in-house seminars, but it does not maintain online
training or have dedicated outreach staff. For example, State
participates in training and outreach programs sponsored by a joint
government and industry nonprofit organization.[Footnote 39] State
officials noted that they participated in 9 such events during 2008,
reaching a total audience of 2,868 people. State officials also
reported conducting 30 company visits which reached 1,625 people.
These visits are designed to better understand how companies are
implementing their export control programs and to assess whether these
programs are in compliance with the Arms Export Control Act and ITAR.
In addition, State's outreach program includes a response team that
answers export control questions via phone and email, but these are
contracted personnel and some of them work part-time. Furthermore,
response team members spend much of their time determining the status
of license applications. State officials told us they lack resources
for outreach as they focus on processing licenses and cannot use
registration fees to fund staffing for outreach efforts.
Selected Countries Have Reported Conducting Performance Assessments:
Most of the foreign countries we reviewed reported conducting broad
performance assessments of their export control systems, while the
United States has generally not done so in the past. For example, in
2007, the United Kingdom conducted a comprehensive review to evaluate
the effectiveness of the export control regulations it enacted in 2004
in order to comply with a national policy of assessing major
legislation 3 to 5 years after implementation.[Footnote 40] In
assessing the effectiveness of the regulations, the United Kingdom
identified denied license applications that would have been approved
prior to 2004. The review also noted areas for improvement, and ECO
performed impact assessments to determine the potential costs and
benefits of proposed regulatory changes. The review led to significant
revisions in the system. For example, the United Kingdom revised its
controls on trading goods by establishing a new three-tiered structure
of goods with varying levels of control associated with each tier. The
United Kingdom determined that the prior two-tiered structure was not
the most effective because there was a category of goods that needed
more control than the goods in the lower tier, but less than those in
the upper tier. Small arms and light weapons, for instance, were
placed in the new middle tier. This tier requires licenses for trading
these items, but not for advertising them for sale. Furthermore,
United Kingdom persons or companies anywhere in the world involved in
trading upper-and middle-tier goods are required to obtain licenses.
The regulations, and the changes that resulted from the review, were
consolidated and issued under Export Control Order 2008. Officials
stated that they expect to conduct a postimplementation review of this
new order in 2012.
Australia, France, and Japan also reported conducting different types
of assessments to identify ways to improve their export control
systems. Australia's Government Solicitor completed a study in 2005 to
evaluate the nation's export control legislation against those of
other countries. We were unable to obtain a copy of this study because
it was not publicly releasable, but Australian officials told us that
it identified several areas for improvement. In addition, the
officials stated that Australia has proposed new legislation to
strengthen its system in response to the study, which if passed, will
introduce further controls on intangible goods and services such as
software, and broaden the coverage of weapons of mass destruction
activities to include the handling, operation, and movement of
chemical and biological weapons and their associated delivery systems.
Australian officials also stated that the government conducted a
regulation impact study of the proposed legislation which determined
that the changes would not impose unreasonable costs on industry.
French officials told us the government conducted a national audit of
its export control system and recently made changes to its processes
for dual-use items. For example, they noted the establishment of the
Dual-Use Export Control Office, staffed by officials from multiple
ministries across the government. Another change was the creation of
an interagency committee that meets approximately once a month to
assess the most sensitive dual-use license applications. French
officials stated that these changes were expected to improve the
quality of their license assessments and to shorten license process
times. In 2006, Japan formed a working group composed of government,
industry, and academia to identify challenges in its export control
system and develop concrete proposals to improve it. Japanese
officials noted that as a result of this review, they strengthened
requirements on intangible technology transfers and punitive measures
for export violations, and introduced controls on brokering and
transshipment. While Canada and Germany reported that they monitor
their export control systems to identify areas for improvement, these
countries did not report formal assessments of their systems.
We have previously reported that neither State nor Commerce have
conducted systematic assessments to determine what corrective actions
may be needed to ensure they are fulfilling their missions. In January
2008, the President signed directives to make improvements to existing
processes in the State and Commerce export control systems. State
officials told us the directives focused on improving current
efficiencies rather than making fundamental changes. For example, one
of the changes was for State to implement a 60-day licensing process.
Changes to the Commerce system included a requirement to review and
update the items covered by the Commerce Control List and to expand
the list of foreign parties subject to greater licensing requirements.
