Export Controls
Challenges Exist in Enforcement of an Inherently Complex System Gao ID: GAO-07-265 December 20, 2006Each year, billions of dollars in dual-use items--items that have both commercial and military applications--as well as defense items are exported from the United States. To protect U.S. interests, the U.S. government controls the export of these items. A key function in the U.S. export control system is enforcement, which aims to prevent or deter the illegal export of controlled items. This report describes the roles, responsibilities, and authorities of export control enforcement agencies, identifies the challenges these agencies face, and determines if information on enforcement outcomes is provided to the export control agencies. GAO's findings are based on an examination of statutes, interagency agreements, and procedures; interviews with enforcement officials at selected field locations and headquarters; and an assessment of enforcement information.
The enforcement of export control laws and regulations is inherently complex, involving multiple agencies with varying roles, responsibilities, and authorities. The agencies within the Departments of Commerce, Homeland Security, Justice, and State that are responsible for export control enforcement conduct a variety of activities, including inspecting items to be exported, investigating potential export control violations, and pursuing and imposing appropriate penalties and fines against violators. These agencies' enforcement authorities are granted through a complex set of laws and regulations, which give concurrent jurisdiction to multiple agencies to conduct investigations. Enforcement agencies face several challenges in enforcing export control laws and regulations. For example, agencies have had difficulty coordinating investigations and agreeing on how to proceed on cases. Coordination and cooperation often hinge on the relationships individual investigators across agencies have developed. Other challenges include obtaining timely and complete information to determine whether violations have occurred and enforcement actions should be pursued, and the difficulty in balancing multiple priorities and leveraging finite human resources. Each enforcement agency has a database to capture information on its enforcement activities. However, outcomes of criminal cases are not systematically shared with State and Commerce, the principal export control agencies. State and Commerce may deny license applications or export privileges of indicted or convicted export violators. Without information on the outcomes of criminal cases, export control agencies cannot gain a complete picture of an individual or a company seeking export licenses or discover trends in illegal export activities. This report is a publicly releasable version of a law enforcement sensitive report we issued on November 15, 2006. Therefore, some examples that involved law enforcement techniques or methods and that support our findings have been removed from this version.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-265, Export Controls: Challenges Exist in Enforcement of an Inherently Complex System
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
December 2006:
Export Controls:
Challenges Exist in Enforcement of an Inherently Complex System:
GAO-07-265:
GAO Highlights:
Highlights of GAO-07-265, a report to congressional committees
Why GAO Did This Study:
Each year, billions of dollars in dual-use items”items that have both
commercial and military applications”as well as defense items are
exported from the United States. To protect U.S. interests, the U.S.
government controls the export of these items. A key function in the
U.S. export control system is enforcement, which aims to prevent or
deter the illegal export of controlled items.
This report describes the roles, responsibilities, and authorities of
export control enforcement agencies, identifies the challenges these
agencies face, and determines if information on enforcement outcomes is
provided to the export control agencies. GAO‘s findings are based on an
examination of statutes, interagency agreements, and procedures;
interviews with enforcement officials at selected field locations and
headquarters; and an assessment of enforcement information.
What GAO Found:
The enforcement of export control laws and regulations is inherently
complex, involving multiple agencies with varying roles,
responsibilities, and authorities. The agencies within the Departments
of Commerce, Homeland Security, Justice, and State that are responsible
for export control enforcement conduct a variety of activities,
including inspecting items to be exported, investigating potential
export control violations, and pursuing and imposing appropriate
penalties and fines against violators. These agencies‘ enforcement
authorities are granted through a complex set of laws and regulations,
which give concurrent jurisdiction to multiple agencies to conduct
investigations.
Enforcement agencies face several challenges in enforcing export
control laws and regulations. For example, agencies have had difficulty
coordinating investigations and agreeing on how to proceed on cases.
Coordination and cooperation often hinge on the relationships
individual investigators across agencies have developed. Other
challenges include obtaining timely and complete information to
determine whether violations have occurred and enforcement actions
should be pursued, and the difficulty in balancing multiple priorities
and leveraging finite human resources.
Each enforcement agency has a database to capture information on its
enforcement activities. However, outcomes of criminal cases are not
systematically shared with State and Commerce, the principal export
control agencies. State and Commerce may deny license applications or
export privileges of indicted or convicted export violators. Without
information on the outcomes of criminal cases, export control agencies
cannot gain a complete picture of an individual or a company seeking
export licenses or discover trends in illegal export activities.
This report is a publicly releasable version of a law enforcement
sensitive report we issued on November 15, 2006. Therefore, some
examples that involved law enforcement techniques or methods and that
support our findings have been removed from this version.
What GAO Recommends:
GAO is recommending that the enforcement agencies take several actions
aimed at improving coordination and remedying other weaknesses in
export control enforcement. The departments generally agreed with the
need for coordination but noted some differences in possible
approaches. They also indicated certain actions are under way to
address some of our recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-265].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Ann Calvaresi-Barr at
(202) 512-4841 or calvaresi-barra@gao.gov
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
Export Control Enforcement Is Complex, Involving Varying Roles,
Responsibilities, and Authorities among Multiple Agencies:
Agencies Face Several Challenges in Enforcing Export Control Laws:
Criminal Outcomes Are Not Systematically Provided to Export Control
Agencies:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Summary of Selected Export Control Enforcement Cases:
Appendix III: Comments from the Department of Commerce:
Appendix IV: Comments from the Department of Homeland Security:
Appendix V: Comments from the Department of State:
Appendix VI: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Agencies, Laws, and Regulations Governing Export Control of
Defense and Dual-Use Items:
Table 2: Enforcement Agencies and Primary Activities:
Table 3: Primary Enforcement-Related Databases at Enforcement Agencies:
Table 4: Selected Export Control Cases for Fiscal Year 2005:
Figures:
Figure 1: Authorities for Defense Items:
Figure 2: Authorities for Dual-Use Items:
abbreviations:
AUSA: Assistant U.S. Attorney:
CBP: Customs and Border Protection:
FBI: Federal Bureau of Investigation:
ICE: Immigration and Customs Enforcement:
OEE: Office of Export Enforcement:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 20, 2006:
The Honorable Henry J. Hyde:
Chairman:
Committee on International Relations:
House of Representatives:
The Honorable F. James Sensenbrenner, Jr.
Chairman:
Committee on the Judiciary:
House of Representatives:
Each year, billions of dollars in "dual-use" items--which have both
commercial and military applications--and defense items are exported
from more than 300 U.S. sea, air, and land ports. To protect national
security, foreign policy, and economic interests, the U.S. government
controls the export of these items.[Footnote 1] The Departments of
Commerce and State are principally responsible for regulating the
export of dual-use and defense items, respectively.
A key function in the U.S. export control system is enforcement, which
consists of various activities that aim to prevent or deter the illegal
export of controlled defense and dual-use items and can result in
apprehending violators and pursuing and imposing appropriate criminal
and administrative penalties, such as imprisonment, fines, denials of
export privileges, or debarment. Enforcement activities--which include
inspections, investigations, and punitive actions against violators of
export control laws--are largely carried out by the Departments of
Commerce, Homeland Security, Justice, and State. Enforcement activities
can result in various outcomes. One recent case resulted in four
business owners pleading guilty to illegally exporting defense items,
including radars and smart weapons, to Chinese government-owned
entities. Three were sentenced to prison, and all had to collectively
forfeit almost $400,000, which represents their revenue from the
illegal exports.
Attempts continue to be made by individuals, companies, terrorist
organizations, and countries of concern[Footnote 2] to illegally obtain
defense and dual-use items. In light of this, you asked us to review
export control enforcement activities. In response, we (1) described
the roles, responsibilities, and authorities of the agencies
responsible for export control enforcement; (2) identified any
challenges the agencies face in enforcing export control laws and
regulations; and (3) assessed whether information on enforcement
outcomes is provided to the export control agencies to inform the
export control process and licensing decisions. This report is a
publicly releasable version of a law enforcement sensitive report we
issued on November 15, 2006. Therefore, some examples that involved law
enforcement techniques or methods and that support our findings have
been removed from this version.
To conduct our work, we identified enforcement roles, responsibilities,
and authorities through an examination of export control statutes,
regulations, formal interagency agreements, policies, procedures, and
operating manuals. We interviewed agency officials at headquarters and
selected field locations responsible for export enforcement--including
inspectors[Footnote 3] and investigators from the Department of
Homeland Security, investigators from the Department of Commerce,
investigators and criminal prosecutors from the Department of Justice,
and compliance officers from the Department of State--about enforcement
activities and challenges. We also identified export control
enforcement information maintained at the various agencies and spoke
with State licensing and policy officials and Commerce officials to
assess whether they obtain this information for decision making. We
performed our review from September 2005 through August 2006 in
accordance with generally accepted government auditing standards. For
more on our scope and methodology, see appendix I.
Results in Brief:
Export control enforcement is inherently complex, involving multiple
agencies that perform various functions using differing authorities.
Several agencies within the Departments of Commerce, Homeland Security,
Justice, and State are primarily responsible for export control
enforcement. These enforcement agencies conduct a variety of
activities, including inspecting items to be exported, investigating
potential export control violations, and pursuing and imposing
appropriate criminal and administrative penalties. These agencies'
enforcement authorities are granted through a complex set of laws and
regulations, which give concurrent jurisdiction to Commerce, Homeland
Security, and Justice's Federal Bureau of Investigation (FBI) to
conduct investigations of potential violations of export control laws
for dual-use items, and to Homeland Security and the FBI to investigate
potential defense item violations.
Enforcement agencies face several challenges in enforcing export
control laws and regulations. For example, agencies have had difficulty
coordinating investigations and agreeing on how to proceed on cases.
Agreements for coordinating investigations do not exist among all the
various agencies, and coordination and cooperation often hinge on the
relationships developed by individual investigators from the various
agencies. Some enforcement activities have also been affected by
license determinations, which are used to confirm whether an item is
controlled and requires a license and thereby confirm whether an export
violation has occurred. State and Commerce officials said they need
complete and accurate information from inspectors and investigators to
make correct determinations. In some instances, inspectors and
investigators said the time it takes to obtain a determination or
changes in determinations has affected their enforcement activities.
Other challenges that enforcement agencies face include balancing
priorities and leveraging finite resources.
Criminal indictments and convictions are key to informing the export
control process and licensing decisions. While enforcement agencies
have databases to capture information relating to their own export
enforcement activities, neither State nor Commerce systematically
receives from Justice notification of the outcomes of criminal cases,
including indictments and convictions for both defense and dual-use
items and, therefore, lacks the full scope of information on
individuals and companies that have been prosecuted. Such information
is needed, in part, because indicted or convicted exporters may have
their license applications or export privileges denied. Without
outcomes of criminal cases, export control agencies may not gain a
complete picture of individuals or companies seeking export licenses or
trends in illegal export activities.
