Defense Trade
State Department Needs to Conduct Assessments to Identify and Address Inefficiencies and Challenges in the Arms Export Process Gao ID: GAO-08-89 November 30, 2007To regulate the export of billions of dollars worth of arms to foreign governments and companies, the Department of State's (State) Directorate of Defense Trade Controls (DDTC) reviews and authorizes export licenses and other arms export cases. While such reviews require time to consider national security and foreign policy interests, the U.S. defense industry and some foreign government purchasers have expressed concern that the U.S. export control process is unnecessarily time-consuming. In 2005, GAO reported that processing times for arms export cases had increased despite State efforts to streamline its process. GAO was asked to (1) describe recent trends in the processing of arms export cases and (2) identify factors that have contributed to these trends. To conduct its work, GAO obtained and analyzed State arms export case data for fiscal year 2003 through April 30, 2007; reviewed relevant laws, regulations, and guidelines, as well as DDTC funding and staffing information; and interviewed State and Department of Defense officials and selected arms exporters.
Three key trends indicate that DDTC's arms export licensing process is under stress. First, the number of arms export cases processed by DDTC increased 20 percent between fiscal years 2003 and 2006. Most of this increase was for licenses for permanent export. Second, during the same period, median processing times almost doubled. Third, the number of open arms export cases increased 50 percent from about 5,000 in October 2002 to about 7,500 in April 2007, with a high of more than 10,000 cases in September 2006. At the beginning of fiscal year 2007, DDTC launched a campaign to reduce the growing number of open cases. Through extraordinary measures--such as canceling staff training, meetings, and industry outreach, and pulling available staff from other duties to process cases--DDTC was able to cut the number of open cases by 40 percent in 3 months. However, such measures are not sustainable in the long term, do not address underlying inefficiencies and problems, and may have negative unintended consequences for the mission. While some blips in the trends can be attributed to onetime events or efforts--such as DDTC's campaign to reduce open cases--procedural inefficiencies, electronic processing system shortcomings, and human capital challenges underlie the overall trends. For example, GAO's analysis shows that DDTC is taking increasingly longer to refer cases to other agencies or State bureaus for additional review--from 7 days in fiscal year 2003 to 20 days during the first 7 months of fiscal year 2007. In addition, implementation of DDTC's electronic system for submitting applications has been problematic, and electronic processing has not been the promised panacea for improving processing times. DDTC does not perform systematic assessments to identify root causes of increased workload, processing times, and open cases and, in turn, develop sustainable solutions.
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-08-89, Defense Trade: State Department Needs to Conduct Assessments to Identify and Address Inefficiencies and Challenges in the Arms Export Process
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Report to the Committee on Foreign Affairs, House of Representatives:
United States Government Accountability Office:
GAO:
November 2007:
Defense Trade:
State Department Needs to Conduct Assessments to Identify and Address
Inefficiencies and Challenges in the Arms Export Process:
Defense Trade:
GAO-08-89:
GAO Highlights:
Highlights of GAO-08-89, a report to the Committee on Foreign Affairs,
House of Representatives.
Why GAO Did This Study:
To regulate the export of billions of dollars worth of arms to foreign
governments and companies, the Department of State‘s (State)
Directorate of Defense Trade Controls (DDTC) reviews and authorizes
export licenses and other arms export cases. While such reviews require
time to consider national security and foreign policy interests, the
U.S. defense industry and some foreign government purchasers have
expressed concern that the U.S. export control process is unnecessarily
time-consuming.
In 2005, GAO reported that processing times for arms export cases had
increased despite State efforts to streamline its process. GAO was
asked to (1) describe recent trends in the processing of arms export
cases and (2) identify factors that have contributed to these trends.
To conduct its work, GAO obtained and analyzed State arms export case
data for fiscal year 2003 through April 30, 2007; reviewed relevant
laws, regulations, and guidelines, as well as DDTC funding and staffing
information; and interviewed State and Department of Defense officials
and selected arms exporters.
What GAO Found:
Three key trends indicate that DDTC‘s arms export licensing process is
under stress. First, the number of arms export cases processed by DDTC
increased 20 percent between fiscal years 2003 and 2006. Most of this
increase was for licenses for permanent export. Second, during the same
period, median processing times almost doubled. Third, the number of
open arms export cases increased 50 percent from about 5,000 in October
2002 to about 7,500 in April 2007, with a high of more than 10,000
cases in September 2006. At the beginning of fiscal year 2007, DDTC
launched a campaign to reduce the growing number of open cases. Through
extraordinary measures”such as canceling staff training, meetings, and
industry outreach, and pulling available staff from other duties to
process cases”DDTC was able to cut the number of open cases by 40
percent in 3 months. However, such measures are not sustainable in the
long term, do not address underlying inefficiencies and problems, and
may have negative unintended consequences for the mission.
Figure: Open Arms Export Cases, Fiscal Year 2003 through April 30,
2007:
This figure is a line graph showing open arms export cases, between
fiscal year 2003 and April 30, 2007. The X axis represents the month
and year, while the Y axis represents the open cases.
[See PDF for image]
Source: GAO analysis of DDTC data.
[End of figure]
While some blips in the trends can be attributed to onetime events or
efforts”such as DDTC‘s campaign to reduce open cases”procedural
inefficiencies, electronic processing system shortcomings, and human
capital challenges underlie the overall trends. For example, GAO‘s
analysis shows that DDTC is taking increasingly longer to refer cases
to other agencies or State bureaus for additional review”from 7 days in
fiscal year 2003 to 20 days during the first 7 months of fiscal year
2007. In addition, implementation of DDTC‘s electronic system for
submitting applications has been problematic, and electronic processing
has not been the promised panacea for improving processing times. DDTC
does not perform systematic assessments to identify root causes of
increased workload, processing times, and open cases and, in turn,
develop sustainable solutions.
What GAO Recommends:
GAO is recommending that State conduct systematic analyses to help
achieve efficiencies in the processing of arms export cases. State
concurred with GAO‘s recommendation.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-89]. For more information, contact Ann
Calvaresi-Barr at (202) 512-4841 or calvaresibarra@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Trends Indicate DDTC's Licensing Process Is Under Stress:
Systemic Inefficiencies Underlie Overall Trends in the Licensing
Process:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Additional Analyses Related to Arms Export Case
Processing:
Appendix III: Comments from the Department of State:
Appendix IV: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Median Days Processing Time by Steps in the Referral Process,
Fiscal Year 2003 through April 2007:
Table 2: Cases Closed and Licensing Officer Positions Filled, Fiscal
Year 2003 through April 30, 2007:
Table 3: DDTC Cases Closed by Case Type from Fiscal Year 2003 through
April 30, 2007:
Table 4: Median Days Processing Time by Case Type from Fiscal Year 2003
through April 30, 2007:
Table 5: Permanent Export Cases Processed and Processing Times by
Commodity Group, Fiscal Year 2003 through April 30, 2007:
Table 6: Percentage of Cases Closed and Median Processing Time for Top
10 Countries of Destination, Fiscal Year 2006:
Table 7: Number of Cases and Processing Times for OEF/OIF Cases, Fiscal
Years 2003 through 2006:
Table 8: Number of Exporters by Cases Submitted, Fiscal Years 2003
through 2006:
Table 9: Percentage of Cases Received from the Top 10 Exporters, Fiscal
Years 2003 through 2006:
Table 10: Cases Closed by Final Action, Fiscal Year 2003 through April
30, 2007:
Figures:
Figure 1: DDTC's Licensing Review Process:
Figure 2: Processing Time Frames for Nonreferred Permanent Export
Licenses and Agreements, Fiscal Year 2003 through April 30, 2007:
Figure 3: Processing Time Frames for Referred Permanent Export Licenses
and Agreements, Fiscal Year 2003 through April 30, 2007:
Figure 4: Open Arms Export Cases, Fiscal Year 2003 through April 30,
2007:
Abbreviations:
DDTC: Directorate of Defense Trade Controls:
DOD: Department of Defense:
DTSA: Defense Technology Security Administration:
OEF: Operation Enduring Freedom:
OIF: Operation Iraqi Freedom:
United States Government Accountability Office:
Washington, DC 20548:
November 30, 2007:
The Honorable Tom Lantos:
Chairman:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The State Department (State), through the Directorate of Defense Trade
Controls (DDTC), regulates the export of billions of dollars worth of
arms[Footnote 1] by U.S. companies to foreign governments and companies
and has responsibility for reviewing and authorizing export license
applications and other arms export cases.[Footnote 2] Reviews of arms
export cases require time to deliberate because U.S. national security
and foreign policy interests must be considered. However, the U.S.
defense industry and some foreign government purchasers have expressed
concern that the U.S. export control process is unnecessarily
burdensome because of the time needed to complete these deliberations.