In August 2009, the President directed the National Economic Council
and the National Security Council to conduct an interagency review of
the entire U.S. export control system. The purpose of this review was
to consider reforms to the system that would enhance the national
security, foreign policy, and economic security interests of the
United States. In April 2010, the Administration outlined the reasons
for reform, including that the U.S. export control system has a
complicated structure involving multiple agencies with separate
control lists, leading to jurisdictional confusion, and has hindered
the ability of allies to cooperate with U.S. forces. The
Administration also proposed a framework for moving to a single
licensing agency, control list, enforcement coordination agency, and
electronic licensing system.
Proposed Treaties Represent a Significant Change in Arms Export
Control, and Several Issues Have Yet to Be Resolved:
Exports and Transfers of Arms under the Treaties Will Not Require
Licensing, but New and Existing Safeguards Will Be Applied:
Under the proposed Defense Trade Cooperation Treaties, specified arms
will not undergo the case-by-case review required by the U.S.
licensing process when being considered for export or transfer.
[Footnote 41] Instead, these arms will be exported and transferred
license-free to certain governmental and nongovernmental entities,
facilities, and personnel that constitute the approved community in
each country. State officials told us the treaties represent a move
from transactional licensing and towards a more risk-based approach.
State has estimated that the treaties could remove the requirement to
obtain a license for approximately two-thirds of the items that
currently require licenses for both the United Kingdom and Australia,
enabling it to focus its resources on other transactions.
According to United Kingdom officials, before entities, facilities,
and personnel in the United Kingdom can become members of the approved
community, they must first be accredited through existing defense
security programs and processes, such as the United Kingdom's List X
facility clearance program. Australian officials told us that
Australian entities, facilities, and personnel must first be on a list
of those approved to handle classified information and material,
similar to Australia's Defence Industry Security Program.
Specifically, both countries will use existing protocols to conduct
security clearance checks of facilities and information systems to
verify that these facilities and systems meet minimum security
standards and are equipped to handle treaty arms.[Footnote 42] In both
countries, government personnel and nongovernmental entities'
employees must have the appropriate security accreditation and a need
to know. Government personnel and nongovernmental entities' employees,
except for members of the United Kingdom armed forces, will also be
evaluated to determine the extent to which they have close or
significant ties to countries and entities of concern, among other
factors.[Footnote 43] Nongovernmental community members in the United
Kingdom and Australia will require approval from both treaty parties--
the United States and the United Kingdom and the United States and
Australia, respectively. As part of the approval process for community
membership, each government will consider multiple factors prior to
approving a nongovernmental entity or facility, such as (1) the
potential risk to national security, including interactions with
countries proscribed by the respective treaty parties' laws or
regulations; (2) the extent of foreign ownership, control, or
influence; (3) prior convictions or current indictment for violations
of arms-export laws or regulations; and (4) the entity's export
licensing history in the United States. State officials told us that
U.S. companies must be registered with State and eligible to export
arms in order to be part of the U.S.'s approved community, but do not
need to be approved by the United Kingdom and Australia. The proposed
treaties provide for consultations between governments regarding
either party's concerns about a nongovernmental entity or facility in
the approved communities, which may lead to the removal of that entity
or facility from the community. United Kingdom, Australian, and U.S.
officials told us that prior to shipping any arm under the treaties
there is a requirement to verify that the recipient is a member of an
approved community.
To ensure security, the treaties will use existing safeguards and
implement new ones. For example, similar to current requirements for
United Kingdom, Australian, and U.S. exporters, members of the
approved communities will be required to maintain records of exports
and transfers under the treaties for at least 5 years. Members of
either the United Kingdom or Australian communities will be required
to provide these records upon request to their respective governments.
These records may also be provided to the United States. While
previously exported treaty arms may be moved or transferred within the
United Kingdom and Australian approved communities without prior
written authorization of the U.S. government, the re-export and re-
transfer of all treaty arms will require approval by treaty parties--
similar to how arms re-exports and re-transfers are currently handled
in the U.S. export control system.[Footnote 44] For example, in order
to re-export or re-transfer a treaty arm from Australia's approved
community, the exporter must first obtain approval from State and
submit evidence of State's approval to the Australian government. Once
the re-export or re-transfer has been approved, the arm at issue will
no longer be considered to be within the scope of the treaty, but will
instead be subject to the applicable U.S. and Australian export
controls. Treaty parties may continue to monitor how the approved
community member is using the treaty arm and assist one another with
these activities.
The proposed treaties include several new security measures. For
example, they will require that U.S. unclassified arms be handled at
an increased security level in the United Kingdom and Australia.