We are recommending that the Departments of Commerce, Homeland
Security, Justice, and State take a number of actions to improve
coordination and licensing determination efforts and facilitate
information sharing of enforcement outcomes with the export control
agencies within State and Commerce. In commenting on a draft of this
report, Commerce, Homeland Security, and State generally agreed with
the need for coordination but some noted differences in possible
approaches. In some instances, they indicated that actions to address
our recommendations were already under way. Justice did not provide
formal comments, and Defense had no comments on the draft report.
Commerce, Homeland Security, Justice, and State provided technical
comments, which we incorporated in this report as appropriate.
Background:
The U.S. government's control over the export of defense and dual-use
items is intended to ensure that U.S. interests are protected in
accordance with the Arms Export Control Act and the Export
Administration Act.[Footnote 4] The U.S. government's control over the
export of defense and dual-use items is primarily divided between two
departments--State and Commerce, respectively (see table 1)--with
support for enforcement activities primarily from Commerce, through its
Bureau of Industry and Security's Office of Export Enforcement (OEE);
Department of Homeland Security, through its Customs and Border
Protection (CBP) and Immigration and Customs Enforcement (ICE); and
Justice, through the FBI and the U.S. Attorneys Office.[Footnote 5]
Table 1: Agencies, Laws, and Regulations Governing Export Control of
Defense and Dual-Use Items:
Regulating agency;
Defense items: State's Directorate of Defense Trade Controls;
Dual-use items: Commerce's Bureau of Industry and Security.
Enforcement agencies;
Defense items: CBP, ICE, FBI,[A] and U.S. Attorneys Office;
Dual-use items: CBP, OEE, ICE, FBI,[A] and U.S. Attorneys Office.
Statute;
Defense items: Arms Export Control Act;
Dual-use items: Export Administration Act /International Emergency
Economic Powers Act.
Implementing regulations;
Defense items: International Traffic In Arms Regulations;
Dual-use items: Export Administration Regulations.
Control list;
Defense items: U.S. Munitions List specifies the defense articles,
services, and related technical data to be controlled;
Dual-use items: Commerce Control List specifies dual-use items and
technologies to be controlled.
Source: GAO analysis of export control laws, regulations, and agency
information.
[A] FBI investigates criminal violations of law in certain foreign
counterintelligence areas.
[End of table]
State and Commerce require exporters to identify items that are on the
departments' control lists and to obtain license authorization from the
appropriate department to export these items, unless an exemption
applies. Exemptions are permitted under various circumstances, such as
allowing for the export of certain items to Canada without a license.
Many dual-use items are exempt from licensing requirements. While items
can be exempt from licensing requirements, they are still subject to
U.S. export control laws. Because exporters are responsible for
complying with export control laws and regulations, regulatory and
investigative enforcement agencies conduct outreach to educate
exporters on these laws and regulations. When shipping controlled
items, exporters are required to electronically notify CBP officials at
the port where the item will be exported, including information on the
quantity and value of the shipment, the issued export license number,
or an indication that the item is exempt from licensing
requirements.[Footnote 6]
Export enforcement aims to ensure U.S.-controlled items do not fall
into the wrong hands and to limit the possibility that illegal exports
will erode U.S. military advantage. Export enforcement involves
inspecting items to be shipped, investigating potential violations of
export control laws, and punishing export control violators.[Footnote
7] When inspectors, investigators, and prosecutors have questions about
whether an item is controlled and requires a license, they request a
license determination.[Footnote 8] CBP and ICE request license
determinations through ICE's Exodus Command Center,[Footnote 9] which
refers the request to State and Commerce; OEE requests determinations
directly from Commerce licensing officers. Some FBI agents request
license determinations through the Exodus Command Center, while others
make such requests directly to State or Commerce.
In fiscal year 2005, Department of Justice data showed that there were
more than 40 individuals or companies convicted of over 100 criminal
violations of export control laws.[Footnote 10] State reported over $35
million and Commerce reported $6.8 million in administrative fines and
penalties for fiscal year 2005. See appendix II for a list of selected
export control cases.
For more than a decade, we have reported on a number of weaknesses and
vulnerabilities in the U.S. export control system and made numerous
recommendations, several of which have not been implemented. For
example, in September 2002, we reported that Commerce improperly
classified some State-controlled items as Commerce-controlled,
increasing the risk that defense items would be exported without the
proper level of review and control to protect national
interests.[Footnote 11] In June 2006, we reported that this condition
remains unchanged and that Commerce has not taken the corrective
actions that we recommended in 2002.[Footnote 12] We have also reported
on long-standing problems in enforcement, including poor cooperation
among the investigative agencies.[Footnote 13]
Export Control Enforcement Is Complex, Involving Varying Roles,
Responsibilities, and Authorities among Multiple Agencies:
Enforcing U.S. export control laws and regulations is inherently
complex.[Footnote 14] Multiple agencies are involved in enforcement and
carry out various activities, including inspecting shipments,
investigating potential export control violations, and taking punitive
actions that can be criminal or administrative against violators of
export control laws and regulations. Authorities for export control
enforcement are provided through a complex set of laws and regulations.
These authorities and some overlapping jurisdiction for conducting
enforcement activities add to the complexity.
Multiple Agencies Are Responsible for Export Enforcement:
Enforcement--which includes inspections, investigations, and punitive
actions against violators of export control laws--is largely conducted
by various agencies within Commerce, Homeland Security, Justice, and
State depending on the facts and circumstances of the case. These
agencies' key enforcement responsibilities are shown in table 2.
Table 2: Enforcement Agencies and Primary Activities:
Agency: Commerce.
Bureau of Industry and Security;
Inspection at U.S. ports[A]: [Empty];
Investigation: [Empty]; Punitive action[B]: Check.
Office of Export Enforcement;
Inspection at U.S. ports[A]: [Empty];
Investigation: Check;
Punitive action[B]: [Empty].
Agency: Homeland Security.
Customs and Border Protection;
Inspection at U.S. ports[A]: Check;
Investigation: [Empty];
Punitive action[B]: [Empty].
Immigration and Customs Enforcement;
Inspection at U.S. ports[A]: [Empty];
Investigation: Check;
Punitive action[B]: [Empty].
Agency: Justice.
U.S. Attorneys Office;
Inspection at U.S. ports[A]: [Empty];
Investigation: [Empty];
Punitive action[B]: Check.
Federal Bureau of Investigation;
Inspection at U.S. ports[A]: [Empty];
Investigation: Check;
Punitive action[B]: [Empty].
Agency: State.
Directorate of Defense Trade Controls;
Inspection at U.S. ports[A]: [Empty];
Investigation: [Empty];
Punitive action[B]: Check.
Source: GAO analysis of information provided by each agency.
[A] CBP and ICE both have the authority to conduct inspections at U.S.
ports, but CBP has a primary role in this area.
[B] For purposes of this report, punitive actions can be either
criminal or administrative against potential violators of export
control laws and regulations. Criminal actions taken against violators
of export control laws and regulations can result in imprisonment,
fines, forfeitures, and other penalties. Administrative actions against
violators can include fines, suspension of an export license, or denial
or debarment from exporting.
[End of table]
Inspections of items scheduled for export are largely the
responsibility of CBP officers at U.S. air, sea, and land ports, as
part of their border enforcement responsibilities. To help ensure that
these items comply with U.S. export control laws and regulations, CBP
officers check items against applicable licenses prior to shipment,
selectively conduct physical examinations of cargo at the port and in
warehouses, review shipping documents, detain questionable shipments,
and seize items being exported illegally. As part of their
responsibilities, CBP officers are required by State to decrement
(reduce) the shipment's quantity and dollar value from the total
quantity and dollar value authorized by the exporter's
license.[Footnote 15] This process helps to ensure that the shipment
does not exceed what is authorized and that the license has not
expired. However, Commerce does not require CBP officers to decrement
Commerce licenses.[Footnote 16] Commerce officials said they have
shipping tolerances that allow exporters to ship controlled items
exceeding the quantity and value approved in a license, but this varies
based on the controlled item. CBP officers do not currently have a
formal means for determining if exporters have exceeded authorized
license quantities and values for dual-use items within any shipment
tolerances permitted for that controlled item. As a result, they cannot
ensure accountability on the part of exporters or that Commerce
regulations have been properly followed. CBP has an automated export
system, which is used for decrementing State licenses. This system has
built-in tolerances to allow the shipment to exceed the total value of
a State license by 10 percent, as permitted by regulations.[Footnote
17]
Investigations of potential violations of export control laws for dual-
use items are conducted by agents from OEE, ICE, and FBI.
Investigations of potential export violations involving defense items
are conducted by ICE and FBI agents. FBI has authority to investigate
any criminal violations of law in certain foreign counterintelligence
areas.[Footnote 18] The investigative agencies have varying tools such
as undercover operations and overseas investigations for investigating
potential violations[Footnote 19] and establishing cases for potential
criminal or administrative punitive actions.
Punitive actions, which are either criminal or administrative, are
taken against violators of export control laws and regulations.
Criminal violations are those cases where the evidence shows that the
exporter willfully and knowingly violated export control laws. U.S.
Attorneys Offices prosecute criminal cases in consultation with
Justice's National Security Division. These cases can result in
imprisonment, fines, forfeitures, and other penalties. Punitive actions
for administrative violations can include fines, suspension of an
export license, or denial or debarment from exporting, and are imposed
primarily by State[Footnote 20] or Commerce, depending on whether the
violation involves the export of a defense or a dual-use item. In some
cases, both criminal and administrative penalties can be levied against
an export control violator.
The export control and investigative enforcement agencies also conduct
outreach activities, primarily educating exporters on U.S. export
control laws and regulations. For example, in fiscal year 2005, ICE
agents conducted more than 1,500 industry outreach visits around the
country. Outreach activities can include seminars and programs,
specialized training, publications, advice lines, Web sites, and
individual meetings with industry, academia, and other government
agencies. These activities can result in companies self-disclosing
violations, tips and reports of potential violations by others, and
cooperation in investigations and intelligence gathering.
Enforcement Authorities Are Granted through Various Laws and
Regulations:
Authorities for export control enforcement are provided through a
complex set of laws and regulations. For defense items, authorities are
granted under the Arms Export Control Act, the Department of Justice
Appropriations Act of 1965, the USA Patriot Improvement and
Reauthorization Act, and the Foreign Wars, War Materials and Neutrality
Act. These statutes and the regulations stemming from them give
concurrent jurisdiction for investigations to ICE and FBI (see fig. 1).