To facilitate defense cooperation, State announced in 2000 several
efforts to reduce arms export processing times, and began the
development of a new automated system for submitting and reviewing
cases. Despite efforts to streamline the process, we reported that
processing times for arms export cases began to increase in
2003.[Footnote 3]
Over the past decade, we have reported on various problems in the U.S.
export control system. Vulnerabilities in the U.S. export control
system, along with related government programs,[Footnote 4] prompted
GAO to designate the effective protection of technologies critical to
U.S. national security interests as a new high-risk area in
2007.[Footnote 5] This report looks at a key component of the arms
export control system--the licensing review process for arms export
cases. Because of concerns about increasing processing times and a DDTC
announcement of a significant number of open cases, you requested we
evaluate the processing of arms export control cases. Specifically,
this report (1) describes recent trends in the processing of arms
export cases, including processing times and open cases, and (2)
identifies factors that have contributed to the trends in processing
these cases.
To conduct our work, we obtained and analyzed State arms export case
data for fiscal year 2003 through April 30, 2007, to identify
processing trends. We assessed the reliability of the data and
determined them to be sufficiently reliable for our purposes. We also
examined DDTC and Department of Defense (DOD) case processing
guidelines, DDTC funding and staffing information, and applicable laws
and regulations. In addition, we interviewed officials from DDTC,
State's bureaus to which cases are referred, DOD's Defense Technology
Security Administration (DTSA), and selected arms exporters to identify
factors affecting processing trends. For more on our scope and
methodology, see appendix I. We performed our review from February
through September 2007 in accordance with generally accepted government
auditing standards.
Results in Brief:
Our analysis pointed to three key trends in the processing of arms
export cases in recent years. First, DDTC's caseload increased 20
percent, from about 55,000 to 65,000 between fiscal years 2003 and
2006. Second, median processing times almost doubled in the same time
period, from 14 days to 26 days. Third, the number of open arms export
cases increased 50 percent, from about 5,000 in October 2002 to about
7,500 in April 2007, reaching a high of more than 10,000 cases in
September 2006. At the beginning of fiscal year 2007, DDTC launched a
campaign to reduce the number of open cases. While DDTC was able to cut
the number of open cases by over 40 percent over 3 months, it did so by
extending work hours and canceling staff training and meetings and
other activities to focus on the mounting number of open cases.
However, such measures are not sustainable in the long term, do not
address underlying inefficiencies and problems, and may adversely
affect the mission.
Inefficiencies and problems in the license review process are largely
affected by procedural weaknesses, shortfalls with the electronic
processing system, and human capital challenges. Lack of screening
procedures for referring arms export cases outside DDTC have resulted
in cases languishing for weeks before any action is taken. While DDTC's
new electronic processing system, D-Trade, was intended to improve
processing times, the system has not been the panacea the agency
expected. Our analysis shows that processing times for like types of
cases are virtually the same, regardless of whether the case was
submitted through D-Trade or on paper. The system also lacks tools to
aid the licensing officer to process cases more efficiently. DDTC also
faces human capital challenges in establishing and retaining a
sufficient workforce with the experience and skills needed to
efficiently and effectively process arms export cases. These factors
have largely gone unaddressed because DDTC management does not
systematically analyze licensing data to identify inefficiencies and
develop solutions to manage its processes and more effectively
structure the workforce.
To improve the efficiency of processing arms export cases, we are
recommending that State conduct systematic analyses of licensing data
to identify potential causes of inefficiencies and develop solutions to
better manage its workload, processes, and workforce structure. In
commenting on a draft of this report, State concurred with our
recommendation and indicated that it has initiated efforts to improve
its processes and organizational alignment. Defense had no comments on
the draft report.
Background:
Under the authority of the Arms Export Control Act, State regulates and
controls arms exports by U.S. companies to help ensure that those
exports are consistent with national security and foreign policy
interests.[Footnote 6] This function has been delegated to DDTC within
the Bureau of Political-Military Affairs. DDTC's staffing levels are
allocated and funded by State. Funding for other DDTC activities and
operations comes from two main sources: (1) appropriated funds that
State then allocates to DDTC through the Bureau of Political-Military
Affairs, and (2) registration fees, which DDTC is authorized to retain
to help fund certain activities related to licensing, enforcement, and
compliance.[Footnote 7]
Exporters submit arms export cases via paper or electronically through
D-Trade, DDTC's Web-based electronic processing system.[Footnote 8]
Cases include permanent arms export licenses, temporary arms exports or
imports, agreements between U.S. industry and foreign entities to
provide technical assistance or manufacturing capability, requests for
amendments to existing licenses or agreements, and requests to
determine commodity jurisdiction.[Footnote 9] Cases vary in terms of
complexity and time to process. For example, agreements generally take
longer than other cases because they are complex, require substantial
work by licensing officers, and often require interagency review.
Once cases are received, DDTC assigns them to one of five teams, based
on commodity categories: firearms, aircraft, missile and spacecraft,
military electronics, and military vehicles and naval vessels. Team
leaders, in turn, assign cases to a licensing officer, who conducts an
initial review to determine whether the case needs a referral to an
agency, such as DOD's DTSA, and/or another State bureau for additional
review--or whether the case can be reviewed and analyzed internally.
Either way, the licensing officer conducts the final review and
determines the final action. Final action on cases can only be taken by
licensing officers with designated signature authority, which DDTC
officials stated takes an average of 18 months of training and
experience to obtain. Prior to approving cases that involve exports
meeting statutory dollar thresholds and involving selected countries,
State must notify Congress.[Footnote 10] Figure 1 depicts DDTC's
licensing review process.
Figure 1: DDTC's Licensing Review Process:
This figure is a flowchart showing DDTC's licensing review process.
[See PDF for image]
Source: GAO analysis of licensing process.
[A] Some cases require congressional notification prior to final
action.
[B] Provisos are conditions that limit the use of exported items and
technologies.
[C] DDTC returns applications without action when it determines the
application does not meet regulatory requirements or does not provide
adequate documentation and details.
[End of figure]
In addition to reviewing arms export cases, DDTC conducts outreach to
educate industry about export controls and promote compliance with laws
and regulations.
Trends Indicate DDTC's Licensing Process Is Under Stress:
Our analysis shows several trends have emerged in the processing of
arms export cases, which indicate the system is under stress. First,
the number of arms export cases processed by DDTC has increased since
fiscal year 2003. Most of the increase was for licenses for permanent
export. Second, processing times almost doubled from fiscal year 2003
to 2006. Third, the number of open arms cases has increased since
fiscal year 2003. While extraordinary actions taken by DDTC to address
the mounting number of open cases achieved short-term gains, these
actions are not sustainable because they strained personnel and
involved deferring other mission-related activities.
Arms Export Caseload, Processing Times, and Open Cases Have
Significantly Increased:
Between fiscal years 2003 and 2006, the arms export caseload processed
by DDTC has increased 20 percent, from about 55,000 to 65,000. DDTC
officials attributed this growth to several possible factors, including
increased globalization of the defense industry and an overall increase
in arms exports. In addition, our analysis of the cases processed by
DDTC shows that permanent export licenses constituted about two-thirds
of all cases, thereby accounting for the major part of DDTC's caseload
activity. For these cases, the greatest increase occurred in aircraft
and related components among the various types of controlled
commodities. Our analysis also showed a high concentration of cases by
country of destination--almost half consisted of seven countries, with
25 percent involving Japan and the United Kingdom. In contrast, we
found cases are not concentrated by major defense arms exporting
companies. In fiscal year 2006, only 21 percent of cases processed
involved the top 10 arms exporting firms. (For additional analyses of
cases, including type of case, commodities, countries, and expedited
cases, see app. II.)
Overall, processing times for all types of cases have increased.
Between fiscal years 2003 and 2006, median processing times nearly
doubled, from 14 days to 26 days. Some types of cases take longer to
process than others, in part because of their complexity. For example,
in fiscal year 2006, technical assistance agreements took a median of
94 days to process. However, these agreements made up less than 9
percent of the cases processed for that year, and therefore may not be
a significant driver of overall increased processing times. Permanent
exports, which constituted the majority of cases, took a median of 25
days to process in fiscal year 2006.