[Footnote 45] The United Kingdom will apply its Official Secrets Act
(which governs the handling of classified material) to all treaty
arms, including both U.S. unclassified and classified arms. Similarly,
Australia will handle all treaty arms as classified. Exporters will be
required to label treaty articles and indicate the level of
classification. United Kingdom and Australian officials told us that
they will modify existing compliance programs for the handling of
classified materials to include coverage of treaty arms. For example,
Australia plans to perform the same reviews and inspections that it
regularly conducts under its Defence Security Compliance Program,
[Footnote 46] but it will also monitor compliance with the treaty's
marking and handling requirements. According to United Kingdom
officials, they plan on using the compliance protocols already set
forth in its List X program, though activities specific to treaty
compliance will not be laid out until the treaty is implemented.
Furthermore, members of the United Kingdom and Australian approved
communities will be required to conduct internal audits to monitor
their compliance with treaty requirements, and nongovernmental members
will be subject to oversight by their respective governments.
According to United Kingdom and Australian officials, internal export
compliance programs are currently encouraged in their systems, but are
not required.[Footnote 47]
Several Implementation Issues Have Yet to Be Resolved:
Enforcement:
The proposed treaties require cooperation among treaty parties on
enforcement of export controls, but plans to fully implement
enforcement procedures have not been finalized. While compliance with
the proposed treaties will provide an exemption from U.S. Arms Export
Control Act licensing requirements, any conduct falling outside of the
terms and procedures of the treaty will be subject to the Act, the
ITAR, and applicable criminal, civil, and administrative penalties or
sanctions. According to United Kingdom and Australian officials,
enforcement of the proposed treaties will be as provided for in the
United Kingdom's Official Secrets Act (including associated
regulations and other legislation as appropriate) and Australia's
proposed treaty implementing legislation. The treaties will require
the United Kingdom and Australia to support U.S. enforcement efforts,
including (1) promptly investigating suspected violations of treaty
procedures; (2) notifying the United States of investigation results
and prosecutions; and (3) cooperating in carrying out investigations.
However, U.S. and United Kingdom officials told us they are still
working to finalize regulatory changes to implement treaty enforcement
procedures and Australian officials stated that its treaty
implementing legislation is currently in draft form. The Justice
Department testified in December 2009 that with relatively minor
regulatory amendments the United States will have sufficient legal
authorities to prosecute and take administrative action against those
that violate treaty requirements. State officials told us the U.S.
regulatory changes will not be finalized until the treaties are
ratified because the ratification process could introduce additional
requirements. Therefore, because the enforcement procedures of the
treaty party countries have not been finalized, we could not assess
how they will implement enforcement responsibilities to ensure
sufficient international cooperation.
Congressional Notification:
Congressional notification requirements under the Arms Export Control
Act will not apply to arms exported or transferred to an approved
party under the treaties. As previously discussed, the Arms Export
Control Act requires State to notify Congress when a proposed arms
export or transfer exceeds certain dollar thresholds. The Senate
Foreign Relations Committee is considering legislation that would
apply the requirements for congressional notification in the Arms
Export Control Act to arms exported under the treaties. The treaties
allow all party governments to provide their legislative bodies with
appropriate legislative notifications, but do not detail specific
notification procedures. State has committed to provide Congress with
information on proposed exports that meet certain dollar-value
thresholds, to notify Congress in advance of arms becoming eligible
for export under the treaties, and to report on major treaty
violations. However, these procedures have not been formalized by
statute or regulation. Similar to regulations to enforce the treaties,
State officials told us that congressional notification procedures
will not be finalized until the treaties are ratified.
Small-and Medium-Sized Business Participation:
Australian government officials and industry representatives in
Australia and the United Kingdom have acknowledged that small-and
medium-sized businesses may face challenges in participating in the
treaties. For example, in the United Kingdom, small firms may not have
List X-accredited facilities and may be limited in their ability to
finance facilities that meet List X accreditation requirements.
Similarly, small-and medium-sized companies in Australia may not be
able to afford the information technology and security systems
required for membership in Australia's approved community. Australian
industry representatives noted that this may discourage small-and
medium-sized businesses from exporting and transferring arms under the
treaties rather than through the existing licensing system. Australian
government officials told us that one possible way to facilitate
greater small-and medium-sized business participation would be to
allow these companies to work in approved community members'
facilities.