Figure 1: Authorities for Defense Items:
[See PDF for image]
Source: GAO analysis based on cited laws and regulations.
[A] CBP and ICE have authority to conduct inspections. ICE conducts
investigations.
[B] The Department of Justice is responsible for prosecutions for
federal crimes not otherwise specifically assigned. 28 C.F.R. § 0.55.
[End of figure]
For dual-use items, authorities are granted under the Export
Administration Act, the International Emergency Economic Powers Act,
the Department of Justice Appropriations Act of 1965, the USA Patriot
Improvement and Reauthorization Act, and the Foreign Wars, War
Materials and Neutrality Act. These laws and their implementing
regulations give investigative authority for dual-use items to OEE as
well as to ICE and FBI, which also have investigative authority for
defense items (see fig. 2).
Figure 2: Authorities for Dual-Use Items:
[See PDF for image]
Source: GAO analysis based on cited laws and regulations.
[A] The Department of Justice is responsible for prosecutions for
federal crimes not otherwise specifically assigned. 28 C.F.R. § 0.55.
[B] The law gives the authority to U.S. Customs Service in the
Department of Treasury. Customs Service was subsumed by the Department
of Homeland Security in March 2003. Homeland Security's CBP and ICE
have authority to conduct inspections. ICE conducts investigations.
[C] In times of declared national emergency, various agencies receive a
presidential delegation of authority by executive order.
[End of figure]
Agencies Face Several Challenges in Enforcing Export Control Laws:
Several key challenges exist in enforcing export control laws--
challenges that potentially reduce the effectiveness of enforcement
activities. First, overlapping jurisdiction for investigating potential
export control violations and instances where coordination among the
investigative agencies has not been effective have had an impact on
some cases. Second, license determinations--which confirm whether an
item is controlled by State or Commerce, and thereby help confirm
whether a violation has occurred--are key to ensuring the pursuit of
enforcement activities and are dependent on complete and specific
information available at the time. Third, prosecuting export control
cases can be difficult, since securing sufficient evidence to prove the
exporter intentionally violated export control laws can represent
unique challenges in some cases. Finally, multiple and sometimes
competing priorities have made it difficult for enforcement agencies to
maximize finite resources in carrying out export control enforcement
responsibilities.
Coordination on Investigative Cases Has Been Limited in Some Instances:
While ICE, OEE, and FBI have jointly coordinated on investigations,
coordination can be challenging, particularly in terms of agreeing on
how to proceed with a case. Formal agreements for coordinating
investigations do not exist among all the investigative agencies. The
extent to which agencies coordinate and cooperate on investigations is
largely dependent on individual work relationships.
Agencies have sometimes not agreed on how to proceed on cases,
particularly those involving foreign counterintelligence. For example,
FBI and OEE agents disagreed as to whether certain dual-use items
planned for export warranted an investigation.[Footnote 21]
Specifically, without coordinating with OEE and ICE, FBI pursued the
investigation, arrested the exporter, and held the shipment of items,
valued at $500,000. Ultimately, criminal charges were not pursued
because the items did not require a license. With respect to foreign
counterintelligence cases involving export controls, investigators have
not always been certain about their respective roles on these cases.
Formal agreements for coordination do not exist among all the
investigative agencies. Specifically, ICE and FBI do not have a formal
agreement to coordinate cases involving export control violations.
Formal agreements that exist have not been updated in recent years. In
1983, Commerce entered into an agreement with the FBI dealing with
certain headquarters-level coordination functions. In addition, a 1993
agreement between Customs and Commerce outlines the investigative
responsibilities of each agency, but it does not reflect departmental
changes that occurred as a result of the establishment of Homeland
Security in March 2003. This agreement also directs these agencies to
enter a joint investigation when it is determined that more than one
agency is working on the same target for the same or related
violations. However, it can be difficult to determine whether these
conditions exist because these agencies do not always have full access
to information on ongoing investigations. According to several agents
we spoke with, sharing information on ongoing investigations in general
can be challenging because of the agencies' varying and incompatible
databases, the sensitivity of certain case information, and the
agencies' varying protocols for classifying information.
The extent to which agencies coordinate their investigative efforts in
the field can depend on individual work relationships and informal
mechanisms that facilitate communication. Some field locations have
established joint task forces to discuss investigative cases. For
example, OEE, ICE, and FBI agents in one field location told us that
they routinely collaborate on investigations as part of a joint task
force that meets monthly. Agents in another location recently
established a task force to locally coordinate export control
investigations. In addition, some agencies have agents on detail to
other investigative agencies. For example, in one field location, an
ICE agent is detailed to FBI to coordinate cases and share export
control information. FBI officials told us the detail has been useful
because the ICE agent can readily provide FBI access to certain
Homeland Security data, which saves critical investigative time for the
FBI agents. At another field location, an OEE agent has been on detail
at ICE for 7 years, which has facilitated information sharing and joint
cases between the two agencies. According to several agents with whom
we spoke, personalities can be a key factor in how well agents from
different agencies work together on investigations. For example, an OEE
agent in charge of one field location told us that the field agents
work effectively on cases with ICE agents in one field location, but
not with ICE agents in another field location because of disagreements
stemming from 15 years ago about how to proceed with investigations.
Confirming Whether Items Are Controlled and Need a License Is Key to
Pursuing Enforcement Activities:
Confirming whether a defense or dual-use item is controlled and
requires a license, known as a license determination, is integral to
enforcement agencies' ability to seize items, pursue investigations, or
seek prosecutions. However, confirmation can sometimes be difficult.
Many inspectors and investigators told us that the time it takes to
make determinations or sometimes changes to previously made
determinations can affect some of their enforcement activities.
According to Commerce and State officials, they depend on complete,
specific, and pertinent information from the inspectors and
investigators to make timely and correct determinations so that
appropriate enforcement actions can be pursued. Moreover, new or
additional information may become available as an investigation
proceeds, which can affect a license determination.
Some inspectors and investigators--including OEE field agents who
request license determinations directly from Commerce--stated that
obtaining license determination decisions can be time consuming and has
taken as much as several months. In several instances, State and
Commerce licensing officers needed more information about the item
before making a license determination, which added to the time it took
to respond. In addition, State officials said they often request
technical support from the Department of Defense when making
determinations for defense items, which can add to the time it takes to
make a license determination. We found that responses to requests for
license determinations ranged from 1 day to 8 months during fiscal year
2005. While State established in September 2004 a goal of 30 days for
processing license determinations, it revised this time frame to 60
days in April 2005 because of resource limitations. Commerce recently
established a 35-day time frame to make a license determination
requested by OEE agents. However, Commerce, in conjunction with the
Exodus Command Center, has not established goals or a targeted time
frame for responding to license determination requests. Goals help
establish transparency and accountability in the process.
While some inspectors and investigators told us that their enforcement
actions have been affected by unclear determinations or changes to
previously made license determinations, Commerce and State officials
said that determinations are dependent on such factors as the
completeness and specificity of the information presented to them at
the time of the request. In one instance, CBP officers were not given a
clear determination as to whether the item was controlled, leaving
officers to decide how to proceed. In other instances, investigators
dropped their cases or pursued other charges based on changes made to
the determination or inconsistent information provided to the exporter.
For example, OEE agents executed search warrants based on a license
determination that the equipment was controlled for missile technology
and antiterrorism purposes. Subsequently, Commerce determined that no
license was required for this equipment, and thereby the case was
closed. In another example, licensing officers provided OEE agents with
a license determination that differed from the commodity
classification[Footnote 22] provided to the exporter. As a result of
the inconsistency between the license determination and classification,
Commerce pursued a lesser charge against the exporter. In addition, in
June 2005, ICE led a joint investigation of a Chinese national for
allegedly exporting critical U.S. technology to China, and on the basis
of an initial license determination review[Footnote 23] by State that
the item was controlled, ICE obtained search and arrest warrants.
However, 9 months later, ICE agents requested a subsequent license
determination to confirm that the item was controlled. It was
determined that the item was not subject to State or Commerce export
control, and therefore the case was dropped. Both State and Commerce
headquarters officials stated that their ability to make license
determinations is dependent upon several factors, including the
completeness and accuracy of the information provided by the inspectors
and investigators at the time of the request. These determinations can
be subject to change as new or additional pertinent information becomes
available as the case proceeds.
Commerce and ICE have recently taken actions to address problems in the
license determination process. In June 2006, Commerce established new
procedures on how to request and process license determinations
internally and is currently revising and providing training for its
licensing officers and OEE agents. In August 2006, ICE's Exodus Command
Center implemented a new system, known as the Exodus Accountability
Referral System, to track license determination requests, provide
enforcement agencies access to the status of their requests, and
provide performance statistics to field agents, inspectors, and
regulatory agencies. These actions recognize some of the problems with
license determinations. However, it is too early to determine their
impact on export enforcement activities.
Challenges Exist in Taking Criminal and Administrative Punitive Actions
against Alleged Export Violators:
When developing a case for criminal prosecution, Assistant U.S.
Attorneys (AUSA) must obtain sufficient evidence of the exporter's
intent to violate export control laws. Gathering evidence of intent is
particularly difficult in export control cases, especially when the
item being exported is exempted from licensing or the case requires
foreign cooperation. For dual-use violations, Commerce officials said
that the lapsed status of the Export Administration Act has made it
cumbersome for prosecuting cases. When pursuing administrative cases,
State, unlike Commerce, has limited access to attorneys and an
Administrative Law Judge, making it challenging to pursue the full
range of administrative actions against export control violators.
Several AUSAs who prosecute many different types of cases, told us that
it can be challenging to secure sufficient evidence that an exporter
intentionally violated export control laws. In particular, securing
such evidence can be especially difficult when the items to be exported
are exempted from licensing requirements. We previously reported
similar concerns of officials from Customs (now within Homeland
Security) and Justice about investigating and prosecuting violations
when exemptions apply, noting that it is particularly difficult to
obtain evidence of criminal intent since the government does not have
license applications and related documents that can be used as proof
that the violation was committed intentionally.[Footnote 24]
Investigations and prosecutions that involve items and individuals in
foreign locations can further complicate evidence- gathering efforts.
According to ICE officials, a foreign government may or may not
cooperate in an overseas export control investigation or arrest, and
foreign and U.S. laws on export controls may differ as to what
constitutes a violation. One OEE field office estimated that over half
of its cases involve foreign persons or entities.