For nonreferred cases, which made up about two-thirds of all cases,
DDTC's in-house processing times increased significantly. For example,
between fiscal years 2003 and 2006, median processing times for
nonreferred cases increased from 8 to 19 days. For the first 7 months
of fiscal year 2007, the median processing time was 17 days. Moreover,
the number of nonreferred permanent export license cases taking longer
than 2 weeks to process increased from 26 percent in fiscal year 2003
to 72 percent in fiscal year 2006. The increase in the percentage of
nonreferred agreements taking longer than 2 weeks was even more
dramatic--increasing from about 13 percent to 87 percent (see fig. 2).
Figure 2: Processing Time Frames for Nonreferred Permanent Export
Licenses and Agreements, Fiscal Year 2003 through April 30, 2007:
This figure is combination of shaded bar graphs showing processing time
frames for nonreferred permanent export licenses and agreements,
between fiscal year 2003 and April 30, 2007. The X axis in both graphs
represent percent, while the Y axis represents the year.
[See PDF for image]
Source: GAO analysis of DDTC DATA.
[A] Agreements include technical assistance, manufacturing, brokering,
distribution, and generic agreements.
[End of figure]
Processing times for cases referred outside of DDTC for review, which
made up about one-third of all cases, have also increased. For example,
between fiscal years 2003 and 2006, median processing times increased
from 49 to 61 days. For the first 7 months of fiscal year 2007, the
median processing time was 50 days. Moreover, in fiscal year 2006, 70
percent of referred agreement cases, which tend to take longer to
process than other cases, took longer than 12 weeks to process,
compared to 11 percent in fiscal year 2003. In contrast, processing
times for permanent export license cases referred outside of DDTC have
held relatively steady for the past several years (see fig. 3).
Figure 3: Processing Time Frames for Referred Permanent Export Licenses
and Agreements, Fiscal Year 2003 through April 30, 2007:
This figure is a combination of two shaded bar graphs showing
processing time frames for referred permanent export licenses and
agreements, between fiscal year 2003 and April 30, 2007. The X axis in
both graphs represent percent, while the Y axis represents the year.
[See PDF for image]
Source: GAO analysis of DDTC data.
[A] Agreements include technical assistance, manufacturing, brokering,
distribution, and generic agreements.
[End of figure]
The number of open arms export cases has also increased because DDTC
has received cases at a higher rate than it processed them. Open cases
increased from about 5,000 in October 2002 to about 7,500 in April
2007, reaching a high of more than 10,000 open cases in September 2006
(see fig. 4).
Figure 4: Open Arms Export Cases, Fiscal Year 2003 through April 30,
2007:
This figure is a line graph showing open arms export cases, between
fiscal year 2003 and April 30, 2007. The X axis represents the month
and year, while the Y axis represents the open cases.
[See PDF for image]
Source: GAO analysis of DDTC data.
[End of figure]
Actions Taken by DDTC to Achieve Short-Term Gains Are Unsustainable:
At the beginning of fiscal year 2007, DDTC launched its "winter
offensive," a campaign to reduce the growing number of open cases.
Through extraordinary measures--such as extending work hours; canceling
staff training, meetings, and industry outreach; and pulling available
staff from other duties to process cases--DDTC was able to reduce the
number of open cases by 40 percent in 3 months. However, DDTC officials
told us that these measures were not sustainable for the long term
because they put a strain on personnel and deferred mission-related
activities.
Not only are these short-term measures unsustainable, they may have
unintended adverse consequences. A DDTC official stated the short-term
emphasis during the winter offensive was necessary to reduce the number
of open cases but may have the unanticipated effect of shifting the
focus from the mission of protecting U.S. national security and
promoting foreign policy interests to simply closing cases to reduce
the queue of open cases.
Systemic Inefficiencies Underlie Overall Trends in the Licensing
Process:
While some blips in the trends can be attributed to onetime events or
efforts, such as the winter offensive, the overall trends of increased
processing times and open cases are affected by several factors,
including procedural inefficiencies, electronic processing system
shortcomings, and human capital challenges. DDTC does not perform
systematic assessments to identify overall trends and root causes,
which could lead to sustainable solutions.
Case Processing Encumbered by DDTC Procedural Inefficiencies:
While DDTC has established a time frame goal in its guidelines for
referring cases outside of DDTC, it has not met this goal.[Footnote 11]
Specifically, the guidelines indicate that DDTC licensing officers
should refer cases to other agencies or State bureaus within 10 days of
receipt by the licensing officer.[Footnote 12] Our analysis shows that
DDTC has taken increasingly longer to refer cases. As shown in table 1,
the median days from when the case was received to outside referral
increased from 7 days in fiscal year 2003 to 20 days during the first 7
months of fiscal year 2007. In contrast, the median number of days
cases spent outside of DDTC for referral has decreased over the same
period from 31 to 18 days.[Footnote 13]
Table 1: Median Days Processing Time by Steps in the Referral Process,
Fiscal Year 2003 through April 2007:
Fiscal year: 2003;
Days DDTC takes to refer a case: 7;
Days at an agency or bureau: 31;
Days from receipt of agency or bureau position to final action: 7;
Days to complete referred cases: 49.
Fiscal year: 2004;
Days DDTC takes to refer a case: 10;
Days at an agency or bureau: 29;
Days from receipt of agency or bureau position to final action: 7;
Days to complete referred cases: 51.
Fiscal year: 2005;
Days DDTC takes to refer a case: 12;
Days at an agency or bureau: 28;
Days from receipt of agency or bureau position to final action: 8;
Days to complete referred cases: 52.
Fiscal year: 2006;
Days DDTC takes to refer a case: 18;
Days at an agency or bureau: 27;
Days from receipt of agency or bureau position to final action: 9;
Days to complete referred cases: 61.
Fiscal year: 2007[A];
Days DDTC takes to refer a case: 20;
Days at an agency or bureau: 18;
Days from receipt of agency or bureau position to final action: 4;
Days to complete referred cases: 50.
Source: GAO analysis of DDTC data.
[A] Data are for the first 7 months of fiscal year 2007.
[End of table]
DDTC has not established procedures to promptly screen most cases to
identify those that need outside referral. As a result, cases often
languish in a team leader's or licensing officer's queue awaiting
assignment or initial review. In contrast, DOD's DTSA--which receives
the majority of cases referred by DDTC--uses a team to screen cases
daily to determine if cases should be reviewed solely at DTSA or
whether they should be referred to military services or other DOD
components for further review. In making the decision to refer cases,
the team considers such factors as the existence of precedent cases,
the level of technology, and the circumstances of the transaction.
According to DTSA officials, this process allows them to expedite
certain cases and to focus efforts on more complicated cases involving
commodities or capabilities not previously exported or presenting
special concerns. For referred cases, DTSA officials told us the daily
screening process allows them to make the referral in less than 2 days
on average. According to DDTC officials, they have recently established
a process for promptly referring technical assistance agreements
outside DDTC but have not done so for other types of cases.
Until recently, DDTC lacked procedures for expediting certain cases.
Specifically, the Ronald W. Reagan National Defense Authorization Act
for Fiscal Year 2005, enacted in 2004, requires the expeditious
processing of arms export cases for the United Kingdom and Australia by
State, in consultation with DOD.[Footnote 14] Although the legislation
does not specify a processing time frame goal, in fiscal year 2006, the
processing times for United Kingdom and Australia cases was 21 days,
which did not differ significantly from the processing times for other
allied countries. (For additional analysis of processing times by
country, see app. II.) DDTC officials told us they have been working
with DOD on developing procedures to expedite processing for United
Kingdom and Australia cases, and recently established a process for
doing so.[Footnote 15]
D-Trade Has Yet to Achieve Case Processing Efficiencies:
The establishment of a new automated system for processing cases had
been cited by State officials as its most significant effort to improve
efficiency. However, the anticipated efficiencies have not been
realized. Our analysis of processing times shows no significant
difference between like types of cases submitted electronically versus
paper submissions. For example, in fiscal year 2006, median processing
time for permanent export cases submitted through D-Trade was 23 days
versus 25 for paper submissions. Although 77 percent of cases are now
received electronically through D-Trade,[Footnote 16] its
implementation has been problematic and electronic processing has not
been the promised panacea for improving processing times.
According to DDTC officials, poorly defined system requirements and a
rush to production led to technical glitches and performance problems.