Concluding Observations:
Over the last decade, we have identified a number of weaknesses in the
U.S. export control system and have called for a fundamental
reexamination of the system, including evaluating alternative
approaches. Recently, the Administration announced proposed export
control reforms following an interagency review, including its
framework for moving to a single licensing agency, control list,
enforcement coordination agency, and electronic licensing system. As
the Administration moves forward with its proposals, it can consider
how similar structures and practices are used in other countries'
export control systems. It can also evaluate other practices used in
these countries' systems, such as the use of risk-based licenses, for
their potential applicability in the United States. While the proposed
reform framework presents an opportunity to make improvements to
enhance the national security, foreign policy, and economic interests
of the United States, the challenge will be to increase the system's
efficiency while maintaining or improving its effectiveness. In
addition, the Administration noted that pending defense trade treaties
with the United Kingdom and Australia are a part of proposed export
control reforms. To ensure the treaties' successful implementation,
several remaining issues, such as enforcement, will continue to be
important as Congress deliberates the approval of the treaties and
State develops plans for their execution.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, State officials
acknowledged GAO's thorough and thoughtful treatment of the
complexities involved with export controls. These officials made
several comments with respect to the greater volume of export license
applications that State approved, concluding that this greater volume
reflects, among other things, State's more stringent controls compared
to other countries. State also commented that its licensing officers
process far more cases than their counterparts in other agencies and
governments and do so more quickly. While we did not specifically
review the effectiveness of other countries' controls, each of these
countries is a member of several international export control regimes
and considers national security interests in their license review
process. Also, while State approves more licenses per officer than
other countries in our review, some countries use a risk-based
licensing approach that allows multiple shipments of less sensitive
items to be approved under a single license, potentially reducing the
total number of licenses they review. As noted in our report, State
generally requires a license for each proposed arms export. With
respect to the proposed treaties, while State agreed that U.S.
regulatory changes will not be finalized until the treaties are
ratified, they noted that the U.S. government plans on how the treaty
will be enforced have been clear. We agree that information on treaty
enforcement has been made available, but as we state in the report,
enforcement procedures of the treaty party countries have not been
finalized and are subject to change until the treaty is ratified and
regulations are implemented. State comments are included in their
entirety in appendix II of this report. State, Commerce, and DOD also
provided technical comments, which we have incorporated as appropriate.
We plan no further distribution of this report until 30 days from the
report date. At that time, we will send copies of the report to the
Secretary of State, the Secretary of Commerce, the Secretary of
Defense, and interested congressional committees. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions on matters discussed in this
report, please contact me at (202) 512-4841 or martinb@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who
made key contributions to this report are listed in appendix III.
Signed by:
Belva M. Martin:
Acting Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To identify how selected allies' export control systems differ from
the U.S. export control system, we selected six countries to include
in our review--Australia, Canada, France, Germany, Japan, and the
United Kingdom. Countries were selected based on several factors,
including whether they were (1) major destinations for U.S. arms and
dual-use items as determined by the number of licenses issued by the
Department of State's Directorate of Defense Trade Controls and the
Department of Commerce's Bureau of Industry and Security, (2) members
of international export control regimes, or (3) major arms exporters.
We also sought regional diversity among selected countries. We
reviewed prior GAO reports to identify broad weaknesses in the U.S.
export control system--jurisdiction, licensing, outreach, enforcement,
and performance assessments--which we used to focus our comparison of
the U.S. and other countries' systems. We analyzed background
documentation to gain an understanding of each selected ally's export
control system. We submitted a structured question set to each country
and obtained related documentation, including data on the numbers of
export license officers and licenses approved in 2008, export control
system annual reports, and export guidelines. We also conducted site
visits to Australia, France, Germany, and the United Kingdom and
interviewed officials in charge of administering and enforcing export
controls, and industry representatives. In addition, we interviewed
European Union officials in Belgium to understand the relationship
between the European Union's export control requirements and those of
the United Kingdom, France, and Germany. We interviewed foreign
embassy officials in the United States from each of the selected
countries and contacted the supreme audit institution in each country
to determine whether any audits had been conducted on the country's
export control system. To obtain current information on the U.S.
export control system, we reviewed agency documents on changes to the
system and interviewed officials from State's Directorate of Defense
Trade Controls, Commerce's Bureau of Industry and Security, and the
Department of Defense's Defense Technology Security Administration.
The information on foreign countries' export control laws and
regulations in this report does not reflect our independent legal
analysis, but is based on interviews, questionnaires, and secondary
sources, such as analyses by foreign law specialists at the U.S.