According to Commerce officials, enforcement of dual-use export
controls under the expired Export Administration Act is a key challenge
for them because it adds an element of complexity to cases and can
encumber prosecutions. These officials said they have encountered
difficulties convincing AUSAs to accept cases to prosecute under a set
of regulations, promulgated under a lapsed statute and kept in force by
emergency legislation. To counter these difficulties, Commerce,
Homeland Security, and Justice officials said they support the renewal
of the Export Administration Act. Commerce stated that renewal of this
act would provide enforcement tools to OEE for conducting
investigations and increase penalty provisions for violators.[Footnote
25]
For administrative actions, export control regulations allow both State
and Commerce to pursue administrative cases before an Administrative
Law Judge, but State has never exercised this authority. Commerce
officials stated that they bring cases before an Administrative Law
Judge when an alleged export violator disputes the charges or objects
to the administrative settlement actions proposed by Commerce. Commerce
has a formal agreement with the Coast Guard Office of Administrative
Law Judges, which is renewed annually, to hear its cases, and
Commerce's attorneys bring about one to three administrative cases
before an Administrative Law Judge each year.
State has never brought a case to an Administrative Law Judge and does
not have attorneys with the experience needed to pursue such export
control cases or a standing agreement with any agency to provide an
Administrative Law Judge. In cases where an agreed settlement with the
violating company appears unlikely and a formal hearing is needed,
State would have to seek services from attorneys in the private sector
or from other departments to help represent the government's interests.
To obtain access to an Administrative Law Judge to hear a case, State
officials told us they would need to first request the Office of
Personnel Management to appoint a judge on a temporary basis. State
would then need to establish an interagency memorandum of understanding
with that agency to establish payment and other arrangements.[Footnote
26] Without a formal agreement to access an Administrative Law Judge
and ready access to attorneys to pursue such cases, State officials
told us that it is challenging to proceed with administrative cases.
State officials indicated that they are exploring various options on
how to get access to attorneys with relevant experience to handle such
cases, including seeking assistance from other departments on a
temporary basis. However, State's options appear to rely on ad hoc
interagency arrangements and would not build any internal expertise for
handling such cases in the future.
Agencies Faced with Balancing Multiple Priorities and Leveraging Finite
Human Resources:
Each enforcement agency's priorities--and the resources allocated to
those priorities--are influenced by the mission of the department in
which the agency resides. At times, agencies have competing priorities,
making it difficult to effectively leverage finite enforcement
personnel. Limited training on export controls has further challenged
agencies to use their enforcement personnel effectively. Some agencies
have recently taken actions to target more resources to export
enforcement activities. However, it may be too early to determine the
impact these actions will have in the long term. In addition,
priorities could shift and necessitate the reassignment of staff.
The investigative agencies have been particularly challenged to
effectively leverage their resources.
² Commerce's overall mission is to promote U.S. economic development
and technological advancements. OEE resides within Commerce's export
control agency, and its priorities emphasize investigating potential
violations of dual-use exports related to weapons of mass destruction,
terrorism, and unauthorized military end use. In carrying out these
priorities, some of OEE's nine field offices--which are responsible for
conducting investigations in multiple states, ranging from 3 to 11
states--have had difficulty pursuing investigative leads outside their
home state. Some OEE field agents told us that not having a physical
presence in the other states adversely affects their ability to
generate investigative leads, and that their caseload is largely within
their home state.
² Homeland Security's mission is to create a unified national effort to
secure the country while permitting the lawful flow of immigrants,
visitors, and trade. ICE is the largest investigative branch within
Homeland Security. In addition to investigating potential defense and
dual-use export violations, ICE investigates drug smuggling, human
trafficking and smuggling, financial crimes, commercial fraud, document
fraud, money laundering, child exploitation, and immigration fraud. ICE
has recently taken action to expand its existing investigation
workforce devoted to export control. As of September 2006, ICE data
showed that total arrests, indictments, and convictions had surpassed
the totals in each fiscal year since ICE's creation in 2003.
² Justice's overall mission is to enforce U.S. laws, and FBI's mission
is to protect the United States against terrorist and foreign
intelligence threats and to enforce criminal laws. As the lead
counterintelligence agency in the United States, FBI investigates
potential dual-use and defense export violations that have a nexus with
foreign counterintelligence. FBI has over 456 domestic offices. Fifty-
six offices are required to have at least one team of agents devoted to
counterintelligence. These teams cover all 50 states, and some agents
are located within the 456 domestic offices. FBI agents are also
responsible for conducting other investigations involving espionage and
counterproliferation.
CBP, the sole border inspection agency, has also been challenged to
leverage its resources. One of CBP's primary responsibilities is to
detect and prevent terrorists and terrorist weapons from entering U.S.
ports, and it devotes most of its resources to inspecting items and
persons entering the country. For items leaving the United States, CBP
uses an automated targeting system to identify exports for examination
by its officers. The workload and the number of officers assigned to
inspect exported cargo can fluctuate daily. For example, at one of the
nation's busiest seaports, the CBP Port Director stated that there can
be five officers assigned to inspecting exports one day and none the
next. Export enforcement efforts are further challenged by the limited
time officers have to review shipment documentation. State regulations
require 24 hours' advance notification before shipment for ship or rail
and 8 hours' advance notification for plane or truck. However, Commerce
regulations do not have time frames specified other than Census Bureau
requirements of notification prior to departure.[Footnote 27] Moreover,
some officers also spend some of their limited time hunting down items
on planes or in shipping containers because documents, such as air
waybills, cannot be located or information on items to be exported is
incomplete. CBP officials stated that they have internal initiatives
under way to address resources devoted to export control inspections.
U.S. Attorneys offices have many competing priorities, including
prosecuting cases involving terrorism, counterterrorism, and government
contractor fraud. Each of the U.S. Attorneys offices has attorneys who
can work on cases involving potential export control violations.
However, several investigators noted that the level of interest in and
knowledge of export control laws varies among AUSAs.
According to several enforcement agency officials, they would like more
advanced training on export controls that could help them use their
time more efficiently--and thereby better leverage finite resources--
but such training is limited. While some specialized training has been
provided to officers in the field, CBP has reduced the number of
training courses directly relating to export controls for the last
quarter of fiscal year 2006 primarily because of budget constraints.
CBP officials said they are considering restructuring the training
curriculum. ICE and FBI investigators also said that they would like
more opportunities for advanced training on export controls. While ICE
headquarters has not funded its advanced strategic export controls
course at the Federal Law Enforcement Training Center for the past 2
years, it reinstated this course in May 2006 and has subsequently
trained over 100 agents. ICE officials also noted that training on
weapons of mass destruction was provided to over 2,000 agents and
analysts during fiscal years 2005 and 2006. Commerce plans additional
training for OEE agents in fiscal year 2007. Justice, recognizing a
need for training on export controls for its attorneys, provided a
training conference in May 2006 for AUSAs, with presentations from
Justice, Commerce, State, and the intelligence community. Commerce,
State, and Justice have also recently sponsored training conferences
for enforcement agencies covering topics such as export control laws
and regulations, license determinations, and proving criminal intent.
Criminal Outcomes Are Not Systematically Provided to Export Control
Agencies:
Criminal indictments and convictions are key to informing the export
control process and licensing decisions. While Justice and the other
enforcement agencies have databases to capture information relating to
their own export enforcement activities (see table 3), outcomes of
criminal cases are not systematically shared with State and Commerce.
Table 3: Primary Enforcement-Related Databases at Enforcement Agencies:
Agency: Justice.
U.S. Attorneys Office;
Database: Legal Information Office Network System;
Description: Captures information on criminal cases, including outcomes
and closure date.
FBI;
Database: Automated Case Support;
Description: Captures details on investigative cases.
Counterespionage Section;
Database: Significant Export Control Cases List;
Description: Captures outcome information on significant criminal
export control cases.
Agency: Commerce.
OEE;
Database: Investigative Management System;
Description: Captures details on investigative cases.
Agency: State.
Directorate of Defense Trade Controls;
Database: Trade Registration, Enforcement and Compliance System;
Description: Captures compliance activities, including voluntary
disclosures, and license determinations.
Agency: Homeland Security.
CBP/ICE;
Database: Treasury Enforcement Communication System[A];
Description: A system of records containing law enforcement information
including suspects, ongoing investigations and enforcement actions.
CBP/ICE;
Database: Seized Asset and Case Tracking System;
Description: Captures activities associated with seizures and
investigations.
CBP/ICE;
Database: Automated Targeting System/Anti-Terrorism;
Description: A system that automatically reviews electronically filed
export documentation and compares it to inspector- defined criteria for
high-risk shipments.
Source: GAO analysis of information provided by above agencies.
[A] Many federal law enforcement agencies have certain access to the
Treasury Enforcement Communication System.
[End of table]
State and Commerce officials stated that information on the outcomes of
criminal cases, including indictments and convictions, is important to
the export licensing process, particularly since indicted or convicted
exporters may be denied from participating in the process. The Arms
Export Control Act requires that appropriate mechanisms be developed to
identify persons who are the subject of an indictment or have been
convicted of an export control violation. Specifically, if an exporter
is the subject of an indictment or has been convicted under various
statutes, including the Export Administration Act, State may deny the
license application. Further, Commerce can deny export privileges to an
exporter who has been criminally convicted of violating the Export
Administration Act or Arms Export Control Act. According to both State
and Commerce officials, information on indictments and convictions is
gathered through an informal process. For example, an ICE agent, who
serves as a liaison with State and is colocated with State's export
control officials, compiles criminal statistics from ICE field offices
in a monthly report that is shared with State compliance officials.
Information on criminal export control prosecution outcomes could help
inform the export control process by providing a complete picture of
the individual or company seeking an export license or trends in
illegal export activities.
Conclusions:
Agencies responsible for enforcement have to operate within the
construct of a complex export control system, which offers its own set
of challenges from the outset. Further compounding this situation is
the failure to coordinate some investigations and address a host of
other challenges that can lead to a range of unintended outcomes, such
as the termination of investigative cases. At a minimum, limited
resources available for enforcement efforts may not be used
effectively. Consequently, there is a need to ensure that enforcement
agencies maximize finite resources and efforts to apprehend and punish
individuals and companies who illegally export sensitive items that may
be used to subvert U.S. interests.
Recommendations for Executive Action:
To enhance coordination in the current system, we recommend that the
Secretary of Commerce direct the Under Secretary for Industry and
Security, the Secretary of Homeland Security direct the Assistant
Secretary of Homeland Security for U.S. Immigration and Customs
Enforcement, and the Attorney General direct the Director of the FBI in
conjunction with the Assistant Attorney General in charge of the
National Security Division to take the following two actions:
² establish a task force to evaluate options to improve coordination
and cooperation among export enforcement investigative agencies, such
as creating new or updating existing operating agreements between and
among these agencies, identifying and replicating best practices for
routinely collaborating on or leading investigations, and establishing
a mechanism for clarifying roles and responsibilities for individual
export control cases involving foreign counterintelligence, and:
² report the status of task force actions to Congress.