For example, in January 2007, DDTC released a new version of D-Trade,
but because of software problems, cases received could not be
processed. As a result, the new version was shut down after 3 days,
requiring DDTC to revert to the previous version. The 1,300 cases
received during the 3-day period had to be resubmitted by exporters,
resulting in some rework and an increase in the number of open cases.
DDTC has relied on an information technology solution without
reengineering the underlying processes or without developing tools to
facilitate the licensing officer's job. In 2001, we reported
information systems that simply use technology to do the same work, the
same way, but only faster typically fail or reach only a fraction of
their potential.[Footnote 17] While defense industry officials told us
that D-Trade simplifies the process for submitting cases and receiving
final authorizations, the system lacks tools to aid licensing officers
to process cases more efficiently. For example, the system has limited
capabilities to reference precedent cases that would allow licensing
officers to leverage work previously done on similar cases. The system
also lacks other tools, such as automated access to regulations,
guidance, or other information that may facilitate processing. DDTC
officials said they expect future versions of D-Trade will incorporate
tools to help licensing officers process cases more efficiently.
DDTC Faces Staffing Instabilities:
The fundamental work of reviewing and analyzing arms export cases
requires an adequate number of personnel with the right skills and
knowledge--especially given the continued rise in caseload. However,
ensuring a sufficient workforce with the needed skills and knowledge
has been a challenge for DDTC because of staffing instabilities. For
example, the number of licensing officers on board has fluctuated over
recent years and was at the same level in fiscal years 2003 and 2006,
yet the number of cases processed increased about 20 percent during the
same period (see table 2).
Table 2: Cases Closed and Licensing Officer Positions Filled, Fiscal
Year 2003 through April 30, 2007:
Cases closed;
Fiscal year: 2003: 54,576;
Fiscal year: 2004: 57,885;
Fiscal year: 2005: 62,954;
Fiscal year: 2006: 65,274;
Fiscal year: 2007[A]: 43,642.
Licensing officer positions filled[B];
Fiscal year: 2003: 35;
Fiscal year: 2004: 31;
Fiscal year: 2005: 31;
Fiscal year: 2006: 35;
Fiscal year: 2007[A]: 34.
Source: GAO analysis of DDTC data.
[A] Data are for the first 7 months of fiscal year 2007.
[B] Licensing officer positions include civil service licensing
officers and team leaders.
[End of table]
DDTC officials have acknowledged that more work is falling on fewer
experienced staff. According to these officials, in the summer of 2006,
about one-half of licensing officers had less than 1 year of
experience, and many did not have the signature authority needed to
take final action on cases. For example, early in 2007, one team had
three licensing officers but only the team leader had the authority to
approve or deny cases. Although the staff could perform research, the
team leader had to review all cases before final action could be taken.
Staffing instabilities have also been affected by fluctuating levels of
military officers detailed to DDTC from DOD, who are generally assigned
to review agreements. The Foreign Relations Authorization Act for
Fiscal Year 2003 states the Secretary of Defense should ensure that 10
military officers are continuously detailed to DDTC.[Footnote 18]
However, the number of officers DOD detailed to DDTC has fluctuated
over recent years. In fiscal year 2006, the number of military officers
detailed to DDTC ranged from 3 to 7. From fiscal year 2005 to 2006,
processing times for agreements nearly doubled from 48 days to 94 days.
In fiscal year 2007, the number of military officers increased to 8,
and by April 2007, processing times for agreements was 72 days. To help
address the potential adverse effect of insufficient numbers of
military officers, DDTC began assigning additional civilian licensing
officers to process agreements in 2006.
DDTC Does Not Conduct Systematic Assessments to Identify Root Causes of
Problems and to Develop Sustainable Solutions:
DDTC management does not systematically assess licensing data to
identify inefficiencies. Analysis of these data could allow DDTC to
more effectively structure its workforce and manage workload. Instead,
DDTC management reviews reports consisting of aggregate information on
received, processed, and open cases to determine the status of cases
and licensing officer productivity. However, DDTC cannot identify the
drivers of the workload or bottlenecks in the process from these status
reports. Using DDTC's data, we conducted analyses of factors that can
drive workload, such as type of cases, commodities, countries, and
profiles of the exporter base (see app. II). Such analyses could
provide insights to managers on ways to reduce workload, structure the
workforce, target outreach with industry, and reengineer processes. For
example:
* By examining caseload by type of commodity, DDTC could assess the
impact on workload of potential changes to licensing requirements such
as application of or modification to exemptions--if such changes are
warranted given the national security risk and foreign policy
interests.
* Given DDTC's current organizational structure of teams associated
with particular commodities, DDTC could examine its licensing data to
determine if there is a concentration of cases by factors other than
commodity, such as country. Such analyses could permit DDTC to consider
possible efficiencies related to aligning its workforce to where its
workload is concentrated. Also, by monitoring processing times for
factors driving the workload, DDTC could take corrective actions and
reallocate resources before processing times for some types of cases
become a problem.
* By assessing the volume and type of case submissions by exporters,
DDTC could better target its industry education and outreach activities
to help ensure the quality of submissions and compliance with export
control law and regulations.
* DDTC could analyze the processing times associated with steps in the
licensing process--such as time it takes to refer cases--to assess the
flow of cases through the review process and identify possible
bottlenecks or inefficiencies in the process.
While DDTC has taken actions to achieve some short-term gains to
growing problems in its processing of cases, DDTC managers lack
systematic analyses to identify root causes and develop sustainable
solutions. Federal managers, including those at DDTC, need to monitor
and assess their systems to ensure that they are well designed and
efficiently operated, are appropriately updated to meet changing
conditions, and provide reasonable assurance that the objectives of the
agency are being achieved.[Footnote 19]
Conclusions:
The licensing of arms exports is a key component of the U.S. export
control system to help ensure arms do not fall into the wrong hands.
Licensing officers are challenged to weigh national security and
foreign policy interests on thousands of cases a year while allowing
legitimate defense trade to occur in an efficient manner. However,
systemic inefficiencies in arms export licensing are straining the
system and may be diminishing licensing officers' capacity to process
cases efficiently and effectively. To date, DDTC has not
comprehensively analyzed its export processing system to identify
causes of inefficiencies and needed actions to address them. Unless
DDTC systematically analyzes its licensing data in terms of drivers of
workload and steps in the process, it will continue to ineffectively
and inefficiently manage its processes, workload, and resources.
Recommendation for Executive Action:
To improve the efficiency of processing arms export cases, we recommend
that the Secretary of State direct the Deputy Assistant Secretary of
the Directorate of Defense Trade Controls to conduct systematic
analyses of licensing data to assess root causes of inefficiencies and
to identify and implement actions to better manage workload, reexamine
its processes, determine the most effective workforce structure, and
target industry outreach.
Agency Comments:
We provided a draft of this report to the Departments of State and
Defense and for their review and comment. DOD did not comment on our
draft. State provided written comments that are reprinted in appendix
III. In commenting on the draft, State concurred with our
recommendation and recognized the need for additional systematic
analyses of data to achieve greater efficiencies. State noted that the
report does not reflect the impact of three recent initiatives, which
according to State resulted in a 30 percent reduction of open cases
from April to October 2007. Because our analysis was through April
2007, we are not able to verify what effects--both short-and long-term-
-the initiatives have had on the number of open cases. Until State
engages in a continual process of systematically analyzing its
licensing data, it will have no assurance that current or future
initiatives will address the underlying causes and achieve sustainable
improvements to the processing of arms export cases.
As agreed with your office, unless you publicly release its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of this
report to interested congressional committees, as well as the
Secretaries of State and Defense; 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 IV.
Sincerely yours,
Signed by:
Ann Calvaresi-Barr:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To determine trends in arms export case processing by State's
Directorate of Defense Trade Controls (DDTC), we obtained State's arms
export case data for fiscal year 2003 through April 30, 2007. We
obtained data from State's paper-based "legacy" system and its D-Trade
system--a Web-based electronic processing system. We merged the data
from these two systems and created a single Microsoft Access database
to determine trends in caseload, cases processed, open cases, and
processing times. Our analysis did not include cases that were approved
and then subsequently suspended or revoked because this action takes
place after the original cases were closed, and including these cases
would thus skew the results. Processing time represents the median
number of calendar days between receipt of a case and the final action.