Library of Congress. We used the information gathered from our review
of documents, structured question sets, site visits, interviews, and
foreign law specialists' analyses as the basis for our comparison of
the U.S.'s and foreign countries' systems. Our review does not include
an assessment of the effectiveness of the selected countries' export
control systems.
To assess the reliability of data on the number of export license
officers and licenses approved in 2008, we discussed the data with
knowledgeable officials, obtained written responses to questions about
the data, and, where possible, verified the data with other published
sources. We found the data to be sufficiently reliable for the
purposes of providing a general indication of the size of each
country's export control system.
To assess how the proposed Defense Trade Cooperation Treaties with the
United Kingdom and Australia will change controls on arms exports, we
reviewed the treaties, their implementing arrangements, and the list
of items that were excluded from each treaty. We submitted a
structured question set on the treaties to the United Kingdom and
Australia and analyzed their responses. We subsequently interviewed
officials from State's Directorate of Defense Trade Controls, the
United Kingdom's Ministry of Defence, Australia's Department of
Defence, and United Kingdom and Australian companies to clarify the
treaties' provisions and to assess possible implementation challenges.
We also analyzed congressional testimony, State Department responses
to congressional questions for the record, and United Kingdom and
Australian treaty related documentation.
We conducted this performance audit from January 2009 to May 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of State:
United States Department of State:
Chief Financial Officer:
Washington, D.C. 20520:
May 25, 2010:
Ms. Jacquelyn Williams-Bridgers:
Managing Director International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Export
Controls: Observations on Selected Countries' Systems and Proposed
Treaties," GAO Job Code 120791.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Robert Copley, Deputy Director, Bureau of Political-Military Affairs
at (202) 663-2803.
Sincerely,
Signed by:
James L. Millette:
cc:
GAO ” John Neumann:
PM ” Andrew Shapiro:
State/OIG ” Tracy Burnett:
[End of letter]
Department of State Comments on GAO Draft Report:
Export Controls: Observations on Selected Countries' Systems
and Proposed Treaties (GAO-10-557, GAO Code 120791):
Thank you for allowing the Department of State to comment on the draft
report "Export Controls: Observations on Selected Countries' Systems
and Proposed Treaties." We appreciate the opportunity and wish to
express appreciation for the GAO's thorough and thoughtful treatment
of the complexities involved with this topic.
State would like to call particular attention to the information
conveyed in Table 2 (Export Licenses Approved, License Officers, and
Average Licenses Approved per Officer in 2008). The data reflects that
the United States issues far more licenses for the export of arms than
any other country in the survey. We note that this apparent disparity
is driven by a number of factors, not least of which is the disparity
in the relative size of the economies of the countries represented in
the chart and the wars in Iraq and Afghanistan where U.S. forces
represent by far the largest contingent of the coalition forces
involved in those conflicts. The disparity is also likely a reflection
of relatively more stringent licensing controls imposed by the U.S. on
its exports, and particularly arms exports, resulting in greater need
for export licenses in the U.S. It is noteworthy that France, the only
other country on the chart that divides its numbers into dual-use and
arms exports like the U.S. does, issued a slightly higher percentage
of arms export licenses than did the U.S. during 2008. French arms
exports constituted 86% of 2008 exports compared to 79% for the U.S.
during the same period.
State would also like to thank the GAO for documenting through this
report the extraordinary efficiency of State's licensing officers who
process far more cases than their counterparts in other agencies and
other governments, and do so more quickly. The report documents that
the government of the United Kingdom (UK) issues 73% of its licenses
within 20 business days whereas the U.S. issued 75% of its licenses
within 20 calendar days. The U.S. issued nine times more licenses with
only twice as many licensing officers. This report sheds important
light on State's need for flexibility in the use of registration fees
in order to be able to hire additional licensing officers and to
provide a permanent outreach capability.