To ensure discipline and improve information needed for license
determinations, we recommend that the Secretary of Homeland Security
direct the Assistant Secretary of Homeland Security for U.S.
Immigration and Customs Enforcement and the Secretary of Commerce
direct the Under Secretary for Industry and Security to establish goals
for processing license determinations. We also recommend that that
Secretary of Homeland Security direct the Assistant Secretary of
Homeland Security for U.S. Immigration and Customs Enforcement, the
Secretary of Commerce direct the Under Secretary for Industry and
Security, and the Secretary of State direct the Deputy Assistant
Secretary for Defense Trade Controls to coordinate with licensing
officers, inspectors, investigators, and prosecutors to determine what
additional training or guidance is needed on license determinations,
including the type of information needed to make license
determinations.
To ensure systematic reconciliation of shipments with Commerce
licenses, we recommend that the Secretary of Commerce direct the Under
Secretary for Industry and Security, in consultation with the
Commissioner of Homeland Security's U.S. Customs and Border Protection,
to determine the feasibility of establishing a requirement for CBP to
decrement Commerce licenses and an action plan for doing so.
To ensure that State and Commerce have complete information on
enforcement actions, we recommend that the Attorney General direct the
Director of the Executive Office for U.S. Attorneys, in consultation
with the Assistant Attorney General in charge of the National Security
Division, to establish formal procedures for conveying criminal export
enforcement results to State's Directorate of Defense Trade Controls
and Commerce's Bureau of Industry and Security.
Agency Comments and Our Evaluation:
The Departments of Commerce, Homeland Security, and State provided
comments on a draft of this report. Justice and Defense did not provide
formal comments. Commerce, Homeland Security, Justice, and State also
provided technical comments, which we incorporated in this report as
appropriate. Overall, the departments providing comments agreed with
the need for coordination, but in some instances, noted some
differences in possible approaches. They also indicated that certain
actions were already under way to address some of our recommendations.
We modified one recommendation accordingly.
In commenting on our first recommendation--to establish a task force to
improve coordination and cooperation among export enforcement
investigative agencies and report the status of task force actions to
the Congress--Commerce stated that it was already taking action to
improve coordination through various work groups and acknowledged that
it will continue to seek ways to improve coordination. Commerce also
commented that the draft report does not provide the data and analysis
to support that there is a lack of coordination. We disagree. We spoke
with numerous agents in the field who cited coordination as a
challenge. The examples we provided were illustrations of some of the
types of coordination challenges that existed. Our evidence indicates
that coordination is a challenge given that three agencies with
differing approaches have concurrent jurisdiction to investigate
potential violations of export control laws. At times, these agencies
have competing priorities, making it difficult to leverage finite
enforcement personnel for oftentimes complex cases.
Homeland Security agrees in principle with our first recommendation,
but believes the establishment of an Export Enforcement Coordination
Center within ICE would address coordination concerns in the most
immediate and comprehensive manner. Homeland Security's solution is one
option for improved coordination. However, it would need to work with
the other enforcement agencies to determine the viability of this
option. Our recommendation for a joint task force is the means by which
to do so. In its technical comments related to coordination, Justice
commented that FBI looks forward to working closely with other export
enforcement agencies.
In its comments on our second recommendation--to establish goals for
the processing of license determinations and coordinate with other
enforcement officials to determine what additional training or guidance
is needed on license determinations--Commerce noted it was already
taking action to improve license determination efforts through
developing procedures and leading and participating in training
conferences on export enforcement. However, these actions do not fully
address our recommendation on establishing goals. Specifically,
Commerce has not established formal license determination response
times in conjunction with the Exodus Command Center, which is a key
means by which license determination requests are processed. Homeland
Security agreed to support goal setting by providing input from a law
enforcement perspective. In its comments on our draft report, State
indicated that it had already established goals for processing license
determinations in conjunction with the Exodus Command Center. As a
result, we revised our recommendation to direct that Commerce and
Homeland Security establish goals for processing license
determinations. State concurred with our recommendation to determine
what additional training or guidance is needed on license
determinations. Specifically, State has agreed with Homeland Security
to update and clarify its guidance on license determinations. State
further noted that consulting with FBI and ICE regarding additional
training for coordinating State's support to their criminal
investigations would build upon its past and ongoing work in this area.
Regarding our third recommendation--to determine the feasibility of
having Homeland Security's Customs and Border Protection officers
decrement Commerce export licenses--Commerce expressed some
reservation. Specifically, Commerce stated that it has seen no data to
indicate that the underlying issue is of sufficient enforcement concern
and that automated systems would need to be developed within CBP to
support this effort. We do not believe that Commerce should dismiss
this recommendation without further analysis. We previously reported
that Commerce has not conducted comprehensive analyses of items that
have been exported;[Footnote 28] therefore it is not in a position to
know whether it is an enforcement concern. In addition, while resources
devoted to outbound enforcement are limited within CBP, it has an
automated export system, which is used for decrementing State licenses.
This allows CBP officers to ensure accountability on the part of
exporters and that State regulations have been properly followed.
Homeland Security commented that CBP officials are prepared to act when
contacted by Commerce regarding our recommendation.
With respect to our last recommendation--that Justice establish formal
procedures for conveying export enforcement results to State and
Commerce--Commerce agreed, citing that it supports efforts to improve
coordination and communication. Justice indicated support for sharing
such information. State also supports this recommendation and noted
that it welcomed any additional information that Justice can provide
regarding the outcomes of criminal cases involving export control and
related violations to help State carry out its regulatory
responsibilities.
Formal written comments provided by Commerce, Homeland Security, and
State are reprinted in appendixes III, IV and V, respectively.
We are sending copies of this report to interested congressional
committees, as well as the Secretaries of Commerce, Defense, Homeland
Security, and State; the Attorney General; the Director, Office of
Management and Budget; and the Assistant to the President for National
Security Affairs. In addition, this report will be made available at no
charge on the GAO Web site at [Hyperlink, http://www.gao.gov].
Please contact me at (202) 512-4841 or calvaresibarra@gao.gov if you or
your staff have any questions concerning this report. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Others making key contributions
to this report are listed in appendix VI.
Signed by:
Ann Calvaresi-Barr:
Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To describe the roles, responsibilities, and authorities of the
agencies responsible for export control enforcement of defense and dual-
use items, we interviewed cognizant officials, examined relevant
documents, and analyzed export control statutes. We interviewed
officials about their enforcement roles and responsibilities at the
headquarters of the Departments of Commerce, Homeland Security,
Justice, and State. We also discussed with Department of Defense
officials their role in providing investigative support to agencies
responsible for export control enforcement. We developed and used a set
of structured questions to interview over 115 inspectors,
investigators, and prosecutors in selected locations and observed
export enforcement operations at those locations that had air, land, or
seaports. We selected sites to visit based on various factors including
geographic areas where all enforcement agencies were represented and
areas with a mix of defense and high-tech companies represented; field
offices with a range of investigative tools available to agents; and
experience levels inspectors, agents, and prosecutors had in enforcing
export control laws and regulations. On the basis of these factors, we
visited Irvine, Long Beach, Los Angeles, Oakland, Otay Mesa, San Diego,
San Francisco, and San Jose, California; Fort Lauderdale and Miami,
Florida; Boston, Massachusetts; Newark and Trenton, New Jersey; and New
York, New York. Additionally, we examined agent operating manuals,
inspector handbooks, and a Federal Register notice, which further
define the roles and responsibilities of enforcement agencies. To
describe export enforcement authorities, we analyzed various statutes
and identified the varying enforcement requirements promulgated through
implementing regulations.
Our structured interviews with officials also enabled us to identify
challenges agencies faced in enforcing export control laws and
regulations. We documented examples of coordination challenges among
the investigative agencies and obtained and summarized information on
significant export control cases identified by these agencies. We also
examined existing memorandums of understanding and agency guidance on
coordinating investigations. To document the impact that license
determinations have on enforcement activities, we obtained examples of
license determinations through Commerce's Office of Export Enforcement
and conducted a case file review of license determinations for fiscal
year 2005 at Homeland Security's Exodus Command Center based on
available information on-site. We selected a cross-section of license
determination files to review that included requests for defense and
dual-use items and that varied in response times. We discussed with
Commerce and Homeland Security officials efforts to improve the license
determination process. Through our interviews, we also identified
challenges with criminal prosecutions and confirmed with headquarters
the difficulties in obtaining sufficient evidence. Finally, we
identified challenges with agencies' priorities and human resources and
obtained information on staffing levels and priorities for assigning
resources. We also reviewed agency training materials to identify
export control training available to enforcement personnel.
To assess whether information on criminal enforcement outcomes is
provided to export control agencies, we identified export control
enforcement information maintained at the various agencies, such as
criminal convictions and indictments for violations of export control
laws. We also spoke with State licensing and policy officials and
Commerce officials to assess whether they received and used this
information for informing licensing or other decisions for defense or
dual-use items. We also spoke with Justice officials to determine
whether the department systematically provided criminal export control
prosecution outcome information to State and Commerce export control
agencies.
[End of section]
Appendix II: Summary of Selected Export Control Enforcement Cases:
For fiscal year 2005, investigative agencies identified several
examples of export control enforcement cases, as shown in table 4.
Table 4: Selected Export Control Cases for Fiscal Year 2005:
Description: Polygraph machines to China: A company and its president
illegally exported polygraph machines to China without required export
licenses;
Punitive action: The company and its president were sentenced to
probation and a criminal fine for criminal export violations. They also
agreed to pay administrative penalties, and the company agreed to a
suspended denial of export privileges.
Description: U.S. fighter jet components to Iran: A businessman pled
guilty to Arms Export Control Act and money laundering violations. The
businessman sought to obtain gunnery systems for fighter jets for
export to Iran, and in meetings with undercover agents attempted to
acquire several fully assembled F-14 fighter jet aircraft for future
shipment to Iran;
Punitive action: The businessman was sentenced to a 57- month
incarceration and a 2-year supervised release.
Description: Night vision technology and electronics components to
China: Two individuals violated the Arms Export Control Act by
attempting to obtain U.S. night vision equipment, military grade power
converters, and traveling wave tubes used in satellite and radar
applications for export to China;
Punitive action: The individuals were arrested and indicted for
conspiring to violate the Arms Export Control Act. One individual was
found not guilty by jury trial, while the other was sentenced to 24
months in prison and a 3-year supervised release.