Open cases are those cases that were received by DDTC but on which no
final action has been taken. To obtain an overview of the data systems
used to accept and process license cases at DDTC, we interviewed State
officials responsible for information technology management. We
assessed data reliability by obtaining and reviewing system
documentation and performing electronic testing of data, and determined
the data to be sufficiently reliable for our intended purposes. We also
analyzed the data by type of license, commodities, countries, cases
referred, cases in support of ongoing war efforts, exporters, and case
final actions.
To identify factors contributing to trends in processing times and open
cases, we interviewed officials from DDTC, State bureaus to which cases
are most frequently referred, the Department of Defense's (DOD) Defense
Technology Security Administration (DTSA), and selected arms exporters.
To understand the process of reviewing arms export cases referred from
DDTC, we obtained and reviewed DDTC case review guidelines, applicable
regulations, and laws. We compared DDTC procedures with DTSA case
processing procedures. To determine the status of D-Trade, we obtained
briefings and systems documentation and discussed problems with
implementing the electronic processing system and future development
plans with cognizant officials. We also compared processing times for D-
Trade and paper processing by calculating processing times for
permanent exports, which are processed through both systems. We
obtained and analyzed data on DDTC funding and staffing levels. We also
obtained and reviewed DDTC status reports used to monitor workload,
processing times, and open cases.
[End of section]
Appendix II: Additional Analyses Related to Arms Export Case
Processing:
This appendix provides additional analyses of licensing data related to
the composition of cases closed and case outcomes. Specifically, we
analyzed the data in terms of types of cases, commodities, countries of
destination, cases in support of ongoing war efforts, exporters, and
case final actions.
Of the 14 case types processed by DDTC, licenses for permanent exports
made up the majority of cases. From fiscal year 2003 to 2006, the
percentage of licenses for permanent exports increased from about 62
percent to over 66 percent of all cases, as shown in table 3.
Table 3: DDTC Cases Closed by Case Type from Fiscal Year 2003 through
April 30, 2007:
Case type: Amendments;
Fiscal year: 2003: 8,725;
Fiscal year: percent: 16.0%;
Fiscal year: 2004: 6,364;
Fiscal year: percent: 11.0%;
Fiscal year: 2005: 9,603;
Fiscal year: percent: 15.3%;
Fiscal year: 2006: 9,001;
Fiscal year: percent: 13.8%;
Fiscal year: 2007[A]: 4,547;
Fiscal year: percent: 10.4%.
Case type: Brokering agreements;
Fiscal year: 2003: 34;
Fiscal year: percent: 0.1%;
Fiscal year: 2004: 66;
Fiscal year: percent: 0.1%;
Fiscal year: 2005: 74;
Fiscal year: percent: 0.1%;
Fiscal year: 2006: 47;
Fiscal year: percent: 0.1%;
Fiscal year: 2007[A]: 31;
Fiscal year: percent: 0.1%.
Case type: Classified export/import;
Fiscal year: 2003: 244;
Fiscal year: percent: 0.4%;
Fiscal year: 2004: 307;
Fiscal year: percent: 0.5%;
Fiscal year: 2005: 310;
Fiscal year: percent: 0.5%;
Fiscal year: 2006: 292;
Fiscal year: percent: 0.4%;
Fiscal year: 2007[A]: 199;
Fiscal year: percent: 0.5%.
Case type: Commodity jurisdictions;
Fiscal year: 2003: 199;
Fiscal year: percent: 0.4%;
Fiscal year: 2004: 173;
Fiscal year: percent: 0.3%;
Fiscal year: 2005: 181;
Fiscal year: percent: 0.3%;
Fiscal year: 2006: 266;
Fiscal year: percent: 0.4%;
Fiscal year: 2007[A]: 225;
Fiscal year: percent: 0.5%.
Case type: Distribution agreements;
Fiscal year: 2003: 75;
Fiscal year: percent: 0.1%;
Fiscal year: 2004: 68;
Fiscal year: percent: 0.1%;
Fiscal year: 2005: 112;
Fiscal year: percent: 0.2%;
Fiscal year: 2006: 111;
Fiscal year: percent: 0.2%;
Fiscal year: 2007[A]: 76;
Fiscal year: percent: 0.2%.
Case type: General correspondence;
Fiscal year: 2003: 1,035;
Fiscal year: percent: 1.9%;
Fiscal year: 2004: 1,335;
Fiscal year: percent: 2.3%;
Fiscal year: 2005: 1,288;
Fiscal year: percent: 2.0%;
Fiscal year: 2006: 1,217;
Fiscal year: percent: 1.9%;
Fiscal year: 2007[A]: 990;
Fiscal year: percent: 2.3%.
Case type: Generic agreements;
Fiscal year: 2003: 519;
Fiscal year: percent: 1.0%;
Fiscal year: 2004: 406;
Fiscal year: percent: 0.7%;
Fiscal year: 2005: 294;
Fiscal year: percent: 0.5%;
Fiscal year: 2006: 293;
Fiscal year: percent: 0.4%;
Fiscal year: 2007[A]: 275;
Fiscal year: percent: 0.6%.
Case type: Government jurisdictions;
Fiscal year: 2003: 2;
Fiscal year: percent: 0.0%;
Fiscal year: 2004: 1;
Fiscal year: percent: 0.0%;
Fiscal year: 2005: 2;
Fiscal year: percent: 0.0%;
Fiscal year: 2006: 0;
Fiscal year: percent: 0.0%;
Fiscal year: 2007[A]: 3;
Fiscal year: percent: 0.0%.
Case type: International import certificates;
Fiscal year: 2003: 225;
Fiscal year: percent: 0.4%;
Fiscal year: 2004: 278;
Fiscal year: percent: 0.5%;
Fiscal year: 2005: 210;
Fiscal year: percent: 0.3%;
Fiscal year: 2006: 250;
Fiscal year: percent: 0.4%;
Fiscal year: 2007[A]: 150;
Fiscal year: percent: 0.3%.
Case type: Manufacturing agreements;
Fiscal year: 2003: 764;
Fiscal year: percent: 1.4%;
Fiscal year: 2004: 566;
Fiscal year: percent: 1.0%;
Fiscal year: 2005: 598;
Fiscal year: percent: 0.9%;
Fiscal year: 2006: 613;
Fiscal year: percent: 0.9%;
Fiscal year: 2007[A]: 565;
Fiscal year: percent: 1.3%.
Case type: Permanent exports;
Fiscal year: 2003: 33,718;
Fiscal year: percent: 61.8%;
Fiscal year: 2004: 38,682;
Fiscal year: percent: 66.8%;
Fiscal year: 2005: 41,093;
Fiscal year: percent: 65.3%;
Fiscal year: 2006: 43,167;
Fiscal year: percent: 66.1%;
Fiscal year: 2007[A]: 28,871;
Fiscal year: percent: 66.2%.
Case type: Technical assistance agreements;
Fiscal year: 2003: 5,249;
Fiscal year: percent: 9.6%;
Fiscal year: 2004: 5,401;
Fiscal year: percent: 9.3%;
Fiscal year: 2005: 4,847;
Fiscal year: percent: 7.7%;
Fiscal year: 2006: 5,536;
Fiscal year: percent: 8.5%;
Fiscal year: 2007[A]: 5,231;
Fiscal year: percent: 12.0%.
Case type: Temporary exports;
Fiscal year: 2003: 2,634;
Fiscal year: percent: 4.8%;
Fiscal year: 2004: 3,012;
Fiscal year: percent: 5.2%;
Fiscal year: 2005: 3,076;
Fiscal year: percent: 4.9%;
Fiscal year: 2006: 3,451;
Fiscal year: percent: 5.3%;
Fiscal year: 2007[A]: 1,895;
Fiscal year: percent: 4.3%.
Case type: Temporary imports;
Fiscal year: 2003: 1,153;
Fiscal year: percent: 2.1%;
Fiscal year: 2004: 1,226;
Fiscal year: percent: 2.1%;
Fiscal year: 2005: 1,266;
Fiscal year: percent: 2.0%;
Fiscal year: 2006: 1,030;
Fiscal year: percent: 1.6%;
Fiscal year: 2007[A]: 584;
Fiscal year: percent: 1.3%.
Total cases closed;
Fiscal year: 2003: 54,576;
Fiscal year: percent: [Empty];
Fiscal year: 2004: 57,885;
Fiscal year: percent: [Empty];
Fiscal year: 2005: 62,954;
Fiscal year: percent: [Empty];
Fiscal year: 2006: 65,274;
Fiscal year: percent: [Empty];
Fiscal year: 2007[A]: 43,642;
Fiscal year: percent: [Empty].
Source: GAO analysis of DDTC data.