Finally, State wishes to clarify one important aspect of the report's
treatment of the question of enforcement of the proposed Defense Trade
Cooperation Treaties with the UK and Australia. While the report is
technically correct in stating that "U.S. regulatory changes will not
be finalized until the treaties are ratified because the ratification
process could introduce additional requirements," we must point out
that the Treaties, their implementing arrangements, and definitions
have been publicly posted on our websites for over two years. Draft
regulations have been shared with the Senate Foreign Relations
Committee and re-drafted in light of their comments and in close
cooperation with the Department of Justice. In other
words, it has been quite clear for sometime how the U.S. Government
will enforce the Treaties.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
Contact:
Belva M. Martin, (202) 512-4841 or martinb@gao.gov:
Acknowledgments:
In addition to the individual named above, John Neumann, Assistant
Director; Jeff Hartnett; Stephen V. Marchesani; Marie Ahearn; Jessica
Bull; Griffin Glatt; Brenna Guarneros; Ian Jefferies; Susan Neill; and
Ramzi Nemo made contributions to this report.
[End of section]
Footnotes:
[1] For the purposes of this report, the term arms refers to defense
articles, defense services, and related technical data, as specified
in 22 U.S.C. § 2778, and the term dual-use refers to items that have
both commercial and military applications, such as high-performance
computers, radars, and underwater television cameras.
[2] Treaty Between the Government of the United States of America and
the Government of the United Kingdom of Great Britain and Northern
Ireland Concerning Defense Trade Cooperation, June 21 and 26, 2007, S.
Treaty Doc. No. 110-7; Treaty Between the Government of the United
States of America and the Government of Australia Concerning Defense
Trade Cooperation, September 5, 2007, S. Treaty Doc. No. 110-10
(collectively the "treaties"). The treaties, as agreed to by the U.S.
President, were received in the U.S. Senate and referred to the
Committee on Foreign Relations on September 20, 2007 and December 3,
2007, respectively, which held a hearing on both on December 10, 2009.
The treaties have yet to be ratified by the U.S. Senate.
[3] Commerce also administers controls for some items that have solely
civilian use. 15 C.F.R. § 730.3.
[4] Commerce administers the dual-use export control system through
requirements contained in the Export Administration Regulations (EAR),
15 C.F.R. § 730 et seq. These regulations include the list of dual-use
items subject to specific controls, known as the Commerce Control
List. The State Department administers the arms export control system
through requirements contained in the International Traffic in Arms
Regulations (ITAR), 22 C.F.R. § 120 et. seq. These regulations include
the list of arms subject to specific controls, known as the United
States Munitions List (USML).
[5] Exporters can make a commodity jurisdiction request to the
Department of State in order to receive a determination as to whether
a defense article or service is covered under the ITAR. State makes
the determination in consultation with the Departments of Commerce and
Defense, as appropriate. 22 C.F.R. §120.4. Exporters may also request
an advisory opinion, classification, or a determination from Commerce
as to whether an item, technology, or activity is subject to the EAR.
15 C.F.R. § 734.6.
[6] As provided for under Executive Order 12981, the Departments of
Defense, Energy, and State have the authority to review any export
license application submitted to the Department of Commerce, and
Commerce may refer export license applications to other departments or
agencies as appropriate. Exec. Order No. 12,981, 60 Fed. Reg. 62,981
(Dec. 5, 1995). These departments or agencies must notify Commerce as
to the types of applications they do not wish to review, in the event
that they determine that certain types of applications need not be
referred to it. If there is disagreement among the agencies, the
application goes through an interagency dispute resolution process.
[7] The treaties are applicable to defense articles--including
articles, services, and related technical data--listed on the USML.
Arms exports and transfers under the treaties must support certain
activities, including (1) combined military or counter-terrorism
operations; (2) cooperative security and defense research,
development, production, and support programs; (3) mutually agreed
upon security and defense projects where the United Kingdom or
Australian government is the end-user; and (4) where the U.S.
government is the end-user. The first three activities in this list
will be described or identified in the treaties' implementing
arrangements.
[8] Japan does not permit arms exports to other countries. However, in
exceptional cases, Japan has allowed arms and military technologies to
be exported to the United States in order to implement joint
development and production related to ballistic missile defense
systems. In these cases, exporters must apply for a license from the
Ministry of Economy, Trade, and Industry (METI), which is the sole
agency in charge of regulating arms and dual-use items.
[9] There are a couple of exceptions to DECO's role in regulating arms
and dual-use exports. The Department of Foreign Affairs and Trade is
responsible for the domestic implementation of United Nations Security
Council sanctions which, in some instances, place restrictions on
defense and dual-use goods and associated services, where those goods
or services are not specified as part of Australia's Defence and
Strategic Goods List. The Department of Resources, Energy, and Tourism
is responsible for issuing permits related to uranium and other
nuclear goods.