Description: U.S. fighter jet and military helicopter components to
Malaysia, Belgium, and United Arab Emirates: A Pakistani national
illegally exported military aircraft parts to various countries. The
individual had a previous 1987 conviction for illegally exporting HAWK
missile components to Iran;
Punitive action: The Pakistani national was indicted on four counts of
violating the Arms Export Control Act. He was convicted and sentenced
to 150 months' imprisonment.
Description: Assault rifles to Colombian terrorist organization: During
meetings with undercover agents, a Colombian national negotiated and
attempted to purchase assault rifles and machine guns for illegal
export to a U.S.-designated terrorist organization in Columbia. A
subsequent investigation identified two coconspirators;
Punitive action: The Colombian national was arrested and pled guilty to
violating the Arms Export Control Act. One coconspirator has been
arrested; the other remains at large.
Description: Missile and fighter jet components to China: An individual
conspired to illegally export parts for the F-14 fighter jet and
components for various missile systems to China. Agents arrested the
individual and her husband as a result of a lengthy undercover
investigation targeting U.S. companies that illegally sold defense
articles over the Internet to foreign buyers;
Punitive action: The individual and her husband were each sentenced to
a 30-month imprisonment, and the individual was also fined $6,000.
Description: Components with nuclear weapons applications to Pakistan
and India: An individual from Pakistan was charged with illegally
exporting oscilloscopes with nuclear weapons applications, as well as
plotting to illegally export 66 nuclear detonator devices to Pakistan.
An Israeli national pled guilty to helping to export the oscilloscopes
and nuclear triggers, and illegally exporting sensitive U.S.
electronics to facilities in India that are involved in that nation's
nuclear and missile development program;
Punitive action: The individual currently remains at large. The Israeli
national pled guilty and was sentenced to a 36-month imprisonment.
Description: Military night vision equipment to China: An individual
attempted to illegally export plastic optical filters suitable for
night vision lighting, night vision goggles with helmet mounts for
fixed-wing and rotary aircraft, as well as liquid crystal displays that
can be integrated into avionics. A U.S. citizen conspired to obtain
night vision goggles;
Punitive action: The individual pled guilty to one count of conspiracy
and will be sentenced at a later date. The U.S. coconspirator pled
guilty to one count of violating the Export Administration Act for his
role.
Description: Weapons to Colombian terrorist group: An individual
plotted to provide arms to a Colombian terrorist group in violation of
the Arms Export Control Act;
Punitive action: The individual pled guilty and was sentenced to a 25-
year federal imprisonment.
Description: Military laser sights to foreign locations: A Japanese
national conspired to purchase and illegally export military laser
sights to Japan in violation of the Arms Export Control Act;
Punitive action: The individual was sentenced to a 15-month
incarceration and was subsequently deported from the United States for
conspiracy.
Description: U.S. fighter jet components to Iran: A Tehran-based broker
attempted to purchase and illegally export U.S. F-14 fighter jet
components to the Iranian military. The individual-who asserted he
worked on behalf of the Iranian Ministry of Defense-also negotiated
with undercover agents over the illegal export of complete military
helicopters and C-130 military aircraft electrical and avionic upgrades
to Iran;
Punitive action: The broker was sentenced to a 41-month federal
imprisonment.
Description: U.S. military night vision systems to Iranian military:
U.S. agents and Austrian authorities thwarted a plot to illegally
supply the Iranian military with thousands of advanced military night
vision systems from the United States. U.S. agents learned that an arms
broker in Tehran was seeking U.S. military night vision goggles for the
Iranian military from vendors in the United States. Austrian
authorities arrested one of the individuals and another coconspirator
after the pair took possession of the first night vision system;
Punitive action: A grand jury indicted the individuals with conspiracy,
violating the Arms Export Control Act, money laundering, forfeiture,
and aiding and abetting. These individuals remain at large.
Description: Military antenna controls to Spain: An individual
attempted to illegally export radar antenna control boxes to Spain for
use by the Spanish Air Force without the required export license in
violation of the Arms Export Control Act;
Punitive action: The individual was sentenced to 2 years' probation and
fined $2,500.
Description: Military helicopter engines and night vision systems to
China: A South Korean citizen attempted to illegally export Black Hawk
helicopter engines and other military items to China. Agents arrested
the individual as he attempted to board a plane bound for China with
military night vision equipment in his luggage. The South Korean
government worked closely with U.S. agents on the investigation;
Punitive action: The South Korean citizen pled guilty to violating the
Arms Export Control Act and was sentenced to a 32-month federal
imprisonment, to be followed by deportation from the United States.
Description: Restricted electronic equipment to China: Four individuals
conspired to illegally export more than $500,000 in restricted
electronic components to China. The components in question could be
used in a wide variety of military radar and communications
applications;
Punitive action: The four individuals were charged with conspiring to
violate the International Emergency Economic Powers Act, the Export
Administration Regulations, and money laundering violations. One
individual was sentenced to 6 months' time served and fined $1,500.
Another was sentenced to a 46-month federal imprisonment and fined
$2,000. A different individual was convicted at trial for five counts
of violating the International Emergency Economic Powers Act,
conspiracy, money laundering, and false statements and sentenced to a
60-month incarceration and a $50,000 fine. Another coconspirator was
sentenced to a 42-month incarceration and was ordered to pay a $50,000
fine.
Description: Sensitive military technology to China: Seven individuals
were indicted on export violations alleging they used their two
companies to illegally export sensitive national-security controlled
items to state-sponsored institutes in China. According to the
complaints, the individuals were illegally exporting millions of
dollars worth of items used in a variety of defense weapons systems,
including smart weapons, radar, and electronic warfare and
communications systems;
Punitive action: Four of the coconspirators pled guilty to violating
the Arms Export Control Act, the International Emergency Economic
Powers Act, conspiracy to violate the Export Administration
Regulations, aiding and abetting, and providing false statements.
Description: Military night vision technology to China: Two individuals
and a company were indicted for illegally brokering the sale of
military and commercial-grade night vision technology to China. Court
documents in the case alleged the pair had entered into a contract with
the Chinese military to produce technology for night vision equipment
in China;
Punitive action: A jury failed to reach a unanimous verdict in the
trial of one coconspirator and a new trial is scheduled.
Source: GAO analysis of information provided by investigative agencies.
[End of table]
[End of section]
Appendix III: Comments from the Department of Commerce:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
United States Department Of Commerce:
Under Secretary for Industry and Security:
Washington, D.C. 20230:
October 3, 2006:
Ms. Ann Calvaresi-Barr:
United States Government Accountability Office:
Washington, DC 20548:
Dear Ms. Calvaresi-Ban:
The Bureau of Industry and Security (BIS) welcomes the opportunity to
provide comments on the draft report, "Export Controls: Challenges
Exist in Enforcement of an Inherently Complex System," GAO-07-13.
Our comments are provided in two sections: first, on the
recommendations made in the report; and second, on technical comments
and clarifications to the text.
Please direct any inquiries regarding these comments to Julissa Hurtado
at (202) 482-8093 or jhurtado@bis.doc.gov.
Sincerely,
Signed by:
Mark Foulon, Acting:
Enclosure:
BIS Comments on Draft Report Export Controls: Challenges Exist in
Enforcement of an Inherently Complex System. GAO-07-13.
Recommendation 1: That the Departments of Commerce, Justice, State, and
Homeland Security establish a task force to consider options of
improved coordination of export enforcement efforts; and report the
status of task force actions to Congress:
Commerce's Bureau of Industry and Security (BIS) believes good
coordination currently exists among agencies involved in export
enforcement. For example, of the 48 cases cited on BIS's Major Cases
List dated August 2006 (attached), 24 involved coordination with one or
more partner agencies. BIS's Office of Export Enforcement (OEE)
Headquarters staff and Special Agents in Charge of OEE's field offices
routinely meet and interact with their counterparts at the Federal
Bureau of Investigation (FBI) and Immigration and Customs Enforcement
(ICE) to coordinate, conduct, and oversee joint enforcement efforts.
Moreover, OEE currently participates in a number of interagency working
groups, task forces, and joint efforts with the FBI and ICE addressing
joint export enforcement efforts, including interagency working groups
at the Headquarters level, and the Joint Terrorism Task Forces and
Regional Counter Intelligence Working Groups in the field. OEE meets
quarterly with ICE to coordinate cases and issues under the 1993
Memorandum of Understanding between BIS and ICE, and has designated
points of contact to coordinate and discuss issues on an as-needed
basis.
The draft report does not provide compelling data and analysis to the
contrary, as it cites only three limited, anecdotal examples of less
than optimal coordination between agencies. Of the two examples
involving BIS, the one involving the FBI does not in fact involve a
lack of coordination. The other involves an instance in which BIS
prevented the commission of an export violation. This action was
consistent with the high premium that BIS places on preventing
violations of the Export Administration Regulations (EAR) and keeping
sensitive items out of dangerous hands.
However, it is always possible to improve coordination, and BIS will
continue to seek ways to do so.
Recommendation 2: That the Departments of Commerce, State, and Homeland
Security establish goals for the processing of license determinations
and coordinate with stakeholders on training and guidance.
As noted in the draft report, BIS has already implemented steps to
improve the processing of BIS license determinations. During the past
year, BIS has developed a procedures template to guide Export
Administration (EA) and Export Enforcement (EE) officers in the
processing of licensing determinations, and BIS's Fiscal Year 2007 Game
Plan establishes a goal for average processing time of 35 days for
license determinations (excluding Exodus). EA licensing officers and
representatives from the Office of Chief Counsel for Industry and
Security have conducted training sessions on these new procedures with
the OEE Field Offices in Boston, Chicago, Dallas, Virginia, Houston,
Miami, Los Angeles, San Jose, and New York. Additionally, BIS is
finalizing guidance to partner agencies on the submission of license
determination requests sufficient to support sustainable
determinations, and welcome the input of our interagency partners in
this process.
BIS has also led and participated in training conferences during the
past year for Special Agents and attorneys of the Departments of
Commerce, Justice, State, and Homeland Security on export enforcement
prosecutions, including license determination requirements and
procedures. This training has included the Department of Justice
training noted in the draft report, which was presented at Justice's
National Advocacy Center (NAC); as well as training jointly prepared
and presented with the Departments of State and Justice in four other
locations in Fiscal Year 2006 (Boston, Los Angeles, San Jose, and
Chicago). BIS plans to continue this training, with sessions at the NAC
and field sites, in Fiscal Year 2007.
Recommendation 3: That the Departments of Commerce and Homeland
Security determine the feasibility of Customs and Border Protection's
(CBP's) decrementing Commerce export licenses.