[A] Data are for the first 7 months of fiscal year 2007.
[End of table]
Processing times varied by type of case, as shown in table 4. For
example, in fiscal year 2006, technical assistance agreements took a
median of 94 days to process, while licenses for permanent exports, the
most common case type, took 25 days, and amendments to existing
licenses took 13 days to process.
Table 4: Median Days Processing Time by Case Type from Fiscal Year 2003
through April 30, 2007:
Case type: Amendments;
Fiscal year: 2003: 8;
Fiscal year: 2004: 8;
Fiscal year: 2005: 10;
Fiscal year: 2006: 13;
Fiscal year: 2007[A]: 8.
Case type: Brokering agreements;
Fiscal year: 2003: 43.5;
Fiscal year: 2004: 41.5;
Fiscal year: 2005: 34.5;
Fiscal year: 2006: 64;
Fiscal year: 2007[A]: 95.
Case type: Classified export/import;
Fiscal year: 2003: 31.5;
Fiscal year: 2004: 35;
Fiscal year: 2005: 36;
Fiscal year: 2006: 42;
Fiscal year: 2007[A]: 30.
Case type: Commodity jurisdictions;
Fiscal year: 2003: 105;
Fiscal year: 2004: 107;
Fiscal year: 2005: 111;
Fiscal year: 2006: 157.5;
Fiscal year: 2007[A]: 126.
Case type: Distribution agreements;
Fiscal year: 2003: 75;
Fiscal year: 2004: 84.5;
Fiscal year: 2005: 64.5;
Fiscal year: 2006: 84;
Fiscal year: 2007[A]: 90.5.
Case type: General correspondence;
Fiscal year: 2003: 57;
Fiscal year: 2004: 62;
Fiscal year: 2005: 52;
Fiscal year: 2006: 65;
Fiscal year: 2007[A]: 86.
Case type: Generic agreements;
Fiscal year: 2003: 22;
Fiscal year: 2004: 14;
Fiscal year: 2005: 30.5;
Fiscal year: 2006: 91;
Fiscal year: 2007[A]: 68.
Case type: Government jurisdictions;
Fiscal year: 2003: 787.5;
Fiscal year: 2004: 98;
Fiscal year: 2005: 1,171.5;
Fiscal year: 2006: [B] ;
Fiscal year: 2007[A]: 171.
Case type: International import certificates;
Fiscal year: 2003: 5;
Fiscal year: 2004: 5;
Fiscal year: 2005: 7;
Fiscal year: 2006: 8.5;
Fiscal year: 2007[A]: 6.
Case type: Manufacturing agreements;
Fiscal year: 2003: 37;
Fiscal year: 2004: 37.5;
Fiscal year: 2005: 45;
Fiscal year: 2006: 99;
Fiscal year: 2007[A]: 83.
Case type: Permanent exports;
Fiscal year: 2003: 13;
Fiscal year: 2004: 17;
Fiscal year: 2005: 20;
Fiscal year: 2006: 25;
Fiscal year: 2007[A]: 25.
Case type: Technical assistance agreements;
Fiscal year: 2003: 39;
Fiscal year: 2004: 41;
Fiscal year: 2005: 48;
Fiscal year: 2006: 94;
Fiscal year: 2007[A]: 71.
Case type: Temporary exports;
Fiscal year: 2003: 37;
Fiscal year: 2004: 36;
Fiscal year: 2005: 36;
Fiscal year: 2006: 38;
Fiscal year: 2007[A]: 33.
Case type: Temporary imports;
Fiscal year: 2003: 13;
Fiscal year: 2004: 14;
Fiscal year: 2005: 16;
Fiscal year: 2006: 22;
Fiscal year: 2007[A]: 16.5.
All cases;
Fiscal year: 2003: 14;
Fiscal year: 2004: 18;
Fiscal year: 2005: 19;
Fiscal year: 2006: 26;
Fiscal year: 2007[A]: 27.
Source: GAO analysis of DDTC data.
[A] Data are for the first 7 months of fiscal year 2007.
[B] No government jurisdiction cases were closed in fiscal year 2006.
[End of table]
For cases involving permanent export licenses, aircraft and related
components were the primary driver of increased cases, increasing about
44 percent, from about 9,800 in fiscal year 2003 to over 14,000 in
fiscal year 2006, as shown in table 5. Processing times for permanent
export licenses also varied by type of commodity group and were
increasing for most commodities from fiscal years 2003 through 2006,
with missile and spacecraft taking the longest to process. Several
commodity groups saw reductions in processing times during the first 7
months of fiscal year 2007, including a significant reduction in
missile and spacecraft. Processing times for aircraft increased during
each period.
Table 5: Permanent Export Cases Processed and Processing Times by
Commodity Group, Fiscal Year 2003 through April 30, 2007:
Commodity group: Aircraft;
Fiscal year: 2003: Cases closed: 9,822;
Fiscal year: 2003: Median days processing: 10;
Fiscal year: 2004: Cases closed: 12,385;
Fiscal year: 2004: Median days processing: 14;
Fiscal year: 2005: Cases closed: 13,224;
Fiscal year: 2005: Median days processing: 18;
Fiscal year: 2006: Cases closed: 14,099;
Fiscal year: 2006: Median days processing: 24;
Fiscal year: 2007[A]: Cases closed: 9,701;
Fiscal year: 2007[A]: Median days processing: 29.
Commodity group: Firearms;
Fiscal year: 2003: Cases closed: 6,984;
Fiscal year: 2003: Median days processing: 8;
Fiscal year: 2004: Cases closed: 7,145;
Fiscal year: 2004: Median days processing: 10;
Fiscal year: 2005: Cases closed: 7,464;
Fiscal year: 2005: Median days processing: 15;
Fiscal year: 2006: Cases closed: 7,429;
Fiscal year: 2006: Median days processing: 20;
Fiscal year: 2007[A]: Cases closed: 4,381;
Fiscal year: 2007[A]: Median days processing: 16.
Commodity group: Military electronics;
Fiscal year: 2003: Cases closed: 6,614;
Fiscal year: 2003: Median days processing: 18.5;
Fiscal year: 2004: Cases closed: 7,748;
Fiscal year: 2004: Median days processing: 23;
Fiscal year: 2005: Cases closed: 8,699;
Fiscal year: 2005: Median days processing: 23;
Fiscal year: 2006: Cases closed: 9,417;
Fiscal year: 2006: Median days processing: 31;
Fiscal year: 2007[A]: Cases closed: 6,536;
Fiscal year: 2007[A]: Median days processing: 28.
Commodity group: Military vehicle and naval vessel;
Fiscal year: 2003: Cases closed: 5,992;
Fiscal year: 2003: Median days processing: 21;
Fiscal year: 2004: Cases closed: 7,107;
Fiscal year: 2004: Median days processing: 26;
Fiscal year: 2005: Cases closed: 7,612;
Fiscal year: 2005: Median days processing: 21;
Fiscal year: 2006: Cases closed: 7,777;
Fiscal year: 2006: Median days processing: 22;
Fiscal year: 2007[A]: Cases closed: 4,376;
Fiscal year: 2007[A]: Median days processing: 31.
Commodity group: Missile and spacecraft;
Fiscal year: 2003: Cases closed: 4,221;
Fiscal year: 2003: Median days processing: 32;
Fiscal year: 2004: Cases closed: 4,229;
Fiscal year: 2004: Median days processing: 29;
Fiscal year: 2005: Cases closed: 3,807;
Fiscal year: 2005: Median days processing: 36;
Fiscal year: 2006: Cases closed: 4,092;
Fiscal year: 2006: Median days processing: 39;
Fiscal year: 2007[A]: Cases closed: 3,151;
Fiscal year: 2007[A]: Median days processing: 17.
Source: GAO analysis of DDTC data.
[A] Data are for the first 7 months of fiscal year 2007.
[End of table]
Arms export cases are relatively concentrated by country of
destination. As shown in table 6, in fiscal year 2006, cases
identifying Japan and the United Kingdom as destination countries
represented about 25 percent of all cases. Processing times, with the
exception of those for Israel, are similar for the top countries of
destination.
Table 6: Percentage of Cases Closed and Median Processing Time for Top
10 Countries of Destination, Fiscal Year 2006:
Rank: 1;
Country: Japan;
Percentage of all cases closed: 12.7%;
Median days processing: 22.
Rank: 2;
Country: United Kingdom;
Percentage of all cases closed: 12.0%;
Median days processing: 21.