[10] Canada's Export Control Division of the Department of Foreign
Affairs and International Trade has sole responsibility for
controlling the following on its Export Control List: non-nuclear-
related dual-use items; items that are specially designed or modified
for military purposes and those that present a strategic military
concern; items that are used or could be used in systems capable of
delivering chemical, biological or nuclear weapons; chemical
substances, biological agents, and related items that could be used in
the production of chemical and biological weapons; and strategic goods
and technology, such as global navigation satellite systems,
propulsion and space-related equipment, and ground control stations.
The Department of Foreign Affairs and International Trade and the
Canadian Nuclear Safety Commission share export control responsibility
for nuclear and nuclear-related dual-use items. This report only
addresses those items where Canada's Export Control Division has sole
export control responsibility.
[11] Germany's BAFA is part of the Federal Ministry of Economics and
Technology.
[12] The United Kingdom's ECO is part of the Department for Business,
Innovation, and Skills.
[13] Germany's consolidated Export List includes a section for arms
and one for dual-use items. Some items in the arms section, contained
in a specific list known as "war weapons," are subject to additional
prohibitions and licensing requirements under the War Weapons Control
Act, and are reviewed and approved by another part of the Federal
Ministry of Economics and Technology. When applying for an export
license to BAFA, applicants have to submit a copy of the war weapons
license granted by the Federal Ministry of Economics and Technology if
the export is subject to the War Weapons Control Act.
[14] The Prime Minister's office has delegated the authority to sign
prior approvals to export to the General Secretariat for National
Defence.
[15] Specifically, the procedures provide that a commodity
jurisdiction determination will be issued by State within 60 days of
receipt from applicants, or if there is an interagency dispute it will
be escalated to the National Security Council by the 50th day under
the procedures. National Security Council, "Procedures on Commodity
Jurisdiction Determinations" (June 18, 2009).
[16] Open individual export licenses are also issued for other goods,
such as dual-use items and clothing and equipment to protect
journalists and aid agency workers in areas of conflict.
[17] NATO-equivalent countries refers to countries such as Australia,
Japan, and New Zealand.
[18] United Kingdom officials stated that this directive does not
override national legal requirements and the United Kingdom maintains
the right to impose restrictions on re-transfers.
[19] State regulations allow exporters to request permission to export
technical data to multiple countries within a single license
application, but do not permit such requests for the export of
hardware. Commerce has a special comprehensive license which
authorizes multiple exports of eligible, preapproved Commerce-
controlled dual-use items and services to preapproved recipients and
eligible destinations. 15 C.F.R. Part 752. Commerce reported that it
had issued a total of 12 special comprehensive licenses as of January
2010, including 1 in 2008 and 1 in 2009.
[20] A major project authorization provides approval for a range of
export activities associated with a foreign government's commercial
acquisition of defense technologies. A global project authorization
covers all exports planned to occur under a government-to-government
international agreement for a cooperative project.
[21] For other countries, State must give written notification to
Congress at least 30 days in advance of State's intent to approve
licenses for defense articles and services of $50 million or more, or
for major defense equipment of $14 million or more. 22 U.S.C. § 2776.
[22] Australian officials told us that applications are considered
sensitive if they involve significant dual-use items, items with a
direct military application, and items that may involve a weapon of
mass destruction concern, a country of concern, or a country that is
subject to sanctions.
[23] The Australian Trade Commission is the government's trade and
investment development agency and operates under the Department of
Foreign Affairs and Trade.
[24] According to French officials, in the case of very sensitive dual-
use export license applications, an interagency commission, chaired by
the Ministry of Foreign Affairs, meets to discuss them. The
interagency commission consists of representatives from several
ministries and organizations within the French government, such as the
Ministries of Energy and Defence and the General Secretariat for
National Defence.
[25] French officials also told us they are in the process of
developing an electronic licensing system for dual-use applications.
[26] DDTC's guidance for referring license applications mentions that
State can also refer applications to the Department of Energy and the
National Aeronautics and Space Administration.
[27] The ITAR states it is the policy of the United States to deny
licenses for exports of defense articles and services, destined for
certain countries--including Belarus, Cuba, Iran, North Korea, Syria,
and Venezuela. This policy also applies to countries with respect to
which the United States maintains an arms embargo (e.g., Burma, China,
Liberia, Sudan) or whenever an export would not otherwise be in
furtherance of world peace and the security and foreign policy of the
United States. 22 C.F.R. § 126.1(a).