BIS has reservations regarding this recommendation, which has been
proposed in the past. BIS has seen no data to indicate that the
underlying issue - verification that the quantities of items otherwise
authorized for export do not exceed tolerable limits - is of sufficient
enforcement concern to justify the burdens that would be placed on U.S.
exporters, CBP, and BIS, when compared to enforcement concerns such as
those regarding exports of materials with Weapons of Mass Destruction
(WMD) and other applications to proliferators, rogue states, and
terrorists. Few if any significant enforcement cases or diversions have
occurred as a result of legitimate exporters exceeding those limits.
Moreover, automated systems to support CBP's decrementing BIS licenses
would have to be developed to support this function. Finally, the draft
report notes that CBP currently devotes a limited number of personnel
to outbound examinations; it is not clear that this would be sufficient
to meet the needs of this recommendation.
Recommendation 4: That the Justice Department establish formal
procedures to convey criminal enforcement results to Commerce and
State.
BIS supports efforts to improve coordination and communication.
The following are GAO's comments from the Department of Commerce letter
dated October 3, 2006.
GAO Comments:
1. While OEE and ICE had prior contact with FBI before it pursued this
case, the agencies did not act together in a concerted way to determine
the best way to proceed with this case.
2. Commerce believed that its actions prevented the commission of an
export violation. However, its lack of coordination in taking this
action undermined enforcement activities.
[End of section]
Appendix IV: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
October 10, 2006:
Ms. Ann Calvaresi-Barr:
Director:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Calvaresi-Barn:
RE: Draft Report GAO-07-13, Export Controls: Challenges Exist In
Enforcement of an Inherently Complex System (GAO Job Code 120489):
The Department of Homeland Security (DHS) appreciates the opportunity
to review and comment on the draft report referenced above. The
Government Accountability Office (GAO) makes four recommendations,
three of which regard or affect DHS components.
The Department and U.S. Immigration and Customs Enforcement (ICE)
officials agree that federal agencies could better coordinate efforts
to address the proliferation of licensable U.S. technologies to
terrorists and other criminals. The draft report, however, does not
specifically address a significant source of coordination conflicts
relating to Federal Bureau of Investigation (FBI) export enforcement
authorities where a nexus to foreign counterintelligence (FCI) exists.
Furthermore, federal agencies do not agree on a uniform definition of
FCI. We address these concerns, in the context of the first two
specific GAO recommendations, in greater detail below.
Recommendation 1: To enhance coordination in the current system, [GAO]
recommends that the Secretary of Commerce direct the Under Secretary
for Industry and Security, the Secretary of Homeland Security direct
the Assistant Secretary of Homeland Security for U.S. Immigration and
Customs Enforcement, and the Attorney General direct the Director of
the Federal Bureau of Investigation in conjunction with the Assistant
Attorney General in charge of the Criminal Division to take the
following two actions:
* establish a task force to evaluate options to improve coordination
and cooperation among export enforcement investigative agencies, such
as creating new or updating existing operating agreements between and
among these agencies; identifying and replicating best practices for
routinely collaborating on investigations; and establishing a mechanism
for clarifying roles and responsibilities for individual export control
cases involving foreign counterintelligence, and:
* report the status of task force actions to the Congress.
ICE officials concur in part. ICE personnel are responsible for export
enforcement investigations within DHS. The Department and ICE agree in
principle that greater cooperation and coordination are crucial to the
most effective U.S. government response to the proliferation of U.S.
technology and arms to terrorists and other criminals. For reasons
detailed below, ICE officials believe the establishment of an Export
Enforcement Coordination Center (EECC) within ICE would address
coordination concerns in the most immediate and comprehensive manner.
ICE has the broadest export enforcement authorities of any U.S. law
enforcement agency and has been exercising these authorities for over
100 years through a legacy agency. A notice published in November 2004
modified 28 CFR Part 0.85(d) to indicate that the Attorney General's
delegation of authority to the FBI included lead investigatory role for
Arms Export Control Act (AECA), the Trading with the Enemy Act (TWEA),
the Export Administration Act (EAA), and the International Emergency
Economic Powers Act (IEEPA) violations related to foreign
counterintelligence matters. Shortly after this action, DHS and DOJ
issued a joint public statement to reaffirm the traditional lead
investigatory role of DHS through ICE in export control cases and that
of the FBI in foreign counterintelligence investigations. The
modification did not define FCI or determine what represents a nexus to
FCI, which creates significant interagency differences in
interpretation. This issue is further exacerbated by the variation in
FBI interpretation depending upon the representative or venue. In one
instance, FBI management told ICE officials that they consider every
technology transfer investigation involving the People's Republic of
China to have a nexus to FCI, whether or not a definitive link to
espionage, sabotage, or assassinations (FCI activities as defined under
50 U.S.C. 401) is present. Based upon ICE's significant experience and
expertise, ICE officials believe that very few investigations result in
the identification of FCI targets as most proliferators of technology
are businessmen or brokers solely motivated by illicit profits.
As noted in the GAO report, ICE has existing export enforcement
coordination procedures with the Department of Commerce (DOC) that have
been in effect for over 20 years, and has provided cohesive and
consistent coordination guidance to both organizations. The existing
coordination procedures require, in part, that DOC seek ICE concurrence
and coordination prior to any searches, seizures and detentions at
ports of entry. In addition, DOC must allow ICE attaches to pursue
investigative leads outside the United States, except under limited
circumstances as delineated in the coordination procedures. In ICE's
view, the existing protocols work, as evidenced by the lack of specific
examples of coordination challenges. Accordingly, ICE does not object
to updating the procedures to include appropriate agency
identification; for instance, the document currently references the
U.S. Customs Service's Office of Investigations, but should instead
identify ICE's Office of Investigations (OI). However, ICE does not
agree to any substantive changes that would modify existing protocols
among relevant parties.
In order to further improve coordination, ICE officials propose the
creation of an EECC at ICE Headquarters within the National Security
Investigations Division. The EECC would function as a clearinghouse for
de-conflicting and coordinating all export enforcement matters, with an
ICE official serving as the Unit Chief of the EECC. In doing so, ICE
would be exercising its leadership position within export enforcement
and leveraging unique authorities, assets and experience. The FBI and
DOC would designate one official each to serve as Associate Unit Chiefs
of the EECC. Other organizations would be provided an opportunity to
participate in the EECC including Customs and Border Protection (CBP),
Defense Criminal Investigative Service, Defense Security Service, Naval
Criminal Investigative Service.
ICE, DOC and FBI personnel, who would have unfettered access to the
relevant ICE, DOC and FBI databases, would staff the EECC. The EECC
would conduct reviews of all participating agencies' export
investigations to determine the most appropriate interagency response,
to include creating an acceptable definition of FCI. The EECC would
coordinate and direct new investigative leads to field components of
each agency for response by all participating agencies. Further, the
EECC would assure that agencies coordinate on existing investigations
as well. Under an option like this, the goal of the GAO recommendation
would be met and U.S. government export enforcement and FCI efforts
would improve significantly.
Recommendation 2: To ensure discipline and improve information needed
for license determinations, [GAO] recommends that the Secretary of
Homeland Security direct the Assistant Secretary of Homeland Security
for U.S. Immigration and Customs Enforcement, the Secretary of Commerce
direct the Under Secretary for Industry and Security, and the Secretary
of State direct the Deputy Assistant Secretary for Defense Trade
Controls, to take the following two actions:
* establish goals for processing license determinations and:
* coordinate with licensing officers, inspectors, investigators, and
prosecutors to determine what additional training or guidance is needed
on license determinations, including the type of information needed to
make license determinations.
ICE officials concur in part. In regard to establishing goals for
processing license determinations, the ICE Exodus Command Center (ECC)
acts as a conduit for licensing requests from CBP officers and ICE
special agents. ICE is not a licensing agency. The ECC directs
licensing requests to licensing agencies including Commerce, State, the
Nuclear Regulatory Agency, the Department of Treasury Office of Foreign
Assets Control (OFAC), and others. The licensing agencies are
responsible for the actual determinations and the length of time
necessary to render those decisions. ICE would support licensing
agencies in goal setting through input from a law enforcement
perspective, in order to support timely and accurate licensing
determinations and the viability of export enforcement investigations.
ICE officials created the Exodus Accountability Referral System (EARS)
operated within the ECC to increase effectiveness and efficiency. EARS
is an intranet based automated system to initiate, track and manage
licensing determinations sent to the ECC by CBP and ICE field
components. EARS facilitates timely submissions, decisions and
resolutions through electronic alerts and processing. EARS also
supports information sharing and reporting capabilities and provides
users with the capability to evaluate and measure export enforcement
results. Finally, it provides an effective method to assure uniformity
is maintained in the referral process.
ICE agents receive timely training related to the licensing
determination process through the Strategic Investigations Training
Seminar (SITS). SITS is a two-week advanced export enforcement training
course offered at the Federal Law Enforcement Training Center (FLETC)
and at seven ICE Special Agent in Charge offices in the field.
Approximately 125 agents and analysts received this training. OI
personnel have provided written guidance to field offices relating to
obtaining "second-level reviews" from the Department of State, to
include identifying all information required to make a most complete
licensing determination possible. Further, OI officials have provided
training through conferences detailing the licensing process and
required information. ICE employees also provide training to other
agencies, including the Department of Commerce, the Federal Bureau of
Investigation, Department of Defense agencies and the Department of
Justice. ICE officials will continue to emphasize the need for the most
accurate and complete specifications available from field offices in
order to obtain licensing determinations during all training events and
related conferences.
Recommendation 3: To ensure systematic reconciliation of shipments with
Commerce licenses, [GAO] recommends that the Secretary of Commerce
direct the Under Secretary for Industry and Security, in consultation
with the Commissioner of Homeland Security's U.S. Customs and Border
Protection, to determine the feasibility of establishing a requirement
for CBP to decrement Commerce licenses and an action plan for doing so.
The recommendation is directed to the Department of Commerce because
the affected business processes are owned by Commerce. CBP officials
are aware that Commerce personnel will contact them to assist in
responding to the recommendation and are prepared to act when
contacted.
The fourth and final recommendation does not involve the Department of
Homeland Security or its components and we have no comments thereon.
We have provided technical comments separately and believe that their
inclusion will enhance the accuracy of the report.
Sincerely,
Signed by:
Steven J. Pecinovsky:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix V: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Management and Chief Financial
Officer:
Washington, D.C. 20520:
NOV 3 2006:
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: Challenges Exist in Enforcement of an Inherently Complex
System," GAO Job Code 120489.
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
David Trimble, Director, Bureau of Political and Military Affairs at
(202) 663-2807.