Rank: 3;
Country: Canada;
Percentage of all cases closed: 6.9%;
Median days processing: 22.
Rank: 4;
Country: Germany;
Percentage of all cases closed: 5.4%;
Median days processing: 24.
Rank: 5;
Country: Australia;
Percentage of all cases closed: 4.5%;
Median days processing: 21.
Rank: 6;
Country: Israel;
Percentage of all cases closed: 4.3%;
Median days processing: 36.
Rank: 7;
Country: South Korea;
Percentage of all cases closed: 4.0%;
Median days processing: 24.
Rank: 8;
Country: Italy;
Percentage of all cases closed: 3.9%;
Median days processing: 25.
Rank: 9;
Country: France;
Percentage of all cases closed: 3.2%;
Median days processing: 29.
Rank: 10;
Country: Spain;
Percentage of all cases closed: 2.4%;
Median days processing: 26.
Source: GAO analysis of DDTC data.
[End of table]
DDTC has procedures to expedite cases submitted in support of ongoing
war efforts including Operation Enduring Freedom (OEF) or Operation
Iraqi Freedom (OIF). These cases did not represent a significant
caseload---ranging from 0.8 percent to 1.5 percent from fiscal year
2003 through 2006. Median processing times for these cases ranged from
8 to 11 days, as shown in table 7.
Table 7: Number of Cases and Processing Times for OEF/OIF Cases, Fiscal
Years 2003 through 2006:
Fiscal year: 2003;
All cases closed: 54,576;
Cases expedited: 444;
Percentage of all cases closed: 0.8%;
Median days for processing: 8.
Fiscal year: 2004;
All cases closed: 57,885;
Cases expedited: 477;
Percentage of all cases closed: 0.8%;
Median days for processing: 11.
Fiscal year: 2005;
All cases closed: 62,954;
Cases expedited: 958;
Percentage of all cases closed: 1.5%;
Median days for processing: 9.
Fiscal year: 2006;
All cases closed: 65,274;
Cases expedited: 773;
Percentage of all cases closed: 1.2%;
Median days for processing: 9.
Source: GAO analysis of DDTC data.
[End of table]
The number of exporters registered with DDTC that submitted cases
increased about 13 percent, from almost 2,500 in fiscal year 2003 to
almost 2,800 in fiscal year 2006. However, most exporters submitted
relatively few applications, as shown in table 8.
Table 8: Number of Exporters by Cases Submitted, Fiscal Years 2003
through 2006:
Fiscal year: 2003;
Total exporters submitting cases: 2,470;
Exporters who submitted: Ten or fewer cases: 1,826;
Exporters who submitted: Percent: 74%;
Exporters who submitted: Five or fewer cases: 1,480;
Exporters who submitted: Percent: 60%;
Exporters who submitted: One case: 684;
Exporters who submitted: Percent: 28%.
Fiscal year: 2004;
Total exporters submitting cases: 2,651;
Exporters who submitted: Ten or fewer cases: 1,911;
Exporters who submitted: Percent: 72%;
Exporters who submitted: Five or fewer cases: 1,582;
Exporters who submitted: Percent: 60%;
Exporters who submitted: One case: 683;
Exporters who submitted: Percent: 26%.
Fiscal year: 2005;
Total exporters submitting cases: 2,759;
Exporters who submitted: Ten or fewer cases: 2,000;
Exporters who submitted: Percent: 72%;
Exporters who submitted: Five or fewer cases: 1,634;
Exporters who submitted: Percent: 59%;
Exporters who submitted: One case: 687;
Exporters who submitted: Percent: 25%.
Fiscal year: 2006;
Total exporters submitting cases: 2,781;
Exporters who submitted: Ten or fewer cases: 1,978;
Exporters who submitted: Percent: 71%;
Exporters who submitted: Five or fewer cases: 1,609;
Exporters who submitted: Percent: 58%;
Exporters who submitted: One case: 737;
Exporters who submitted: Percent: 27%.
Source: GAO analysis of DDTC data.
[End of table]
In contrast, some exporters submit thousands of applications in a given
year. In terms of all cases received, the percentage of cases received
from the top 10 exporters in terms of cases submitted ranged from about
19 to 26 percent, as shown in table 9.
Table 9: Percentage of Cases Received from the Top 10 Exporters, Fiscal
Years 2003 through 2006:
Fiscal year: 2003;
Total cases received: 55,073;
Cases received by top 10 exporters: 14,240;
Percent: 25.9%.
Fiscal year: 2004;
Total cases received: 58,404;
Cases received by top 10 exporters: 10,896;
Percent: 18.7%.
Fiscal year: 2005;
Total cases received: 65,150;
Cases received by top 10 exporters: 14,508;
Percent: 22.3%.
Fiscal year: 2006;
Total cases received: 67,785;
Cases received by top 10 exporters: 14,263;
Percent: 21.0%.
Source: GAO analysis of DDTC data.
[End of table]
As shown in table 10, most cases processed by DDTC are approved or
approved with condition, known as a proviso. Very few cases are denied.
The number of cases returned without action increased from about 13
percent in fiscal year 2003 to over 17 percent in the first 7 months of
fiscal year 2007.
Table 10: Cases Closed by Final Action, Fiscal Year 2003 through April
30, 2007:
Final action: Approved;
Fiscal year: 2003: 27,916;
Fiscal year: Percent: 51.2%;
Fiscal year: 2004: 29,914;
Fiscal year: Percent: 51.7%;
Fiscal year: 2005: 34,638;
Fiscal year: Percent: 55.0%;
Fiscal year: 2006: 35,046;
Fiscal year: Percent: 53.7%;
Fiscal year: 2007[A]: 19,961;
Fiscal year: Percent: 45.7%.
Final action: Approved with proviso;
Fiscal year: 2003: 18,918;
Fiscal year: Percent: 34.7%;
Fiscal year: 2004: 19,054;
Fiscal year: Percent: 32.9%;
Fiscal year: 2005: 18,586;
Fiscal year: Percent: 29.5%;
Fiscal year: 2006: 20,183;
Fiscal year: Percent: 30.9%;
Fiscal year: 2007[A]: 15,507;
Fiscal year: Percent: 35.5%.
Final action: Denied;
Fiscal year: 2003: 395;
Fiscal year: Percent: 0.7%;
Fiscal year: 2004: 426;
Fiscal year: Percent: 0.7%;
Fiscal year: 2005: 394;
Fiscal year: Percent: 0.6%;
Fiscal year: 2006: 433;
Fiscal year: Percent: 0.7%;
Fiscal year: 2007[A]: 229;
Fiscal year: Percent: 0.5%.
Final action: Returned without action;
Fiscal year: 2003: 6,992;
Fiscal year: Percent: 12.8%;
Fiscal year: 2004: 8,237;
Fiscal year: Percent: 14.2%;
Fiscal year: 2005: 8,990;
Fiscal year: Percent: 14.3%;
Fiscal year: 2006: 9,171;
Fiscal year: Percent: 14.1%;
Fiscal year: 2007[A]: 7,450;
Fiscal year: Percent: 17.1%.
Source: GAO analysis of DDTC data.
[A] Data are for the 7 months of fiscal year 2007.
[End of table]
[End of section]
Appendix III: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Management and Chief Financial
Officer:
Washington, D.C. 20520:
November 8, 2007:
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, "Defense
Trade: State Department Needs to Conduct Assessments to Identify and
Address Inefficiencies and Challenges in the Arms Export Process," GAO
Job Code 120629.
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
Laurell Brault, Deputy Director, Bureau of Political and Military
Affairs, Office of Directorate of Defense Trade Controls at (202) 663-
2736.
Sincerely,
Signed by:
Bradford R. Higgins:
cc: GAO – Anne-Marie Lasowski: PM – Frank Ruggiero:
State/OIG – Mark Duda:
Department of State Comments on GAO Draft Report:
Defense Trade: State Department Needs to Conduct Assessments to
Identify and Address Inefficiencies and Challenges in the Arms Export
Process, (GAO-08-89, GAO Code 120629):
Thank you for allowing the Department of State the opportunity to
comment on the draft Defense Trade: State Department Needs to Conduct
Assessments to Identify and Address Inefficiencies and Challenges in
the Arms Export Process.
The GAO recommended that the Secretary of State direct the Deputy
Assistant Secretary of the Directorate of Defense Trade Controls (DDTC)
to conduct systematic analyses of licensing data to assess root causes
of inefficiencies and to identify and implement actions to better
manage workload, reexamine its processes, determine the most effective
workforce structure, and target industry outreach.