[28] Commerce's definition of an export includes the release of
technology or software subject to the EAR in a foreign country or to a
foreign national in the United States. EAR, 15 C.F.R. § 734.2(b)(2).
The release to a foreign national in the United States is deemed to be
an export to the home country or countries of the foreign national.
This deemed export rule does not apply to persons lawfully admitted
for permanent residence in the United States or persons who are
protected individuals under the Immigration and Naturalization Act (8
U.S.C. § 1324b(a)(3)). EAR, 15 C.F.R. § 734.2(b)(ii).
[29] Under ITAR, a foreign person is defined as any person who is not
a lawful permanent resident of the United States or who is not a
protected individual, such as political refugees or political asylum
holders. 22 C.F.R. § 120.16.
[30] State's guidance states that this normally does not present a
problem unless the country of birth is a country where exports are
prohibited under 22 C.F.R. § 126.1.
[31] For export control purposes, State's DDTC considers a third-
country national to be an individual from a country other than the
country which is the foreign signatory to the technical assistance or
manufacturing license agreement. A third-country national may also be
a dual national if he or she holds nationality from more than one
country.
[32] This ITAR amendment provides that all access must take place
completely within the physical territories of the aforementioned
countries or the United States. 22 C.F.R. § 124.16.
[33] Under this arrangement, Australian Department of Defence
personnel that are dual nationals cannot be nationals from the
prohibited countries listed in ITAR section 126.1.
[34] In March 2010, the Stockholm International Peace Research
Institute reported that the United States was the largest supplier of
major conventional weapons from 2005 to 2009, accounting for 30
percent of the global arms export market. By comparison, Germany,
France, and the United Kingdom accounted for 11 percent, 8 percent,
and 4 percent, respectively, of the global arms export market for
major conventional weapons over the same period.
[35] We also included license amendments in the count of total
licenses approved where such data were available.
[36] State officials told us they calculate their average license
processing time from the date they receive the application until it is
returned to the applicant, and includes the time spent in obtaining
other agencies' input, participating in interagency dispute
resolution, and notifying Congress of particular transactions.
[37] Commerce officials stated the average processing time for dual-
use export applications includes the time that other agencies take to
review and provide recommendations, but does not include time spent in
the interagency dispute resolution process.
[38] An open general export licence (OGEL) allows the export or trade
of specified controlled goods by any company, removing the need for
exporters to apply for an individual license, provided the shipment
and destinations are eligible and that certain conditions are met.
ECO's compliance officers conduct periodic audits of exporters who
hold open general export licences.
[39] This organization, the Society of International Affairs, was
formed in 1967 by the federal government and industry. Its purpose is
to serve as a forum for the exchange of information--through events
such as luncheons, conferences, and workshops--related to export and
import licensing issues.
[40] The United Kingdom has an office called the Better Regulation
Executive which works with government agencies to improve both new and
existing regulations, and publishes guidance on postimplementation
reviews.
[41] As discussed earlier in this report, the treaties are applicable
to defense articles--including articles, services, and related
technical data--listed on the USML.
[42] State officials told us they do not intend to conduct additional
security evaluations of facilities and personnel.
[43] For approval for membership in Australia's community, personnel
will be subject to an additional background check if the initial check
gives rise to concern of significant ties to a country that is
proscribed in U.S. regulations. Access will not be granted until
mutually determined by the United States and Australia. Furthermore,
for nationals of third countries who are not also Australian citizens,
approval for membership in the Australian community will require U.S.
and Australian authorization.
[44] Under the treaties, re-export and re-transfer refer to the
movement of previously exported treaty arms from the approved United
Kingdom and Australian communities. Specifically, re-export refers to
exporting treaty arms to a location outside of the United Kingdom or
Australia. Re-transfer refers to the movement of a treaty arm to a
location within the United Kingdom or Australia.
[45] U.S. classified arms exported and transferred under the treaties
will continue to be treated as classified in the United Kingdom and
Australia. U.S. material is classified if it is determined that the
unauthorized release of the material could be expected to result in
damage to U.S. national security. Classified information may only be
accessed by individuals who have been cleared for access and have a
need-to-know.
[46] Australia operates the Defence Security Compliance Program to
monitor members' compliance with the Defence Industry Security Program
discussed earlier.
[47] In Australia, Defence Industry Security Program members, as part
of the Defence Security Compliance Program, are required to have
internal compliance programs. As mentioned previously, the United
Kingdom's ECO conducts periodic audits of exporters who hold open
individual or general export licences.
[End of section]
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