Sincerely,
Signed by:
Bradford R. Higgins:
cc: GAO - Anne-Marie Lasowski:
PM - John Hillen:
State/OIG ; Mark Duda:
Department of State Comments on GAO Draft Report:
Export Controls: Challenges Exist In Enforcement of an Inherently
Complex System (GAO-07-13/GAO Code 120489):
We appreciate the opportunity to comment on the GAO's draft report
entitled "Export Controls: Challenges Exist in Enforcement of an
Inherently Complex System."
The Department of State is pleased that the draft GAO report highlights
the complexities inherent in export control enforcement and the steps
the Department has taken to address these challenges. Recognizing this
complexity and the need for effective interagency coordination, earlier
this year the Department co sponsored with the Department of Commerce a
successful multi-agency export enforcement conference to train and
educate the key players from the law enforcement and regulatory
communities on the criminal enforcement of export cases. Also providing
critical support and coordination in this area are the permanent
liaisons from Immigration and Customs Enforcement (ICE) and Federal
Bureau of Investigation (FBI) assigned to the Department to coordinate
and support criminal investigations. These efforts are producing
results. In fiscal year 2006, there was a 50% jump in the Department's
direct support to investigations and criminal trials from the previous
year, as well as large increases in the number of Arms Export Control
Act (AECA) related arrests and indictments.
While the Department has a strong record of imposing civil penalties
for violations of the regulations, the GAO report correctly notes that
the Department has never brought formal civil charges before an
Administrative Law Judge as provided for in the law. While we do not
believe there are a significant number of civil enforcement cases that
merit being brought before an Administrative Law Judge, we are
currently examining options for providing the necessary legal support
and access to Administrative Law Judges to make it possible to pursue
such cases.
The Department concurs with the report's recommendations to consult
with the FBI and ICE regarding additional training for coordinating
State's support to their criminal investigations. This will build upon
our past and ongoing work in this area. The Department also welcomes
any additional information the Department of Justice (DOJ) can provide
regarding the outcomes of criminal cases involving export control and
related violations to help the Department carry out its regulatory
responsibilities. The Department already established goals in 2004 for
providing regulatory support to the enforcement community within
specified time periods. Based on the one incident cited in the report
of confusion over this guidance, the Department has already reached
agreement with Immigration and Customs Enforcement to update and
clarify this guidance.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
Ann Calvaresi-Barr (202) 512-4841 or calvaresibarra@gao.gov:
Acknowledgments:
In addition to the contact name above, Anne-Marie Lasowski, Assistant
Director; Matthew Cook; Lisa Gardner; Arthur James, Jr; Karen Sloan;
Lillian Slodkowski; Suzanne Sterling; and Karen Thornton made key
contributions to this report.
Related GAO Products:
Defense Technologies: DOD's Critical Technologies List Rarely Informs
Export Control and Other Policy Decisions. GAO-06-793. Washington,
D.C.: July 28, 2006.
Export Controls: Improvements to Commerce's Dual-Use System Needed to
Ensure Protection of U.S. Interests in the Post-9/11 Environment. GAO-
06-638. Washington, D.C.: June 26, 2006.
Defense Trade: Arms Export Control Vulnerabilities and Inefficiencies
in the Post-9/11 Security Environment. GAO-05-468R. Washington, D.C.:
April 7, 2005.
Defense Trade: Arms Export Control System in the Post-9/11 Environment.
GAO-05-234. Washington, D.C.: February 16, 2005.
Foreign Military Sales: DOD Needs to Take Additional Actions to Prevent
Unauthorized Shipments of Spare Parts. GAO-05-17. Washington, D.C.:
November 9, 2004.
Nonproliferation: Improvements Needed to Better Control Technology
Exports for Cruise Missiles and Unmanned Aerial Vehicles. GAO-04-175.
Washington, D.C.: January 23, 2004.
Export Controls: Post-Shipment Verification Provides Limited Assurance
That Dual-Use Items Are Being Properly Used. GAO-04-357. Washington,
D.C.: January 12, 2004.
Nonproliferation: Strategy Needed to Strengthen Multilateral Export
Control Regimes. GAO-03-43. Washington, D.C.: October 25, 2002.
Export Controls: Processes for Determining Proper Control of Defense-
Related Items Need Improvement. GAO-02-996. Washington, D.C.: September
20, 2002.
Export Controls: Department of Commerce Controls over Transfers of
Technology to Foreign Nationals Need Improvement. GAO-02-972.
Washington, D.C.: September 6, 2002.
Export Controls: More Thorough Analysis Needed to Justify Changes in
High-Performance Computer Controls. GAO-02-892. Washington, D.C.:
August 2, 2002.
Export Controls: Rapid Advances in China's Semiconductor Industry
Underscore Need for Fundamental U.S. Policy Review. GAO-02-620.
Washington, D.C.: April 19, 2002.
Defense Trade: Lessons to Be Learned from the Country Export Exemption.
GAO-02-63. Washington, D.C.: March 29, 2002.
Export Controls: Issues to Consider in Authorizing a New Export
Administration Act. GAO-02-468T. Washington, D.C.: February 28, 2002.
Export Controls: Actions Needed to Improve Enforcement. GAO/NSIAD-94-
28. Washington, D.C.: December 30, 1993.
(120615):
FOOTNOTES
[1] For the purposes of this report, "items" refers collectively to
commodities, software, technology, and services.
[2] "Countries of concern" refers to those countries that the U.S.
government believes may support terrorism or contribute to the
proliferation of weapons of mass destruction.
[3] Inspections are primarily conducted by Homeland Security's Customs
and Border Protection officers.
[4] 22 U.S.C. § 2751 et seq. and 50 U.S.C. App. § 2401 et seq. The
Export Administration Act is not permanent legislation. 50 U.S.C. App.
§ 2419. Authority granted under the act lapsed in August 2001. However,
Executive Order 13222, Continuation of Export Control Regulations,
which was issued in August 2001 under the authority provided by the
International Emergency Economic Powers Act (50 U.S.C. §§1701 et seq.),
continues the controls established under the act, and the implementing
Export Administration Regulations. Executive Order 13222 requires an
annual extension and was recently renewed by Presidential Notice on
August 3, 2006. 71 Fed. Reg. 44551.
[5] Other departments, including Defense and Energy, may provide
technical expertise on items to enforcement agencies. Also, Defense and
the military services have investigative units that may provide support
to the enforcement agencies.
[6] Exporters are required to electronically notify CBP officers of
items to be shipped through the Automated Export System, which is
maintained by the Census Bureau.
[7] Enforcement activities can also include reviewing disclosures by
exporters of possible export control violations, prelicense checks, and
postshipment verifications. See GAO, Export Controls: Post-Shipment
Verification Provides Limited Assurance That Dual-Use Items Are Being
Properly Used, GAO-04-357 (Washington, D.C.: Jan. 12, 2004), and GAO,
Defense Trade: Arms Export Control System in the Post 9/11 Environment,
GAO-05-234 (Washington, D.C.: Feb. 16, 2005.)
[8] Commerce, upon request, can provide an initial license
determination based on a review of data gathered by licensing officers
and investigators/inspectors to determine whether an item requires a
license. Commerce will also provide a certified license determination
for use as evidence such as in criminal trials. State, also upon
request, can provide an initial license determination based on
available information. State also undertakes a second-level or pretrial
review, which is an in-depth examination of a commodity, defense
service, or brokering activity to verify whether it is covered by the
Arms Export Control Act or its implementing regulations. Finally, State
can provide a trial certification for use in criminal proceedings.
[9] The Exodus Command Center was established in 1982 as the single
point of contact for investigators and inspectors in the field needing
operational support from export control agencies. For example, it
responds to inquiries for export licensing verifications by contacting
export control agencies within State and Commerce.
[10] Convictions may cover more than one violation.
[11] GAO, Export Controls: Processes for Determining Proper Control of
Defense-Related Items Need Improvement, GAO-02-996 (Washington, D.C.:
Sept. 20, 2002).
[12] GAO, Export Controls: Improvement to Commerce's Dual-Use System
Needed to Ensure Protection of U.S. Interests in the Post-9/11
Environment, GAO-06-638 (Washington, D.C.: June 26, 2006).
[13] GAO, Export Controls: Actions Needed to Improve Enforcement, GAO/
NSIAD-94-28 (Washington, D.C.: Dec. 30, 1993), and GAO, Export Control
Regulation Could Be Reduced Without Affecting National Security, GAO/
ID-82-14 (Washington, D.C.: May 26, 1982).
[14] Adding to the complexity is the sale of defense items through the
U.S. government's Foreign Military Sales program, which are subject to
a different process and inspection procedures than those items sold
directly by the exporter and subject to State's export control system.
[15] International Traffic in Arms Regulations, 22 C.F.R. §123.22 (a)
and (c)(1) (2006).
[16] According to Commerce officials, exporters in the past were
required to decrement Commerce licenses as shipments were made and
submit the decremented licenses to the department. While Commerce no
longer requires exporters to submit decremented licenses, Commerce
requires exporters to retain shipment records for possible inspection
by the department. State also requires exporters to retain shipment
records.
[17] International Traffic in Arms Regulations, 22 C.F.R. §123.23
(2006).
[18] See 28 C.F.R. § 0.85(d), 69 Fed. Reg. 65542.
[19] OEE currently does not have the same investigative authorities as
ICE and FBI. However, legislation has been proposed (H.R. 4572) that,
if enacted, would provide OEE with additional investigative
authorities.
[20] In addition, State officials said a company, as part of the terms
of an agreement with State, can conduct audits to ensure compliance or
assign a special compliance officer to oversee remediation efforts and
conduct in-depth reviews of violations at the company.
[21] Commerce determined that the item did not require a license. FBI
asked for an opinion from the National Security Agency, which deemed
the item high risk for national security. However, the National
Security Agency did not have the authority to determine if the item was
licensable.
[22] If exporters have determined that their items are Commerce
controlled, but are uncertain of export licensing requirements, they
may request a commodity classification from Commerce. See GAO-02-996.
[23] In September 2004, ICE issued guidance to its investigators
indicating that State strongly recommends a second-level review in
cases that are heading toward indictment or a plea agreement. This
review is an in-depth examination of items to verify that they are
controlled by State.
[24] GAO, Defense Trade: Lessons to Be Learned from the Country Export
Exemption, GAO-02-63 (Washington, D.C.: Mar. 29, 2002).
[25] Congress recently passed the USA Patriot Improvement and
Reauthorization Act, which increased to $50,000 per violation the
maximum civil penalty and to 20 years the prison term for criminal
convictions under the International Emergency Economic Powers Act.
[26] State officials indicated that they have on occasion established
such arrangements through the Office of Personnel Management but
acknowledged that establishing such arrangements takes time.
[27] Census requirements also allow that, in certain circumstances, an
exporter may transmit shipment information up to 10 working days from
the date of exportation.
[28] See GAO-06-638.
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