State concurs with the overall GAO recommendations; however, it should
be noted that the GAO review does not include licensing data collected
after April 2007, and thus does not capture the full impact of the
licensing guidance and procedural changes that were implemented after
March 2007. Although, the recommendations have merit, they are more
historical in nature. The draft report identified three key trends in
the processing of arms export cases:
(1) A 20% increase in the number of export cases received by DDTC
between fiscal years 2003 and 2006;
(2) Processing times almost doubled from fiscal year 2003 to 2006;
(3) Increase in the number of open arms cases since fiscal year 2003;
Our remarks will focus on the last two trends identified in the draft
report.
In September 2006 the number of open arms export cases reached a high
of 10,200 cases. The timeframe in which this occurred came when DDTC
was severely resource constrained in terms of total number of
personnel, experienced licensing officers with full signature
authority, and the post-911 environment and support of the Global War
on Terror (OIF/OEF). Simultaneously, we were implementing a D-Trade
system which we continue to believe will have major long term
benefits-- particularly D-Trade II--but which in the short run has
experienced some challenges and delays.
As stated in the draft report, DDTC undertook extraordinary measures
over the course of three months to reduce the number of open cases by
almost 50 percent. We recognized that the measures were not sustainable
and conducted a critical review of our internal procedures to identify
and address deficiencies in the analysis and case review process. Since
that time frame, several initiatives were implemented that are
highlighted below, resulting in a reduction of the number of open cases
from 7,500 in April 2007 to 5,300 as of 31 October 2007 (a 30 percent
reduction).
(1) Management Case Review Guidance-addresses the decision-making
process for pending cases and identifies required timelines for
specific actions by licensing personnel.
(2) Expedited License Processing Guidelines and revised staffing
requirements. The guidelines address the expedited review process for
priority cases such as OIF/OEF, Defense Capabilities Initiative, and
UK/Australia cases. We also revised the staffing requirements to
eliminate the staffing of spare parts to NATO countries, and routine
staffing to other Bureaus and Agencies, based on the level of
technology and geographical region.
(3) Deputy Assistant Secretary (DAS) level review for cases over 75
days. In the three months since the review was implemented we have
continued to see a significant reduction in the number of "old" D-Trade
cases. We are confident that the improvements noted are long-term,
given the disciplined approach and increased accountability instituted
through the case review process.
We recognize that additional systematic analyses of the data collected
by our internal staff, along with the data provided by the GAO, is
needed to achieve even greater efficiencies in the arms export analysis
and review process. We have initiated a review of our organizational
alignment to better structure the workforce, and have made initial
staffing changes to two of the licensing teams, as a result of the
imbalance in the caseload. We are also committed to pursuing
technological solutions to optimize the ability of licensing officers
to access case related material, and reducing the administrative burden
on the licensing staff and the arms export community.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Ann Calvaresi-Barr (202) 512-4841 or calvaresibarra@gao.gov:
Acknowledgments:
In addition to the contact named above, Anne-Marie Lasowski, Assistant
Director; Bradley Terry; Peter Zwanzig; Jacqueline Wade; Arthur James,
Jr; Julia Kennon; Karen Sloan; and Alyssa Weir made key contributions
to this report.
[End of section]
Related GAO Products:
Export Controls: Vulnerabilities and Inefficiencies Undermine System's
Ability to Protect U.S. Interests. GAO-07-1135T. Washington, D.C.: July
26, 2007.
High Risk Series: An Update. GAO-07-310. Washington, D.C.: January,
2007.
Export Controls: Challenges Exist in Enforcement of an Inherently
Complex System. GAO-07-265. Washington, D.C.: December 20, 2006.
Defense Technologies: DOD's Critical Technologies Lists Rarely Inform
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.
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.
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: State and Commerce Department License Review Times Are
Similar. GAO-01-528. Washington, D.C.: June 1, 2001.
Export Controls: Reengineering Business Processes Can Improve
Efficiency of State Department License Reviews. GAO-02-203. Washington,
D.C.: December 31, 2001.
Export Controls: System for Controlling Exports of High Performance
Computing Is Ineffective. GAO-01-10. Washington, D.C.: December 18,
2000.
Defense Trade: Analysis of Support for Recent Initiatives. GAO/NSIAD-
00-191. Washington, D.C.: August 31, 2000.
Defense Trade: Status of the Department of Defense's Initiatives on
Defense Cooperation. GAO/NSIAD-00-190R. Washington, D.C.: July 19,
2000.
Export Controls: Better Interagency Coordination Needed on Satellite
Exports. GAO/NSIAD-99-182. Washington, D.C.: September 17, 1999.
Export Controls: Some Controls over Missile-Related Technology Exports
to China Are Weak. GAO/NSIAD-95-82. Washington, D.C.: April 17, 1995.
[End of section]
Footnotes:
[1] For the purposes of this report, "arms" refers to defense articles
and services as specified in the United States Munitions List. 22
C.F.R. § 121.1 (2007).
[2] Arms export cases processed by DDTC include applications for the
export of arms and agreements between U.S. industry and foreign
entities to provide technical assistance or manufacturing capability.
[3] GAO, Defense Trade: Arms Export Control System in the Post 9/11
Environment. GAO-05-234 (Washington D.C.: Feb. 16, 2005).
[4] Related programs include the Foreign Military Sales program, the
Committee on Foreign Investment in the United States, and the
Department of Defense's program for identifying militarily critical
technologies.
[5] GAO, High Risk Series: An Update, GAO-07-310 (Washington, D.C.:
January 2007).
[6] The Arms Export Control Act authorizes the President to control the
export and import of defense articles and services. 22 U.S.C. § 2778.
The statutory authority of the President to promulgate regulations with
respect to defense exports and imports was delegated to the Secretary
of State by Executive Order 11958, as amended. This authority is
implemented through the International Traffic in Arms Regulations. 22
C.F.R. §§ 120-130 (2007).
[7] Registration fees are paid by manufacturers and exporters who must
register with State as required by the Arms Export Control Act. 22
U.S.C. § 2778. State can use these funds only for expenses related to
such activities as contract personnel assisting in the evaluation of
license applications, automation of trade control functions, or
enhancement of compliance and enforcement activities. 22 U.S.C. § 2717.
[8] At the time of our review, only certain types of cases could be
submitted electronically through D-Trade, including licenses for
permanent export, temporary export, and temporary import.
[9] Exporters can request a jurisdiction determination when they are
uncertain if an export item is subject to State controls or want an
item removed from State's jurisdiction.
[10] For example, the Arms Export Control Act requires that Congress be
given at least 15 days written notification of State's intent to
approve licenses for defense articles and services valued at $100
million or more, or for major defense equipment valued at $25 million
or more, to North Atlantic Treaty Organization (NATO) member countries,
Japan, Australia, and New Zealand. 22 U.S.C. § 2776(c).
[11] In 2007, DDTC established guidelines that cover the export
licensing review process, including review and referral of cases.
[12] According to DDTC officials, DDTC has an informal rule that team
leaders are supposed to assign cases to licensing officers within 2
days, thereby increasing the overall time frame goal to 12 days.
[13] In 2007, DDTC established a policy limiting review to 15 days of
cases referred to State bureaus and other agencies, except for DOD and
the Missile Technology Export Committee. DDTC can grant extensions if
additional time is needed.
[14] Pub. L. No. 108-375 § 1225 (2004).
[15] In June 2007, the United States and the United Kingdom signed a
defense trade cooperation treaty that would exempt some arms exports to
the United Kingdom from export license requirements. In September 2007,
the United States and Australia signed a similar treaty. Until these
treaties have been ratified by the United States Senate, they will not
have the force of law.
[16] The current version of D-Trade accepts 3 of the 14 types of case
processed by DDTC, including applications for permanent export, the
most common case type.
[17] GAO, Export Controls: Reengineering Business Processes Can Improve
Efficiency of State Department License Reviews, GAO-02-203 (Washington,
D.C.: Dec. 31, 2001).
[18] Pub. L. No. 107-228 § 1401(c) (2002).
[19] GAO, Internal Control Management and Evaluation Tool: Exposure
Draft, GAO-01-131G (Washington, D.C.: February 2001). See also GAO,
Export Controls: Vulnerabilities and Inefficiencies Undermine System's
Ability to Protect U.S. Interests, GAO-07-1135T (Washington, D.C.: July
26, 2007).
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